Screwed

The Things We Read

Today was one of those days when as a Realtor you just shake your head and wonder at the world. The day’s head shake started with a comment arriving at this blog, asking for help. It goes something like this;

“I put my large deposit down on this condo development which is to complete by the end of December 2008. I can’t sell my house and the bank won’t give me a mortgage on the condo until I do.”

“Can you recommend a lawyer?”

Brutal

Proffering opinions on real estate and other worldly thoughts is what this blog is about. Sometimes, being brutal is also part of the opinion package.

When questions like this arrive they demand a re-think about what is really being asked. Is the proposition serious, frivolous or an acknowledgement that the proposer has created a financial screw up and searching for someone to save their ass from disaster?

Let’s Face It

Conservative position asks why anyone would purchase a unit in a project that was having financial troubles back in February of this year. Those troubles made the news and was public knowledge. Wondered is, when buying, did those red flags jump out at them with the warning that this project might not be a good fit?

Were they were looking for opportunity. Did they think they were getting a deal in a building in the right location with upward price potential. As the astute investor they must have thought they were catching a point in the price wave where they could quickly, flip the paper, and make some fast money.

Pre-supposed is that prior to signing the contract they considered downside alternatives, diligently discussed all issues with their Realtor who, should have advised them to discuss the intricacies of the contract with a lawyer BEFORE their rights of recision lapsed. It doesn’t seem that way. Now a few short weeks before they must complete on the condo, they realize that they are locked in and are scrambling to find a way out.

Big Ooops

An assumption derived from the question is that the proposer does not possess the financial ability to carry both properties. Presumed, is that they thought the Vancouver real estate would continue its upward spiral. Little or no regard seems given to market change or the implication such a market change would have on their welfare. One speculates that the first signs of market change were disregarded and a hoped for rebound was dreamed.

“I can’t sell my house!”

The immediate retort is why not? Speculation suggests that continued false optimism prevails. That their asking price continues to exceed the interest of potential buyers. Evidenced is that several months into the process the house has not sold leaving them between a rock and a hard place. They are at the fire sale stage. The questions are screams of despair as they try to find a sign that points the way out.

Could you recommend a lawyer

Can a lawyer help? Maybe, but it’s would appear that they have gotten themselves into a jamb from which they can not be retrieved. Contracts of purchase and sale are much like concrete – they hold firm and last a long time.

Can’t Get a Mortgage

It must be the bank’s fault! Seriously, they have to ask themselves, if they were the bank would they provide a mortgage to someone who seems unrealistic, possibly uncooperative or unprepared to accept hard solutions that will minimize the impact to their financial wealth. Don’t blame the bank. They didn’t didn’t force the purchase of the condo nor are they forcing them to borrow the money. Can you feel the squeeze?

What Can I Say?

As Realtors there are those amongst us who recognize that we are not magicians and that we do not possess the powers to change markets or personal circumstance.

The numbers are in, the Vancouver real estate market is down and is forecast to continue that trend. Adjust your price, sell your house, get the mortgage try and maintain what you have and move on.

Sure, you are going to limp for a while, but failing to make a decision in the hope that some lawyer is going to get you out of this mess is wishful thinking.

Easy to say, but wasn’t it the same wishful thinking that got you into this mess in the first place. Get real serious about selling your home and minimize your loss. Alternatively, prepare for a Christmas stocking containing big financial lumps.

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I’m always happy to answer your Vancouver Real Estate question? Call or send me an email Twitter or Skype me at YatterMatters.

Larry

About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

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*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

November 28th, 2008 at 5:59 am

You don’t seem very sensitive about this poor buyer’s situation. Reading between the lines, it almost sounds like you think they’re responsible. 🙂

Is there any legislation in BC that limits a sellers right to seek damages in the event that a buyer fails to close?

November 28th, 2008 at 9:32 am

Norm,

What ever gave you that idea? 🙂

Big kids need to know that breaking promises can be a rough game – you can get hurt.

The rant is probably more to do the sense of entitlement as in – “why is this my fault”.

To be glib, I refer to Baretta’s line where he says – “if you can’t do the time, don’t do the crime”

Damages: I don’t think there is a defined limit. The seller must make effort to mitigate the buyer’s loss by way of resale. In the current market that might be 25% to 30% of purchase price plus legal costs and interest.

November 28th, 2008 at 7:12 pm

Thanks Larry.

In Saskatchewan we have legislation known as the “Limitation of Civil Rights Act.” A seller cannot recover damages in excess of the amount of the deposit provided that the buyer is a natural person who intends to occupy the property as a principal residence. The law makes it fairly easy for a buyer to walk away on a deal knowing exactly what it will cost them. Not so great for sellers, especially if the market is in decline.

November 28th, 2008 at 9:23 pm

Norm,

I won’t ask what an “unnatural” person is? 🙂

Doesn’t seem like much incentive for anyone to believe in the enforcability of a contract. Is it the norm (no pun intended) to then get large deposits with each purchase so as to disuade buyers from walking.

We have a rule of thumb which says 5% of purchase price. With our prices this becomes substantial with deposits ranging from $50 to a $100,000.

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