A family on my street sold their home privately last month and followed up with an offer on a resale home in another area of town. Both transactions set to take place on the same day as is typical in this scenario. The husband, a nice enough guy, asked me to list their current home in March and at the last minute he decided to list privately and coincidentally at the very price I suggested their home should list at during my spring meeting with them.
The husband approached me while I was washing the car on Sunday morning. He wanted my advice. His home had been sold and he had a closing date that was just a couple weeks away. The purchasers for his current home had just informed him that they would not be following through on their purchase and further to that, asked for their $2000 deposit back.
The only way my neighbour is able to close on the purchase of his new home is with the successful sale of his existing home and although the least of his pending worries, he is most likely going to lose his paid deposit on the purchased home, listed by a licensed Realtor and with a legally binding contract in place that will serve to protect the vendors well in the likely lawsuit for damaged pending through his breaching the purchase contract.
Those sellers listed with a Realtor and having legally binding contracts in place can site lost or delay of opportunity to sell, costs and inconveniences incurred on a home they may have purchased on the expectation of their home being sold firm which might include legal costs, mortgage penalties, moving costs in the outcome of them now having to breach their purchase contract. This domino effect may continue further on from there as most home sales result in another purchase.
He and his family also face ramifications from lenders with whom he has a mortgage slated to discharge shortly and a new mortgage agreement set to begin. Changes to services, schools for his children and any other changes made will now have to be reversed or put on hold. This is a deteriorating situation no one wants to find themselves in.
If you read this and decide I am just trying to scare you, well yes, I am guilty as charged. Among other things, hiring a Realtor is like taking out an insurance policy, you don't take auto insurance on the expectation of the worst happening and most of you will likely make it to and from work this week without a scratch, but you know that risk exists and you make responsible choices to protect yourself and your family from those worst case scenarios should they arise.
I asked my neighbour if he would show me the contracts for his sale. On inspecting it I told him the lax single page contract of purchase on his existing home was not likely to be considered a legally binding document with its many un-initialed changes, signature of only one of the purchasing parties and no acceptance acknowledged in writing by the sellers. Given that, I told him he stood little chance of recourse with his default buyers, but he was free to find another buyer and one option might be to reduce the price of his house by at least part of the amount he stands to lose by defaulting on his purchase and hope for an unlikely quick sale and closing.
My neighbour's efforts were all well intended but his attempt to save himself a few thousand dollars by not paying to have a professional oversee the sale from sign up to closing of his family's largest single asset was short sighted if not foolish given the lack of understanding therefore ability to protect his family from the many scenarios that often crop up in what looks to many Canadians from the outside to be a simple transaction.
Here is a valuable tip: The easier a professional makes their work appear be it your dentist, mechanic, carpenter etc. isn’t necessarily a reflection of the simplicity of the tasks. There is also the possibility it is the fruit of their accumulated experience and acquired wisdom at their trade. Translated, the simpler your Realtor makes the purchase or sale look and feel the more value you got for your investment.
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Wow, Mike! What are these people thinking, going unrepresented into perhaps the largest single financial transaction of their lives?