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hey everybody it's susan cabane your favorite broker and i'm here to talk to you about what happens when a deal fails to close [Music] i've been in this situation once where a deal has really failed i've been in a situation where it's almost failed but we've got it to work out i'm going to share some stuff with you guys as you know that when you go to purchase a property you're going to have to put a deposit down on it typically you give a deposit once you have an accepted agreement that basically means is you go look at properties you make an offer on it your offer gets accepted you basically have until the next business day to give a deposit typical agents listing agent like myself would like to try to get about five percent of the value of the property in a deposit so what ends up happening is is that the next day you're gonna go to the office and you're gonna drop off your certified deposit check or you're gonna wire transfer that money into the real estate trust account say for example that deal doesn't close the closing date comes and goes and the deal hasn't closed most people would assume that since that buyer didn't close the transaction they would automatically get that money that was in deposit whether it was 20 50 000 the seller would automatically get that money and then they would move on maybe re-list or maybe not sell because they made a profit i don't know but it doesn't work like that so what i want to explain to you guys is how the money actually leaves a trust account so a real estate trust account is a very protected account and is highly regulated by real estate council of ontario which is basically a consumer protection agency in dealing in real estate transactions the first and the best way to get a money out of a real estate trust account is a lawyer the seller's lawyer indicating that the deal has closed that's the best way deals close let's get that money out of trust and let's disperse it to where it needs to go perfect second way is something called a mutual release this is where both parties mutually agree to release each other from the contract and to dispense the money as it's indicated this is what i mean by as indicated and again let me back up for a mutual release so a mutual release most commonly is used when say for example you've made an offer on a property and you have conditions maybe you have a condition for financing and home inspection typical conditions so what happens you guys go through the property you do a home inspection you get through your financing process but guess what maybe you can't get the mortgage for what you thought you can maybe the lender is not willing to approve that property maybe there is something wrong with the home inspection that you guys are not willing to take on in that conditional period what we can easily do is use a mutual release basically say hey you know we didn't get financing there's problems with the property that we don't want to take on and within that conditional period everyone is really obligated to sign that mutual release and it basically releases the money out of the trust account back to the buyer and it releases both parties from that contract liability completely so that's the second way still not bad compared to the third way the third way straightforward is a court order what ends up happening and this is where we get into what ends up happening when a deal fails to close if a deal fails to close on the closing day what ends up happening is is that if the buyer is not willing to close a property they have some kind of problems or whatever you could try to negotiate with them and say hey sign a mutual release you know whatever the deposit is you could basically say give us all the money or let's make a deal on where this deposit money is going to go and you could use a mutual release to come out of that deal now if that buyer doesn't want to cooperate there's more complications to it what would end up happening is is that more than likely you would go back you would sell that property on the market again and now what you would do is is that you would say hey if you realize a loss maybe you sold the property for six hundred thousand dollars previously and now you can only get 575. you have a 25 000 loss there maybe you already moved out and you have expenses on actually maintaining that property right now maybe it's a mortgage maybe it's utilities maybe it's insurance all those damages get calculated and then you can go back to the buyer in court and sue them for it what would happen is you would go to court you would basically get a litigation lawyer because a normal real estate lawyer will not handle this type of case and you would basically sue that buyer once there's a court order that you are in the right to get that money the court will actually issue an order to that real estate trust account to release the money in the way that they prescribe that is a really tough way to get your money back out most of the time in my situation i've been trading for almost 10 years full time in real estate we've gotten to a point of where a buyer has failed to close but they've basically said hey listen you know we need an extension the the lender that we were working with came back and asked us for this this and this and they don't want to give us the money we need a little bit more time to get financing you can make some arrangement around that and say hey okay give us some additional deposit prove to us that you have the capability of actually closing the transaction and then you give them an extension and usually we're able to get the deal to close in that manner i've ran across one situation recently i'll save that story for a later time that became a very complicated situation where we were not able to get it to close and there was a lot of stuff that we ended up needing to do another note i can leave you guys with over here is this and i kind of mentioned it already is that a real estate lawyer really just handles straightforward real estate transactions anytime there's a complication that really comes up about it everyone wants to protect themselves and wants to limit the liability so they really don't tell you and i found it to be a very stressful time for some of my clients where the lawyer is not really telling you what you can and cannot do they'll give you an opinion and then you have to decide and for me i find it unfair you hired a professional they should be giving you real concrete advice on what to do and when they just kind of like throw their hands up and tell you hey like you know these are your options and you choose whatever's best for you and hopefully it works out for you this was a situation with one of the lawyers i was dealing with with one of my clients not a lawyer i would recommend to go with and i actually had to personally go around to lawyers that i trust and know and get more solid advice basically give my clients that advice you know they can do what they want with that but it gave them a little bit more surety of what can happen so my point over here is is that look when the transaction goes well the real estate agent's a hero the mortgage person is a hero the lawyer is a hero when everything goes well but when things fall apart and you got to pick up the pieces that's when you really realize who the professional actually is in the transaction i'll leave you guys with that i think that there's going to be a very interesting story that i'll be able to tell you guys in about a month or so but we'll leave that for now if you guys have any questions about how a deposit works how the trust account works feel free to reach out to me comment on this like it share it with your friends and again if you guys need to get a hold of me just send me a dm or a text message until then remember one thing get kabani get sold sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it sell it soul