Bidding Wars - Now you have buyer's Remorse

A major issue arising in bidding wars is when a buyer regrets their purchase decision almost immediately afterwards. Or worse, when their lender appraisal says that they paid too much and will not lend the buyer enough to close the deal. Here are five lessons to learn about the consequences of a buyer’s remorse in these situations.


1. Can the buyer simply refuse to pay the deposit, if it has not yet been paid?

In many bidding wars, this is not possible, as sellers are demanding certified cheques or bank drafts to accompany any offer. However, even if a buyer can either stop payment on an uncertified cheque or refuse to pay the deposit, they are still liable for damages. They can be sued by a seller for the difference in price if the seller subsequently sells for less money. In addition, even if the seller subsequently sells for more money, the buyer can be sued for the amount of the deposit that they failed to deliver.

2. Should a buyer agent approach the listing agent for a mutual release immediately?

Be very careful about this. If a buyer agent communicates that the buyer cannot close, then the seller could take the legal position and declare that the buyer has committed an anticipatory breach of contract. This would permit the seller to treat the contract as terminated by breach, and proceed to sue the buyer for the items listed above. It is best for these negotiations to be carried out by lawyers, to make sure that the parties’ legal position is protected at all times, if a settlement is being negotiated.

3. Is there a legal solution to this?

If there is sufficient time before closing, a buyer is permitted to assign their contract to a new buyer, who could take over their position and close with the seller. This is because unlike a contract with a builder, there is nothing preventing a buyer from assigning a re-sale agreement before closing. A buyer must understand that if they are asking their own agent to “sell” the property for them, they will have to pay real estate commission as well. Therefore, a buyer would have to assign their agreement for a price that is equal to the price they paid plus commission, just to break even.

4. Does a seller have to agree to this assignment?

In most cases the answer is no, unless the original offer contained a seller take-back mortgage. However, in practice, many lenders will not recognize the new buyer unless there is an amendment done to the original agreement to change the buyer name to the new buyer. This will require the consent of the seller.

In my opinion, this is unfortunate as lawyers routinely change how a buyer can take title by providing a direction to this effect on closing. Sellers should consent to this anyway, as long as the original buyer remains liable if the new buyer cannot close the agreement for any reason.

5. Can the buyer list the assignment onto the MLS system?

Theoretically, a buyer could list the property on an MLS system because they have a right in the contract that they can sell. However, most real estate board rules require that to list a property on their system, you must be able to show the property and without the seller’s agreement, this will not be possible.

I had a situation where the buyer could not close after winning a bidding war. I negotiated with the seller’s lawyer to permit the buyer to put the property back onto the MLS system and the seller would permit showings. It was also agreed that the buyer could not make any profit on this re-sale and that they could only recover their extra commission cost. The benefit to the seller was that their deal closed and the parties were able to save themselves from very expensive legal proceedings.

Anyone can close a simple real estate deal. When it comes to choosing or recommending a real estate lawyer, make sure you have one that can solve problems that can arise as well.

#Toronto #realestate
#callme

http://SellinginToronto.ca

Your rental property can be seized as Proceeds of Drug Money Laundering

Here is the situation;

Couple owns a few rental properties that they rent to [second chance] ex cons, people down on their luck, homeless people trying to re establish themselves, low income housing.

Police decide that rent payments made to the Landlord in cash must be the proceeds of crime since the only form of income for the tenant is dealing drugs.

This very scenario is playing out right now in the Ontario Courts under the Civil Forfeiture Act.  

Here are the details in Broad strokes;

Margaret and Terry Reilly are from Orillia, Ontario. The Reilly's own several rental properties, some of which are former single-family homes that they have converted into rooming houses for low-income tenants. Margaret has been involved in alleviating poverty and homelessness since her father became the priest at an inner-city Anglican church in Toronto and opened a youth hostel there, while Terry has served on the City of Orillia Homeless Committee. Providing housing to marginalized members of society has always been a deliberate choice for the Reilly's.In 2008, after police surveillance confirmed drug activity at two of the Reilly's rental properties, a branch of the government called the Director of Asset Management took control of them. Since then, the properties have languished largely unoccupied, falling into progressively worse repair. Stripped of their rights as landlords, the Reillys had no choice but to watch their properties deteriorate physically and depreciate in value. Then, in 2012, the Government of Ontario brought a motion to permanently seize and sell the properties on the grounds that some of the tenants’ rents may have been paid, in part, with the proceeds of their drug activity. There is no evidence that any funds paid by tenants was derived from drug money; the state merely assumed that cash payments must have come from the proceeds of illegal activity. http://theccf.ca/r-v-reilly-civil-forfeiture/ 

This property(S) were seized under the Forfeiture Act without anyone being charged.
This family has NEVER had their day in court but had their property taken away.

The lesson here is monitor your tenant activity; visit twice of more time per year to ascertain the activity in YOUR PROPERTY.   Be more diligent in your tenant screening. Bad things can happen to good people. 

#ASKPYLYP

Use a realtor to screen tenants in your rental condos.

Ready to invest?   If  I haven't scared you call me at 647 218 2414
http://Davidpylyp.com 

Will Title Insurance cover a hidden defect?

How could insurance cover a Hidden [latent] defect?

By its very nature, it is something hidden.

Not so fast .....

the case revolves around Paul and Stefanie Macdonald who bought a home in the city that they believed had been poorly renovated by its previous owner. When they attempted to undertake renovations of their own, they found that load-bearing walls had been taken out without building permits – making the second floor unsafe for use. This prompted the city of Toronto to issue a work order to support the unsafe floors with the Macdonalds paying out $75,000. They made a claim to Chicago Title on their insurance policy to cover these costs because the policy was said to provide coverage if the title was unmarketable. However, the claim was denied as the company stated that it was not covered under the policy.
This, in turn, prompted court action beginning in 2014, with the judge ruling that the municipal work order resulted from a hidden defect that was not covered under the policy. It stated that the work order did not affect “ownership of the land” as it was not registered on the property title – even though work orders are never registered against the title.
http://www.insurancebusiness.ca/ca/news/breaking-news/huge-title-insurance-case-reaches-conclusion-217419.aspx

 It was last year that the decision was reversed with the insurer ordered to pay more than $50,000 in costs with the ruling suggesting the hidden defect made the title unmarketable. Now an appeal by the insurer has been dismissed and the ruling upheld.

So  what's the conclusion?

The situation will be taken under advisement and studied by the Industry.   I am sure if you are in the situation to sue; you now have case law in your favour.

Do you check the insurance claims history of a house before you buy? 
You can actually    With a Home Verified Report
http://eleganthomesinwesttoronto.blogspot.ca/2013/07/did-you-buy-house-with-flood-damage.html

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