You are finally ready to purchase a home, you have picked out the shade of blue you want to paint your living room, you have picked out the matching curtains, and the new 50-inch television is ready to be delivered the day after closing. The home of your dreams is at your fingertips. What can go wrong?
First of all, before you even start shopping for a new home, go to your bank, trust company or other financial institution, and see what amount of a mortgage you can qualify for. Do not put an offer on a home of any kind without a mortgage pre-qualification so you know how much money you will have available between your resources and the bank. It is a tragedy waiting to happen if you sign an unconditional offer, give your hard earned money to your builder or real estate agent and later find out you didn’t qualify for the mortgage in the first place.
An Agreement of Purchase and Sale for the purchase of land is a contract. Once it has been signed, it is unconditional and binds both of the parties to do the things that they are obligated to do under that contract. If either party does not perform their part of the bargain, they can be liable to the other party for either specific performance or damages. Firstly, if a purchaser defaults he/she will likely lose the deposit. The vendor will then have the option of suing to force closing of the deal and to make the purchaser pay all legal fees related thereto (specific performance), or sue for any damages the vendor might suffer before he resells the house (things like interest, changes, price differential, etc.) and legal fees. If the vendor defaults, as the purchaser, you have the same kind of rights to force the closing or receive damages, plus you can tie the property up with a lien until all is resolved.
What if circumstances change? Say you lose your job, get a divorce, or worse, someone dies in between the period of signing the offer and closing the deal? For new-home contracts, many vendors will try to help if you approach them and explain the circumstances. Remember, they have no obligation under the law to help you. It would be a gesture of goodwill or compassion only. In this circumstance, the best thing to do is discuss the matter with your lawyer. Your lawyer will calmly explain the options to help mitigate and/or reduce potential loss. A great real estate agent (like my son Jonathan Schwarz at Revolution Realty) will move heaven and earth to find you a buyer to take over your deal. Usually this is the best solution.
The moral of the story is to make sure you have financing or that the offer is conditional for a few days on both financing and review by a lawyer. Be prepared for adversity and have a back-up plan if it happens. It is critical you get the right advice and only a lawyer can provide legal advice – that is the law. When you select a lawyer, find one who cares about you and wants a long-term relationship.
Questions or comments? Mail or deliver your letters to the magazine or to us through our website, www.schwarzlaw.ca, or by email at email@example.com.