What happens when you can’t close?????
Your buyer cannot sell their existing home, now what?
By Mark Weisleder
I am now being consulted by buyers who have purchased homes without any conditions and cannot sell their existing homes. This could be as a result of the recent government housing policy announcements, increased number of listings, uncertain lending conditions and fewer bidding wars. As such, you need to understand all the issues and consequences to provide timely advice and do what is necessary to protect your clients and your deals. Here are 5 things to understand:
- What if the buyer cannot close?
If the buyer cannot close, they will likely forfeit their deposit and be subject to a lawsuit from the seller, for the difference in the sale price if the seller now sells the property for a lower price than the buyer agreed to pay.
- What are some options available to the buyer?
One option is to approach the seller and request an extension of their own purchase agreement, so that they have more time to sell their existing home without panicking. Another option is to sell or assign their agreement to a third party buyer, to have another buyer take over their agreement, pay them back their deposit, and close directly with the seller.
- Do you need the seller permission to assign this agreement to another buyer?
Under the terms of the OREA re-sale agreement, no permission is required. However, it is best to be up front and work with the seller for a number of reasons. The seller salesperson could have a list of buyers who have already seen the property who may be willing to take over this deal. In addition, any new buyer would want to see the home and since your client does not yet own it, they have no right to show the home. By obtaining the assistance of the seller, you can show the home and hopefully arrange for a new potential buyer to take over.
- Who will pay the real estate commission?
The real estate commission will still have to be paid on both transactions. Therefore, the original buyer will likely have to sell for more than they paid, just to break even. In my experience, this should be made clear when trying to arrange this with the original seller, that the buyer will not be making any profit on this re-sale, and is just looking for someone to take over their purchase obligation.
- Who pays land transfer tax?
Land Transfer tax will only be paid once in this scenario, by the new buyer who finally closes the transaction with the seller.
In my experience, it is best to deal with all these issues early in the process, by being up-front and honest with your seller and finding a solution that works for everyone. By working together, you can likely reduce the potential losses on all sides and in most cases, complete the transaction to the satisfaction of everyone.
questions about any closing issue, do not hesitate to contact me toll free at 1-888-876-5529 or at firstname.lastname@example.org