Desmond Brown

When Deals Don't Close

01 September 2017
Desmond Brown

We sold a bungalow back in April with a completion/closing date scheduled for mid July. It seemed like a straightforward transaction. We represented the Seller, who lived out of town and had rented the house to two separate tenants - one who occupied the main floor of the bungalow and the other who lived in the basement.

In the Agreement of Purchase and Sale, our client promised the buyer vacant possession of the entire premises, meaning that both tenants would have to move out and find new places to live before the deal would close.

The main floor tenant found a new home very quickly; however, as the closing approached we discovered that the basement tenant had not found a place to move to and to top it off, hadn't even started looking. Jenn, my valued team member who had the listing, spoke to the tenant.  He told Jenn he didn't use the internet and had no idea how to even start searching for a place.

Our seller, who lived out of town, was an absentee landlord and rarely spoke to her tenants. She finally became aware of the situation and asked us to help her tenant secure a new place. Jenn scrambled to find apartments for the tenant, but as the tenant repeatedly cancelled appointments or wasn't available to see what Jenn had lined up, it became apparent he didn't want to move and wasn't going to vacate in time for the deal to close as scheduled.

Our next step was to try to extend the closing date a couple of months while the tenant looked for a new home. We approached the buyer, who referred us to his lawyer. The buyer's lawyer said his client was not willing to extend the closing.  Jenn then advised our seller to offer the buyer a reduction in the purchase price to close later, but that was turned down too. From the time the buyer and seller had executed the Agreement of Purchase and Sale in April to the original closing date in mid July, the market had changed and the value of the bungalow had fallen by approximately seven percent. This was a convenient and legal way for the buyer to get out of the deal, which he did.

This is a contrast to what we've been hearing in the media lately about buyers simply wanting out of deals or asking for price reductions because of the change in market conditions, and threatening not to close if the sellers don't comply.

Our bungalow didn't close because our client didn't fulfill her obligations as set out in the contract. Shame on buyers who try to get out of the deals because there has been a slight downward correction in the market. How would buyers feel if the value of the home they bought appreciated before closing and the seller wanted out of the deal because they felt the sale price was too low?  The answer is obvious: in either scenario the buyer or seller should do the right thing.

 As always, if you have any questions about buying or selling or just want to chat about the current market, please feel free to get in touch.