Questions, Questions
Thursday, October 23, 2008
A lot of questions this week on "my buyer wants out of the contract, what do I do" ... or "I made a mistake, I want out of the contract ... my realtor did not protect me, etc." Of course, anytime you have a legal question, you should really ask your lawyer. But there are some questions that have additional concerns.
Q: My (listing) agent was informed by the buyer's agent that they have walked away from their $10,000 deposit and will not buy my house. But thinking we had a firm $650,000 sale - we bought another home worth $720,000 in the meantime. We didn't know the buyer could walk after removing all subject clauses. We now have to lose our $50,000 (also walking away) or are stuck with two houses. We cannot afford this as we are in our late seventies and do not have any income to serve a large mortgage.
A: That is really troublesome. We have advised many times here, never to write an offer, if you don't have a sale on your existing home. In this case, you did have a sale, but the buyer didn't complete. Now is the time to get a lawyer to read over the contract you have with your first buyer .... and advise you accordingly. Your lawyer, after reviewing the - hopefully - well drawn interim agreement - may see a lawsuit for "specific performance" which would allow you to sue the buyer to complete the deal. "Specific performance" is a form of 'equitable relief in which a court orders one party to a definite and certain contract to perform what the party has promised to perform'. They are generally difficult to win, but the possibility could be explored. If you walk away from the house you are buying, the seller may be exploring these options as well. The moral for everyone is ... get a large deposit - at least 10 per cent of the price - and make sure you have an enforceable interim agreement. I've seen interim agreements that were faxed back and forth with a hundred initials, that no one can read anymore. Get it re-typed, better to know right away whether the buyer is shaky or not.
Q: We are at 4.25 years into a 5 yr. mortgage at 4.8 per cent with a $230,000 balance owing. We have a $35,000 line of credit and we're struggling each month. With interest rates going up, is it financially smart for us to pay the penalty to get out of the remaining mortgage contract we're in, in order to 'lock in' at a higher rate of say, 5.6 per cent now, in case rates are even higher when it's time to renew?
A: You may wish to analyze your options on paper. l: Read your contract, since it's longer than three years the penalty won't be more than three months interest. 2: If you have a pre-payment clause in your contract you can deduct that from your amount owing and only pay the penalty on the balance. 3: Call your bank. They may let you out of the penalty if YOU. remortgage with them. 4: The LOC portion would be open, so there isn't a penalty to pay that one out. 5: Haggle hard for your mortgage rate. I've seen this week 5-year terms as low as 5.25 per cent for fast closing mortgages. The real question is what will interest rates be like in future ... and alas ... no one really knows in these crazy times. I advise my students to go long, just for the 'sleep well at night rights'.
When markets turn into a buyer's market it is often difficult to adjust quickly. To all of you that have written telling me you're having a hard time selling your home ... go to Jurock.com and read the 26 ways to make your home sell faster story ... or join our Real Estate Action Weekend on October 24, 25 and 26.
Published in the Vancouver Sun, October 16, 2008
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