Not too long ago I had an agent walk past me with a distraught look on her face. When I stopped her and asked her what was wrong she said she had fallen asleep at the switch while negotiating an offer on one of her listings and, as a result, now had to pay for a hot water tank and a furnace.
Can you guess how this came to be?
On the Schedule A was the typical chattels and fixtures clause which, in addition to its stipulating that all chattels and equipment are to be good in working order on the date of closing, also stipulates that the chattels and fixtures shall be free of all liens and encumbrances. As it turns out, the hot water tank and furnace were on a lease to own contract (which is different from a straight rental). The rental items clause in the APS was left blank. If the hot water tank and furnace had been inserted into the blank, the buyer would have been obligated to assume the rent to own contract (that is, if the rent to own company allowed it to be assumed, which sometimes they do not).
In this case, since it was left blank, the buyer was not obligated to assume the contract, and as we saw in the chattels and fixtures clause in Schedule A, those fixtures were to be transferred to the buyer on completion free and clear. This now meant that the seller had to pay out the remaining balance on the rent to own contract. The sellers rely on us to protect them and look after their best interests. Since that didn’t happen here because the agent overlooked it, she undertook to pay out the contract without even being asked to do so by the seller, which was the right thing to do and was good business.
The moral of the story is that, when listing properties, it is important to ask the seller if they have any lease to own contracts for appliances, alarm systems, air conditioning units, furnaces, etc. It sometimes happens that sellers don’t even know they are involved in these contracts so it’s not a bad idea to triple check with them. It may also be the case that the appliances were bought, for example, at The Brick or at Sears with monthly payments. In these cases, there will be a lien on them until they have been paid out in full. This may mean your seller will have to pay out the balance on or before closing, potentially resulting in a much lower net than they anticipated from the sale of their house. As such, they should be made aware that they will have to pay out the balance so they are not faced with surprises on closing.
There is another moral to this story. It is very easy to become complacent when reviewing offers. You may read the first few words of a financing condition or some other clause, recognize it from those few words, and not bother to read the rest of it, or just do a basic skimming because you’ve seen them so many times. As you have seen here, not carefully reading every word and every line can end up costing you the price of a furnace and hot water tank, or, in some cases, much more money, not to mention your reputation.
Recent Comments