Tag Archives: buying a home

Structuring Holdbacks During Negotiations

Date: November 6th, 2019
By: Ron Thibeault

Handling Closing Day Issues In Your Offer

Buyers are often surprised during our meetings to learn that a pre-possession walk-through is not a right. In fact, technically Buyers don’t have access to the property until the funds have already been released on the day of closing.

In almost all cases, Buyers expect their newly purchased home to be perfect. It is an emotional time and the excitement is palpable. They walk into a dirty home and all of that excitement disappears.

Can You Holdback Money?

The first inclination of Buyers is to demand that money be held back from the Seller to cover the costs of the cleanup. Unfortunately, the reality of a real estate transaction is that Buyers are not entitled to holdback money from the closing funds for minor breaches of contract.

The standard form contract in use in Alberta does not give Buyers an automatic right to withhold funds unless that right has been agreed to in the purchase contract.

What constitutes a minor breach? That is not easy to quantify but examples of this would be where the home has not been cleaned as required, an appliance is not working or there is some drywall damage.

Can You Minimize Risk?

This is simply a question of negotiation at the time of your Offer. Will the Seller accept a clause in the contract giving the Buyer a right to holdback funds if the property is not up to standard at closing? It is unlikely, but certainly something worth attempting to negotiate.

If, for example, a term of your Offer obligates the Seller to get carpets professionally cleaned, a clause should also give you the right to holdback a preset amount at closing pending the production of receipts showing the work having been done.

You should also ensure that a term is added to your original offer giving you the right to a walk-through either the night before or morning of closing.

Simply put, if there is work to be completed by the Seller before closing, you and your Agent must ensure that the Offer has terms added that protect you in the event those matters aren’t resolved as required. The wording of these holdbacks is vital. Your Realtor is not a lawyer so if there are any questions either contact us or have your agent contact us to review what should be included in the holdback clause.

Purchasing The Property You Expected

Date: November 6th, 2019
By: Ron Thibeault

The proverbial “Wolf in Sheep’s Clothing” is what we all want to avoid.

We all make assumptions based on what we see or what we think we see. Buying a property is no different. We look at the fences surrounding a property and assume that they outline the property lines; we look at a beautiful greenhouse and assume it was built properly and in the right location. The reality is that our assumptions are often not correct.

An example of this is where a property backs onto a green space. You assume the back fence is on the property line but it actually goes 15 metres back into the green space and the yard is actually smaller by that amount.

You bought the property assuming that the yard was massive and now it turns out that the City requires that the fence be relocated to the property line.

Are Real Property Reports A Solution?

The current contract requires that the Seller provide the Buyer a Real Property Report (“RPR”) at least 10 days prior to the closing day. The problem is that even if that contract term is adhered to, the transaction is typically unconditional at that point and there is little time to deal with the relevant issues. There are questions of what your rights are should a problem be discovered at that point.

Ultimately, standard real estate industry practices are responsible for these problems. When a Seller lists a property with a real estate agent, the Listing Agreement stipulates that the Seller has a RPR that reflects the current state of the improvements on the property.

Effective agents will check on this and follow up knowing that the RPR can become a significant problem. Unfortunately, some real estate agents still don’t follow this most basic of requirements and you are left at risk as a result.

Making Your Offer

Before you submit an offer on a property, make sure that your agent is aware of your concerns. Have your agent make the necessary enquiries and seek to obtain a copy of the Real Property Report prior to submitting your offer.

If it isn’t available, ask why and structure your offer accordingly to ensure that you know what it is you are purchasing.

Buying Foreclosed Properties Comes With Risks

Date: November 5th, 2019
By: Ron Thibeault

So, you want to get a deal? Looking at a foreclosed home? Well, the risks in doing that might be more than you expected. Often what looks to be a fantastic deal really might not be exactly that in the end.

Normally, the Seller gives certain warranties to the Buyer that the property will be, amongst other things, in the same condition as when it was originally viewed, that there are no compliance issues, that there are no defects the Seller is aware of. This is not the case in a foreclosed property.

Risk? What Risk?

The major issue in dealing with a foreclosed property is that the lender who has foreclosed will be selling the property with no warranties whatsoever. A typical term of an Offer relating to a foreclosed property specifically states that the property is being sold on an “as is” basis.

What does this really mean? In layman’s terms it means that you assume all of the risks with foreclosed properties and may ultimately be left holding a property that has serious deficiencies.

In a standard transaction, the Seller warrants to the buyer that there are no compliance issues and is obligated to provide evidence of that. In a foreclosure situation, you will likely not know of any compliance issue until you go to sell the property in the future and, most importantly, will be left with the problem because the lender sold the property “as is.”

What Is The Worst That Can Happen?

How serious can the problem be? If you purchase a property with a serious compliance issue, say a portion of the garage was encroaching into the neighbouring property, you might not be able to resell that property until that issue is resolved, which could include moving the garage; you have absolutely no recourse as against the owner/lender who sold it to you.

Ultimately, buying a foreclosed property is not for the faint of heart. If you decide to make an offer on one you should ensure that your agent is fully aware of how to protect you and discuss the issue with us prior to making your offer. Sometimes deals really are too good to be true but we can help you get through the process.