They bought Firm but haven't sold Now what?

Our buyer cannot sell their existing home, now what?

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: 1.      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. 2.      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. 3.      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. 4.      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. 5.      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. At our firm, we not only close real estate deals all over Ontario, we also provide timely advice on how to deal with any closing issue you or your clients may face.If you have any questions about any closing issue, do not hesitate to contact me toll free at 1-888-876-5529 or at mark@realestatelawyers.ca   Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529

FOREIGN BUYERS be careful

5 Things to know about the New Ontario 15% Non- Resident Speculation Tax

** Although the Province has just announced the 15% Non-Resident Speculation tax, there are already more questions than answers. Here is what you need to know. 1.      The tax is for non-residents of Canada buying 1-6 residential units in the Golden Horseshoe area of Ontario. This tax is in addition to any Land Transfer Tax payable. It applies only on 1-6 units of residential property purchased by a Non-resident of Canada in the Golden Horseshoe Region of Ontario, including Toronto, Niagara, Hamilton, Peterborough, Simcoe, Waterloo and York. It thus does NOT apply to any apartment building with at least 7 residential units, or any commercial property, industrial property or vacant land. 2.      What if you are a Canadian citizen but also a non-resident? If you are a Canadian citizen, you do not pay the tax. Even if you are a non-resident, living in the US, Great Britain or Hong Kong, as long as you are a Canadian citizen, you will not pay this tax. 3.      What if there are 3 buyers buying a property that cost $500,000.00, each owning a third of the property, with 2 owners being Canadian citizens and one being a non-resident? Here it becomes very problematic. Even if the non-resident will own only one third of the property, they must pay 15% on the entire purchase price of $500,000.00, or $75,000.00 4.      Lenders ask for parents to sometimes co-sign a mortgage for their children buying a home and take a small percentage of title, even 1%, to do so. What happens if the children are permanent residents of Canada but the parent is a non-resident? This is a disaster, because under the new rules, even if the parent was holding the 1% title in trust for the children, they must pay 15% of the tax on the ENTIRE purchase price.  Mortgage brokers, lenders and realtors must be aware of this when qualifying potential buyers. In this regard, lenders will have to start giving serious consideration to accepting a guarantee instead from the non-resident parents, to avoid the non-resident parents having to take any interest in the property, triggering this tax. The issue, however, is that if the children do not qualify based on their income, the parent may have to go on title to satisfy the lender requirements. In addition, the guarantee will likely require the parents to obtain independent legal advice , and permit them to raise more defences if the bank tries to enforce it. As you can see, this is not easy, and this must be determined before anyone in this situation puts in an offer to buy a home. 5.      Rebates Even if the tax is paid, rebates will be available if the non-resident becomes a resident of Canada or a Canadian citizen within 4 years of closing, or if the non-resident is a foreign student who has been enrolled as a full-time student at an approved Ontario institution for at least 2 years after closing, or the foreign national has worked at a full-time Ontario job for at least one year after closing. At our firm, we close real estate deals all over Ontario including the Golden horseshoe area.  With our mobile signing service we can come to you at the time and location of your choice to sign your closing documentation.   f you have any questions about the 15% non-resident speculation tax, do not hesitate to contact me toll free at 1-888-876-5529 or at mark@realestatelawyers.ca Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529