As summer winds down, it’s a good time to reflect on recent transactions, recurring issues we’ve seen, and best practices to help avoid problems.
1. Power of Sale Properties
Unfortunately, we’re seeing more Power of Sale listings. When representing a Buyer, it’s critical to explain the risks:
- No representations or warranties on the property, chattels, or fixtures.
- Home inspections are essential—do not skip them.
- Open permits, work orders, or deficiency notices become the Buyer’s responsibility; title insurance will not cover these.
- Vacant Home Tax risk—if the defaulting owner failed to file the declaration, the Buyer could be on the hook. Include a protective clause in the Agreement to safeguard your client.
2. Backing Out of Deals—Almost Impossible
Many clients contact me hoping to be released from deals (e.g., financing fell through, value dropped, overextended). Builders are not granting releases. The result: deposits forfeited and potential lawsuits. Best advice: find a way to close—even via a private mortgage—to avoid a bigger mess.
3. Sales Involving Spousal Splits
These can be complicated, especially when emotions run high. Remember:
- We are not marriage counsellors or family lawyers.
- No funds can be released until a signed separation agreement clearly sets out the division of proceeds.
- A recent example: a spouse purchased a new property expecting the separation agreement to be signed before closing—only to scramble for an extension when it wasn’t. Funds can sit in trust for months or years while parties resolve disputes.
4. Clear, Precise Agreements
Disputes hinge on contract wording. Example: a clause required the Seller to fill a propane tank but didn’t specify who pays. Now, $800 is in dispute—something easily avoided with careful drafting. Be explicit and concise in your clauses.
5. Status Certificates Must Be Current
Ensure the clause specifies a current status certificate—within 30 days. Anything older is likely outdated and a new one must be ordered.
6. Clarify Inclusions and Rentals
Don’t rely on standard clauses. Example: a $4M home included a heated basement floor powered by a rented boiler—$200/month rental, $30,000 buyout—yet it wasn’t mentioned in the Agreement. The Buyer disputes paying for it, and the Seller points to the realtor. Always ask about rental or rent-to-own items and ensure they’re documented.
7. Large Sale Prices Require Large Deposits
For high-value properties, protect your client:
- Obtain the largest possible deposit.
- For long closings, request additional deposits.
- Where feasible, research the Buyer’s ability to close. Defaults are on the rise—large deposits are your best protection.
8. Assignments—Proceed with Caution
Assignments have shifted. Profitable flips are rare; many Assignors are desperate to offload at a loss. Assignments are among the most complex transactions:
- Always make them conditional on lawyer review.
- Refer to a lawyer experienced in assignments—many are not.