You might think that was a bad day for Paul, but it gets worse.
The vendors put the property back on the market. The agent calls the next higher bidder who actually had come in at $455,000, but he has already bought something else. It’s a little later in the year, and other purchasers wonder if something is the matter with the property; nevertheless it sells rather quickly to close within 90 days. Only one slight problem, it sells for $445,000.
So, what does this mean to Paul?
Well, the vendors are to be placed in the same position as they would be in, as far as money is concerned, as if Paul had completed the agreement on time as agreed.
They tally up their expenses and find the following:
Costs of storage ($750/month)
Costs of moving ($3,500)
Cost of 3 months utilities ($800/month)
Cost of 3 months insurance ($250/month)
Cost of 3 months taxes ($550/month)
Cost of 3 more months on the mortgage (interest component only, $300,000 first) Increased rate of interest on their mortgage (it went from 5% to 6.5%)
Legal fees and disbursements for the second transaction (otherwise unnecessary)
Loss of use of the net proceeds of sale ($195,000 being $495,000 less first mortgage)
So, what would all this add up to?
(usual losses)
$5,750 for storage and moving
$4,800 for utilities, taxes, and insurance
$3,750 in regular mortgage interest
$1,125 in bonus interest
$1,500 in legal fees
$3,778 (computed at 7.75%)
$20,703
Brian Madigan LL.B., Broker
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