Mark Weisleder makes an excellent point in his recent email (August 26th, 2013) about the cascading effect of one purchaser's financing not coming through and the Seller's purchased another home and then could not close.
This follows on the heels of another conversation I had with Stan Gelman about a bank withdrawing the Financing because the house did not appraise for the agreed Selling Price. We can debate the details, but a BANK issues a Commitment to Finance based on certain conditions being met; in this case appraisal was only one. Since the property did not appraise the Financing was withdrawn and a DOMINO effect ensued for NON closing transactions.
Due to the growing possibility of buyers being declined their financing at the last minute, sellers need some protection in the event their closing is delayed or cancelled and they are forced to carry 2 homes for an extended period of time.
One company that I have dealt with that provides this coverage is Canadian Home Shield. Their President, James Vlachos, who is an insurance broker, advises me that for as little as $99, sellers can purchase a $25,000 insurance policy that will cover all mortgage payments, real estate taxes, utilities and insurance premiums up to a total of $25,000 in the event that the deal does not close through no fault of the seller. I personally have had 2 seller clients recover over $9,000 in costs after a buyer failed to close their purchase agreement.
Buyers can also purchase breakdown insurance protection for their home systems and appliances. Since most real estate contracts provide that sellers only warrant their systems and appliances to the date of closing, this provides buyers with the opportunity to purchase additional insurance protection for a year after closing.
For further information, please see the attached website:http://www.canadianhomeshield.com/
The Agents in the transaction should not have waived the Condition for Financing UNTIL the appraisal had been completed. However, within the logistics of the transaction, a Financing Waiver is prepared 5 days post the Acceptance and Acknowledgement [of a Deal being made]. This has no bearing on the closing date. I am not making excuses or blame, this is exactly how I would normally proceed with a transaction.
With changing Home Values, spirited Bidding, Slipping Condo Values, Changing Credit qualifying Criteria there is ever more need for vigilance on the part of Buyers and Sellers.
I will be including this Transaction Insurance in all future Listings as a part of my Bundle of Services. If you are buying all cash, none of this applies; it doesn't matter does it?
Would you take this insurance?
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