It finally closed!! The deal I thought might never close. The deal that took as much of my time as 10 other deals. The deal that should be in the real estate training manual for all the things that can be learned from it. But I’m getting ahead of myself. Let’s start at the beginning.

We had four clients, more or less, who were selling the property. One lived in Toronto and 3 lived in other parts of Canada. There was also an estate involved. The client  who lived  in Toronto had an estates lawyer and a real estate lawyer. The other three clients were represented by a separate lawyer. There had been a fire in the home a few years ago. The property was being sold for land value and was originally two separate lots.

We were first approached by one of our clients to discuss the sale of the property approximately a year and a half before it went on the market. There were numerous issues that needed to be resolved before it could be listed. When it finally came to market, it was listed at was thought to be a fair price based on the recent sale prices of comparable properties.

We spoke with the lawyers and were advised to disclose that there had been a fire on the property several years earlier, even though the damage had been repaired,  because some insurance companies might refuse to insure a property that had a fire and, without insurance, it would be much harder and expensive for a buyer to obtain a mortgage. Making full disclosure would prevent a buyer from backing out of the deal because they couldn’t get financing and claiming that it was our fault for failing to disclose the fire. Lesson 1: Disclose, disclose, disclose any facts you know that might be sufficient grounds for a buyer to back out of the deal later on if they are not aware of these facts. 

We advised all potential buyers that, while it might have been possible to sever the property into the original two lots and build two new homes instead of one, we couldn’t guarantee that and they should consult with their lawyers, planners or architects for expert advice on this matter. Lesson 2: Don’t make representations unless you’re certain they’re correct because it might be possible for a buyer to use a misrepresentation to get out of the deal or negotiate a lower price.

We were flooded with calls from builders wanting to see the property. They all claimed they didn’t have their own agents and wanted to put their offers in through us. “Sorry,” we said, “we’re representing our four clients, the estate and their 3 lawyers. Not only do we already have our hands full, but we’re not getting in the middle of  this one. Surely you must know an agent who can help you?” (Unless this was the first home any of these builders had ever bid on, chances are they had all worked with an agent before.) Lesson 3: If you hire an agent to represent YOUR best interests, make sure your agent does just that. And if you’re an agent, avoid representing both sides to a transaction. The extra commission isn’t worth the potential liability (as you’ll see later on in this saga and in Commission Side Deals). [Remember this lesson because it comes up again later.]

We received fifteen offers. Remember, we were representing four clients, three of  whom were not in Toronto, an estate and three lawyers. This was not a straightforward offer process. There was a lot of information to review and analyze and then convey to our clients along with our advice. Lesson 4: Make sure your agent keeps you informed of absolutely everything that’s  going on. At the end of the day, it’s your property and your money that are on the line. As an agent, don’t withhold any information from your client. Disclose, disclose, disclose everything to your client. 

Some potential buyers were corporations. Some were individuals “in trust”. We told the agents for these buyers that our clients preferred to deal with individual buyers and not with corporations or trusts and gave these buyers the opportunity to use their individual names. Most builders don’t have an emotional attachment to the property they’re buying so they may be more likely to walk away from a deal than a buyer who needs a home in which to live. If the successful buyer ended up breaching the contract and our clients needed to sue him, we wanted our clients to be able to sue an individual who presumably had assets and not a corporation or a trust without assets. It’s called protecting your client. Lesson 5: Think of everything that can possibly go wrong and do what you can to protect yourself in advance. 

For the same reason, we requested a large deposit by way of certified cheque from the buyers because the more money a buyer has at risk, the less likely he is to walk away from a deal. Lesson 6: Get as large a deposit as possible. [This lesson comes up again later, too.]

After reviewing all the offers with our clients, it was clear that several were better than the rest. These buyers were given the opportunity to improve their offers if they so desired. When these offers were resubmitted, one offer was the best. Our clients decided to accept that offer. When we contacted that agent to inform him of the good news, his reply was unexpected: “Oh, ya. I should’ve called you. My buyer changed his mind and is withdrawing his offer.” This was a surprising turn of events, especially since we had just spoken to this agent 15 minutes earlier when he resubmitted his clients offer. As a matter of law, an offer cannot be withdrawn prior to the irrevocable date. Our clients could’ve sued this buyer for damages, but practically speaking, the second best offer was excellent, too, and it wouldn’t have been worth the time and effort to sue the first buyer. Lesson 7: An offer or counteroffer cannot be revoked before the irrevocable date. Before you submit an offer or a counteroffer, make certain you’re prepared to live with the result if your offer is accepted because you risk being sued if you revoke your offer or counteroffer.

Finally, after these lengthy negotiations, our clients accepted what we all agreed was a phenomenal offer. Maybe even too phenomenal. [Remember this point for later.] Our clients were very happy. At this stage, the excitement usually dies down, the documents are forwarded to the lawyers and the parties and agents settle in and wait for closing.  But that’s not what happened in this case. Not by a longshot. What happened next deserves its own blog post, so stay tuned for It Finally Closed – Part II.