Intervention needed in the housing market: Duensing
By Mia Clarke, Associate Editor
One family got caught up in a bidding war that ended up costing them $500,000 — and no house to show for it, says Duensing, principal of Duensing Law.
He says the case, which illustrates the “imminent necessity for government intervention in the housing market,” has tragic consequences for a family “whose excitement to dive into the marketplace led them to suffer a substantial financial penalty.”
In April 2017, the family found their dream home — a $2 million house just listed that week. They submitted an offer of $2.05 million, but soon became embroiled in a bidding war with two other families, says Duensing.
Afraid of losing the home, they increased the offer to $2.25 million and didn’t include a condition about first securing financing. The offer was accepted, he says.
“The Agreement of Purchase and Sale required an initial deposit of $30,000, which the [family] paid. Unfortunately … they soon discovered that they could not secure financing for the home,” wrote Duensing.
“With the approach of a second deposit of $90,000 imminent, the family contacted the listing agent and expressed concerns that they had overpaid for the property. After failing to pay the second deposit as of the due date of April 10, the family communicated to the [sellers] that they could not secure the financing to close the purchase of the home."
Lawyers for both sides tried to work out a solution but, with no resolution in sight, the sellers relisted their property at $2.25 million.
The would-be buyers confirmed that they couldn’t afford the house and asked the sellers to try to mitigate the losses by contacting the other families who had shown an interest in the property,” says Duensing.
With no offers in more than two weeks, they reduced the asking price to $1.998 million, he says. Two months later, the price was further reduced. In August, the sellers finally received $1.78 million — a loss of $470,000.
The sellers asked the Ontario Superior Court for summary judgment requiring the would-be buyers to pay the difference, wrote Duensing.
In response, the potential purchasers argued that the sellers “did not take reasonable steps to mitigate their losses, and should have relisted the property once the … family failed to pay the $90,000 second deposit, arguing that the [homeowners] would have been able to sell the property for more, while the market remained hot,” says Duensing.
“Interestingly, an expert real estate appraiser testified that the real estate market remained ‘hot’ until approximately May 15, 2017, with prices falling off after that, which ties into the government programs that were implemented after April 2017, which were designed to cool down the real estate market,” he writes.
The court found that the potential buyers officially repudiated the Agreement of Purchase and Sale on May 2 — not April 10 — and that the sellers “did not act unreasonably by listing their home at $2.25 million,” says Duensing.
As a result, they were ordered to pay the homeowners’ loss of $470,000, he says.
“Coupled with their initial $30,000 deposit, the … family has lost half a million dollars, with no property to show for it. Hopefully, the cooling housing market will prevent these tragedies from happening in the future, and buyers, sellers and agents will insist on a finance condition in all Agreements of Purchase and Sale, for the protection of all parties,” writes Duensing.