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Case Study: Walk away from a deal because of the deposit amount?

 

When Deposit Demands Derail Real Estate Deals

Here is a recent case study that happened to me and some of the everyday complexities and challenges in real estate transactions. The key points are:

• The buyers found a house in rough shape that had been on the market for 2 years, presenting an opportunity for sweat equity.
• The initial offer was over 90% of the asking price, with a $10,000 deposit and a quick 45-day closing timeline - a very strong offer.
• The seller countered, asking for a higher $25,000 deposit, citing it as "standard" for a 5% deposit.
• We argued that the $10,000 deposit was appropriate given the buyers' financial situation and the limited risk to the seller with the quick closing timeline. However, the seller insisted on the higher $25,000 deposit.
• Ultimately, the deal fell through, as the seller was overly focused on maximizing the deposit rather than working constructively with the qualified buyers.

This case study illustrates how a seller's inflexibility around deposit amounts, even when a buyer is making a very strong offer, can derail an otherwise viable transaction. A $10,000 deposit on a home under $1 million is already a substantial amount that demonstrates the buyers' commitment. Pushing for an even higher $25,000 deposit, without a clear justification, seems unreasonable and could cost the seller a sale.

A common question is how much deposit is standard on a real estate contract? The simple answer is that there is no simple answer. The deposit money is a term of the contract agreed upon between the buyer and the seller. The more deposit money put forward, the more security the seller gains once the conditions have been met. The deposit money forms part of the purchase price and is calculated as part of the total price offered and not in addition to it.

For sellers, the deposit serves as a security measure that provides peace of mind. A buyer who submits a large deposit demonstrates a strong commitment to the deal. This is an excellent thing in a multiple offer situation. This good-faith money acts as a safeguard, ensuring that the seller won't be left in the lurch if the buyer backs out without a valid reason. 

So in my case, the seller wanted a $25,000 security measure for a closing that would happen in 45 days. He felt that $10,000 was insufficient to enforce the closing, as it was such a small amount that the buyers might be willing to walk away if they changed their minds. I don't know how many people who are buying houses under $1 million don't think $10,000 is a lot of money. The only common reason why anybody would walk away from their deposit in a real estate deal that I can think of is if values drastically changed. The bottom dropped out of the market. The risk of that happening in 45 days is extremely low. Is it worth walking away from a deal altogether because of that fear?

**Update** The listing that turned us down is still listed for sale. My buyer found another property, placed an offer and closed.

Capital Gains, how much do I pay and how is it calculated? Find out here all about Capital Gains.

Capital Gains explained without putting you to sleep

Ahhhh, good old Capital Gains. 

Let’s dive into the topic of what exactly capital gains are and why they matter for real estate investors and homeowners.

Capital gains are the profits you make when you sell an asset, like a house or investment property, for more than you originally paid for it. This "gain" in the asset's value is considered taxable income by the government. The capital gains tax rate is calculated based on your tax rate for regular income.

One key exception is that capital gains taxes generally don't apply to the sale of your primary residence, as long as you've lived there for at least 2 of the last 5 years. This can make it a powerful wealth-building tool for homeowners.

So, how much will you actually pay in capital gains taxes? Your accountant, not your realtor, is best suited to answer that. But I can give you a rough example calculation to understand the basics:

Let's say you sell an investment property for $100,000 more than you originally paid for it. You'd be taxed on 50% of that $100,000 gain, which is $50,000. If you're in the 33% tax bracket, that would result in $16,500 in capital gains taxes owed. The remaining $83,500 would be yours to keep.

There are online capital gains calculators that can give you a quick estimate before talking to your accountant. And remember, as they say, the only two certainties in life are death and taxes - including capital gains taxes when you make money on an investment.

In summary, capital gains are a crucial aspect of real estate investing and homeownership that you should understand. Knowing how they work can help you plan your finances and maximize your returns. Please let me know if you have any other questions.

                                        Brought to you by: Your local Realtor®

If you are looking to either Buy or Sell, contact me at 705-927-6236

Brad Sinclair, Sales Representative

Team Lead at The Brad Sinclair Team

Royal Heritage Realty

Your inside source to cottage country

Not intended to solicit clients under contract 

How to Read a Property Survey. Quick and Easy Explanation.

Decoding Property Surveys: A Step-by-Step Guide

Plan of Subdivision

In this guide, we'll break down the key elements of a survey plan and explain how to use them:

Boundary Lines

The boundary lines on the survey plan show the precise edges of the property. Knowing the exact boundaries is essential to avoid issues with neighbours. In the survey the boundary lines are noted as thicker black lines.

Boundary Measurements

Each boundary line has a direction (bearing) and distance associated with it. These measurements allow you to verify the accuracy of the boundaries and spot any encroachments.

Structures and Setbacks

The survey plan outlines the distances between buildings and structures on the property, as well as the surveyed boundaries. This tells you where you can build or make changes.

Survey Markers

Surveyors use various methods to clearly mark property corners, including setting monuments or measuring from known points. These markers are essential references.

Subdivision Details

The underlying subdivision plan provides historical context about how the property was initially developed and divided.

Land "Parts"

One parcel can be made up of multiple PARTs that are numbered. You can discover the PARTs that make up the one parcel by finding it on the survey or referring to the legal description of the property seen on a real estate listing, offer or GeoWarehouse report. 

Title and Description

Every survey has a title and description of the survey. Important notes are the date of the Survey, Plan numbers, who completed the survey and scale,

Additional Plans

Other survey plans may be referenced to provide supplementary boundary information to support the current survey.

By understanding these key elements, you'll be able to easily read and interpret a property survey. Mastering this skill is invaluable for anyone involved in real estate or land transactions.

Property Survey

Brought to you by: Your local Realtor®

If you are looking to either Buy or Sell, contact me at 705-927-6236

Brad Sinclair, Sales Representative

Team Lead at The Brad Sinclair Team

Royal Heritage Realty

Your inside source to cottage country

Not intended to solicit clients under contract 

Hiring a Local Agent is Key When Selling/Buying Rural Property

 

Not everyone can sell rural real estate. Find out what you don’t know.

This week, I showed a vacant parcel of land in the rural Haliburton area. An agent from downtown Toronto listed the property, but they had never even seen the property in person. They didn't even know there was an old house on the land, even though it was in poor condition.

This raises serious questions about the Agent's fiduciary duties and whether they truly represent the seller's best interests. Why would a seller list their property with an agent who doesn't know the area or even the property itself?

Unfortunately, some agents may be willing to take on listings for properties they know nothing about; they just need to complete the paperwork and fire it onto the MLS. While this may be easy and profitable for the Agent, it's not in the seller's best interest.

As a local agent in the Peterborough/Hastings area, I have access to the same MLS data as big city agents. The key difference is my intimate knowledge of the local market and properties. This allows me to properly market and show the property to qualified buyers who are a good fit.

If a seller lists with an agent who lacks this crucial local expertise, they are likely missing out on potential buyers and may struggle to get the best price for their property. Hiring a local agent who knows the area inside and out is crucial when selling rural or specialty properties.

Hiring a local agent also ensures the property is priced appropriately based on recent comparable sales and crucial market knowledge. Out-of-town agents may struggle to accurately value rural properties. Local experts can identify unique features that impact the price. Furthermore, a nearby agent can easily coordinate viewings, liaise with potential buyers, and provide hands-on support throughout the selling process. This local expertise and availability is invaluable when selling rural real estate.

As a rural agent, I have full access to the big city MLS. The access swings both ways. The big city agent now has full access to the rural market, which temps them to represent Buyers in areas they know nothing about. Where is the nearest hospital or fire hall? What services does the municipality offer? What does the waterfront look like in the summer? All things if you don't know about the area, the Buyer needs to be informed. If the Agent does not know either, fiduciary duties are not met. Local expertise allows the local Agent to highlight unique features and address potential buyers' concerns about rural living. 

In conclusion, when selling or buying a rural or specialty property, it is essential to hire a local real estate agent who is intimately familiar with the area. This local expertise allows the Agent to properly represent the Seller or Buyer, and provide hands-on support throughout the sales process. Sellers and Buyers who list with out-of-town agents who lack this local knowledge are at a significant disadvantage and may potentially make a huge mistake with the lack of local knowledge and information.

Brought for you by: Your local Realtor®

If you are looking to either Buy or Sell, contact me at 705-927-6236

Brad Sinclair, Sales Representative

Team Lead at The Brad Sinclair Team

Royal Heritage Realty

Your inside source to cottage country