I’ve come to realize that using the phrase, “This is a first for me” to describe an experience in real estate is naive on my part.

It doesn’t matter how long you’re in this business, you are going to continually see things for the first time, again and again.  The business evolves, as do the people within it, the processes for transacting in real estate, and thus the experiences endured.  Along the way, change is constant, and “firsts” are going to appear.

Back in December, my colleague, Chris, and myself, were working with clients who wanted to purchase a home and sell their condo.

Easy enough, right?

This represents the largest part of my business, and has for the last few years: condo-owners who are moving up to houses.  Or if you want to put it the other way around: home-buyers who happen to own condos.

It’s more than just a coincidence that this is where I find myself working probably half of the time, since an overwhelming majority of house-buyers also happen to own condos.  That’s just the nature of the real estate cycle.  Looking at my board right now (yes, I have a board), I currently have eight would-be home-buyers who are living in condos, and who would be selling those condos once they purchase a home.

As I said, this is the largest part of my business, and for the most part, it’s smooth sailing.

We’ve talked a lot in the past about “buying before selling,” and while there are proponents of both sides of this argument, almost every client I’ve ever worked with has bought and then sold.  The reasons, and the risks, are a topic for another day.  But suffice it to say, the way our market works, you need to spend time house-hunting and then perhaps make multiple purchase attempts before finally tying one up, and then sell the condo, which for the most part, has had few obstacles over the years.

Our clients in this case, we will call Allan and Frances.

Allan and Frances owned a condo in the west end (purchased through another agent) that was only 6-years-old, and in a dynamite location, with decent amenities, and was a reasonably-priced building.  Sales in the building weren’t exactly plentiful, but there was a track record over the past two years.

We figured their condo was “worth” about $575,000, but we told them that when the time came, we felt we could get $600,000 for it.

We set out to find a house for Allan and Frances, using a conservative sale price of $575,000 for the condo in our calculations of affordability and purchasing power, and after losing out on two houses, we ended up securing one that was about 10% below their price ceiling.  Who doesn’t love that, right?

Our next job was to put the condo on the market, and we continued to follow all the steps that we use with our other sellers.

We met with our stager, Lucie, and walked Allan and Frances through the process.

First, we listed off everything that they needed to remove from the condo, and over the following weekend, they did so.

Second, we had painters come into the unit to provide a fresh look.

And lastly, Lucie and her team came through and staged the condo, bringing in about 50% of the furniture that would be presented to buyers upon the listing.

From a pricing standpoint, we used what I call the “hybrid” strategy between the age-old “under list and hold back,” and “price at fair market value,” which is to say that we did both.

We priced at $599,900, and had a set offer date.

Why?

Well, we didn’t like the idea of pricing at $499,900, or $529,900, or $549,900, looking for bids of $600K or above.  There just wouldn’t be the organic interest in this unit, in this building, in this location.

Figuring that our staging, marketing, and ability to sell real estate would bring this unit around $600,000, even though comparables said $575,000, we priced at $599,000, but also had an offer date, to try to trick the market into either bringing us a bully offer over list, or bringing us multiple offers on our scheduled offer night.

And if it didn’t work?  Well, we just leave the listing out at $599,900, no harm, no foul.

I always order the condominium’s Status Certificate well in advance of the listing, not only to encourage unconditional offers (by having a copy for interested buyers and buyer agents to review) but also so I can familiarize myself with the building.

This building looked to be in good shape.

The reserve fund had $2.5 Million in it, which is exceptionally rare for a building of this age!

There was a budget surplus of $50,000 for this fiscal year, which is also quite rare, and very unexpected.

There were no special assessments planned, and no maintenance fee increases scheduled.

There were, however, two issues:

1) The building had Kitec plumbing.
2) There was a lawsuit.

Call me cavalier, but neither of these is uncommon.

Literally hundreds of downtown Toronto condos have, or had, Kitec plumbing, and hundreds and hundreds of buildings have had the Kitec replaced in the last five years.  I have a standard clause that I use when representing the sale of a unit with Kitec, which holds back funds from the sale proceeds for upwards of twenty-four months, to be held in trust, and applied to the eventual cost of Kitec replacement.

Lickety-split.

As for the lawsuit, I wrote about this at length in November: “When Is A Condo Lawsuit A Dealbreaker?”

In this case, the condominium corporation was the plaintiff in the lawsuit, and not the defendant, which is far less concerning (some lawyers would say “not” concerning).

Again, call me cavalier if you want to, but I’m not playing down these two issues because of bias, but rather experience.  I have sold dozens of condos with Kitec plumbing, both on the buy and sell sides, and I’ve sold dozens of condos with varying types of lawsuits.

This literally comes down to the old adage about making an omlet and breaking eggs: condos have issues.  Period.

Overall, we felt confident about the building, the unit, and the listing, and on offer night, we received two offers.

The top offer was for the list price, rounded up – $600,000, and was unconditional, with the seller’s desired closing date, and a certified deposit cheque in hand.  The second offer was lower, and without a cheque, so acceptance was a no-brainer.

The deal was done, and things seemed good.

The buyer’s agent was in Oshawa, and he had the deposit cheque on him.  We didn’t consummate the deal until about 9:30pm, and while I urged, er, directed him to bring the cheque to us that night, he said he wasn’t able to do so, but assured us that he would produce the cheque in the morning.

You know where this is going, right?

When we sell properties in this market, we always try our best to get a deposit cheque with the offer.  When the leverage is on our sides, ie. when there’s a hot listing with an “offer date” and multiple bids, we’re able to motivate buyer agents to bring deposit cheques with them.  When a property has been sitting on the market for 58 days, there’s no way a cheque is coming with the offer.  In fact, a buyer agent would look too eager by bringing a cheque, but again topic for another day.

In this case, we did have multiple offers, but I had no leverage to force this agent to bring the cheque.  This was the offer we wanted, and the other offer was less desirable on every term and condition.

I had no choice but to accept the fact that the cheque would be brought the next morning, which, to be honest, is how most agents do things.

Fifteen years in this business, and I have never sold a property, with the deposit provided “herewith” in the form of a bank draft, only to see the bank draft fail to appear the next morning.

But as I said, there’s a first time for everything…

The next day, I waited for the email from my office saying that the cheque had been dropped offer, but that email never came.  10am turned to 11am, noon came and went, and at 1:00pm, the buyer’s agent called me.

This agent, to be fair, was very new in the business.  He also worked in a town outside of Toronto, and wasn’t accustomed to how things are done here.

“We have a bit of a snag,” he told me.  “My buyer is freaking out about submitting an unconditional offer last night,” he explained.

Here in Toronto, of course, almost all of our offers are unconditional; even condos.  But in Oshawa?  I bet people are buying houses conditional on the sale of their own home.

I tried to calm the agent down, but he was frantic.

“I made a mistake,” he told me.  “I shouldn’t have pressured him to come in unconditional.”

This was all just noise to me, of course.  Regardless of how his buyer felt, or how he felt, they owed us a cheque.

“My client’s mortgage broker is telling him he never should have come in without a condition,” he told me, and I informed him that all mortgage brokers ask for a condition, but the market doesn’t always allow for it.

I reiterated, ever-so-nicely, that they needed to bring us the cheque before 9:30pm that night, or they’d be in breach of the agreement.

But later that afternoon, the buyer agent called me again, this time claiming, “There’s a problem in the building.  First National won’t lend here.”

Now we had a problem.

I had sold a condo, firm, and was waiting on a cheque.  The buyer purchased a condo, firm, and was being told that his lender of choice wouldn’t finance the purchase.

Do you see where there’s a disconnect?

Legally-speaking, this buyer was obligated to bring the deposit cheque, regardless of his financing.  But logically, was he going to do so?

The only thing left to do at this point was stare at the clock, and wait for 9:30pm to see if they would breach the contract.

By 10:00pm, it became obvious that the cheque wasn’t coming, and they weren’t afraid of the word “breach.”

By 10:30pm, the buyer agent called me and said, “Can we do an Amendment?  We’ll do five business days to review for financing, and then bring the cheque?”

This made perfect sense for them, for two reasons:

1) It would allow them time to actually attempt to secure financing
2) It would give them a true “out” if they needed one

Because at this point, they were in breach of contract, having bought a property without providing a deposit within the legally agreed-upon time period.  If we all agreed to include a condition for five business days, then they could provide the cheque, wait five days, decide not to proceed with the deal, and then legally opt out, and get their deposit back without deduction.

We ran this by Allan and Frances, and they said, “No way.”

We all went to bed without anything sorted, and the next day, it was all quiet.

No word from the buyer agent, that is, until………..he asked for a mutual release.

I had spent a considerable amount of time talking to my mortgage broker about the building, and he said that Royal Bank and Scotia would not lend on the building, but that TD would.  I passed this information along to the buyer agent, but he said it didn’t matter; the buyer was “spooked.”

I don’t blame him!  What kind of first-time buyer wants to go through all this?

But nobody put a gun to his head!  He made an offer and it was accepted.  Period.

Not only that, we knew that he could get financing, and it wouldn’t be through some B-lender, but rather one of the Big-5 banks.

The buyer wasn’t budging.  Two days went by, and he hadn’t provided a deposit, nor had he given us any indication that he was even considering coming back to the table.

Allan and Frances refused to sign the mutual release, which would absolve the buyer of any further liability, and I encouraged them not to.  What was in it for them?  Until we had another offer in place, there was no upside.  If they sold this place for $50,000 less, then the original buyer would be on the hook for it.

Allan and Frances could continue to offer the condo for sale without signing the mutual release, and if that was the case, then why sign it?

So that’s what we did.

And low-and-behold, two days later, we received another offer on the condo.

This one was amazing.  How about $610,000, unconditional?

We were ecstatic.

Yes, we had a hand in motivating that buyer, and that buyer agent, to get to that price.  But it was the lack of a condition, and, the fact that a deposit was in hand, that made this so sweet.

All we had to do was sign this offer, obtain the cheque, and then we would sign the mutual release for the first deal, and move on!

I had received the offer while driving, and Chris had been running point with this other agent for the last two days, so it wasn’t until I got home, sat down, and looked at the offer that I realized there was a problem.

The offer was for $10,000 above our asking price, with no conditions, and with a cheque in hand.

But we couldn’t accept this offer, even if we wanted to.

(TO BE CONTINUED…)