The Break Up

No, I don’t mean that awful movie with Jennifer Aniston and Vince Vaughan – the one that was supposed to be amazing but resulted in me lasting only twenty minutes before I changed the channel…

I mean the disastrous break-up between two condo-owners that netted them a massive, and somewhat unexpected financial loss.

I’m no marriage counselor, nor am I the authority figure on relationships, but I’ve always maintained “Don’t buy a property together until you’re good and ready!”

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Yeah, I really didn’t care for that movie at all.

It was anything but “classic” Vince Vaughan and it’s never fun to see your hero go downhill.

Look no further than Matthew McConaughey

Matthew McConaughey was a consummate guy’s guy, and all it took was three little words from Dazed and Confused to spawn a generation of McMatt wannabe’s: “Alright, Alright, Alright.”

Or how about, “That’s why I love high school girls – I keep gettin’ older, and they stay the saaaaame age!”

McMatt went on to deliver manly-man performances in “U-571” and “The Newton Boys,” and then showed us his intellectual yet still manly side in “A Time To Kill” and “Amistad.”

But “The Wedding Planner” signaled the beginning of the end for McMatt.

It was crushing to see the man who said, “You just gotta keep on livin’ man, L-I-V-I-N” being pulled at from both sides by Jennifer Lopez and Bridgette Wilson.  Even worse is that we all got dragged to see this movie by our girlfriends, who said, “But you love Matthew McConaughey!”

Then came “How To Lose A Guy In 10 Days” with Kate Hudson.

And “Failure to Launch” with Sarah Jessica Parker followed shortly thereafter.

And then came “Fool’s Gold” which saw McMatt reunited with Kate Hudson who started his career on this dangerous path of romantic comedies.

But I lose all respect for Matthew McConaughey when I saw the first preview for “Ghost of Girlfriends Past.”

Come on, Matthew!  Shoot somebody, or something!  Drink a beer!  Pick a fight!  Drive a fast car!

Forget it…this is a lost cause…

I’ve always emphatically stated that it makes no sense to buy real estate with your partner unless you are “sure” that it’s going to work out.

This begs the question: “How do you know you’re sure?”

I don’t know.  I’m not Dear Abbey…

For young couples, I think it helps if you’re married or at least engaged.  To BUY a condo with your girlfriend of boyfriend is just asking for trouble, and I know a few couples who have had this blow up in their face.

But as we all know, more than 50% of marriages on our planet end up in divorce, so even a marriage can’t save your precious house or condo!

About three weeks ago, a colleague of mine was asking me just how accurate our Land Registry system was.  I told her it was VERY accurate, and then inquired, why?

She said that she was going to make an offer on a condo listed at $599,000, but it showed in Land Registry that it had been purchased by the current owners on September 1st, 2009 for $600,000.

Something didn’t add up!

Land Registry shows all previous owners of a property (house, condo, commercial property, vacant land) in addition to the transfer date, and the transfer amount.  If you sell your condo to your sister for $1.00, it shows up in Land Registry as such.

So my colleague was wondering why this condo, which was listed on the open market at the end of October, seemed to have previously sold less than two months earlier!

Was this a flip?  The condo didn’t seem to be recently renovated.

It wasn’t a foreclosure, nor was it a transfer of ownership within the same family.

So I told my colleague, “Why don’t you just ask the listing agent for the back story?”

She did, and he simply said, “The two guys who bought the place had a big fight, broke up, and now they’re selling.”

Ouch!

I hope they enjoyed the condo for those 58 glorious days…

I hear that divorces can be expensive and messy, but so too is buying a condo and breaking up with your partner after a few weeks!

The Land Transfer Tax on the $600,000 purchase in September amounts to $16,200.

I would probably peg the legal fees to close the transaction at around $1,200.

Let’s assume there were “miscellaneous” expenses of $3,000 for the moving trucks, and a few new pieces of furniture which they’ll probably cut in half after they go their separate ways…

Assume that the sellers put down 20% and had a mortgage for the remaining $480,000.  To discharge this mortgage early would normally have a penalty of three months’ interest, or approximately $5,220 according to my calculations.

And to put this condo on the market only two months after buying it, and pay two real estate agents to sell it for them, the owners are looking at $30,000  in fees and commissions.

That’s $55,620 before we’ve even considered whether or not they can sell the condo for what they paid!

I didn’t think that this was the type of property to get multiple offers, and my colleague agreed.

Her client was willing to pay the asking price if he needed to, but with offers being reviewed at 7:00PM that night he sure wasn’t going to name his price until he knew if he was in competition or not.

My colleague registered her offer at 9AM on the day of offers, and called the listing agent every hour until 7PM.  She had an offer of $565,000 in her hands, and went to present the offer with that, and that alone.

As luck would have it, another buyer came to the table at about 7:05PM that night and messed it all up!

My colleague presented her offer under the impression that she was the only game in town, but eventually she was allowed to go back to her client to improve her offer.  The other cooperating agent knew there was a competing offer, but my colleague sure didn’t!  It would have been very unfair to not give her an hour to see what she could come up with, and in the end she came up with $599,000.

I told her she should go to $605,000 or $610,000 – being in competition and all, but her client said he was willing to lose the property for a few thousand dollars, and they went ahead at $599,000.

And you know what?  She got it for $599,000!

Great for her client, terrible for the sellers!

So the sellers lost $55,620 after holding this condo for two months, but it could have been a lot worse!

What if that second offer didn’t come in at 7:05PM?  What if $565,000 was the only offer and the buyer refused to go any higher?

Then the sellers would have been out $89,620 for their efforts!

Break-ups aren’t cheap, but this has got to hurt!

And what hurts the most is that this condo was one of the nicest I’ve seen all year.  It was in a beautiful neighborhood, in a top building, and it had a huge outdoor terrace that overlooked the lake – perfect for entertaining your friends who will eventually have to choose sides after the break-up.

That’s a lot of money, and it could have been worse.

I suppose it’s all relative, and we hear about celebrity break-ups that cost $50,000,000 in settlements.

I remember when my parents split up about a decade ago, and my mom told me she had written a $15,000 cheque to her divorce lawyer as a “retainer.”  I called her lawyer to discuss her services, and she told me that she charged $450 per hour for all phone calls, rounded up to the nearest minute.  There was a flat fee of $50 for simply answering the phone.

I eventually stepped in between my parents and helped them to negotiate their divorce settlement because I knew that at the rate things were going, the lawyers would probably eat through 50% of the assets by the time all was said and done.

The crazy part is – we all lived happily ever after.  We really did, and we’re all a lot better off; happier as a group collectively and as individuals.

I hope the same could be said for the sellers of this $599,000 condo.

And I hope some young girl is reading this right now thinking, “maybe I shouldn’t buy that condo with my boyfriend of four months….”

2 Comments

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  1. Duff says:

    Regardless of when they sold, 2 months, or 2 years, they were going to incur that loss. Sure, waiting a few years would give them gains that negate this, but lost money is lost money. I’m starting to think that buying any property that you expect you’ll need to sell without some outside reason (like moving due to work) is a poor decision.

    David, I’d love to hear your opinion as to whether the concept of a ‘starter’ home still makes sense considering the amount of leveraged borrowing people need to buy one these days. Does the exposed risk, upkeep expenses and potential gains add up to something that outweigh the costs of selling and buying a house on the ‘next level’.

  2. earth mother says:

    Ouch! no one likes to lose money… thanx for the number crunching & the cautionary tale! Then again, some cynics would say the financial loss is worth it to escape the union!

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