Ok, I wrote about my best deal of 2011 and now it's time to talk about the worst deal of 2011. It's the worst deal not because the property was lousy or because my client over paid, it had nothing to do with anything like that; instead it happened to fall into this category because my client himself sabotaged his own deal! Can you believe it?
In all the years of selling Toronto real estate this was a first; even for me.
Well this one goes like this, I met my client a year ago at the golf course and we managed to build a great business relationship, I even sold him another entry level investment property not too long ago. Over time he insisted that he was ready to take the next step and invest in a much larger type of property as he had some money and didn't know where to put it. As a Toronto Realtor, when someone says that he has a couple of million dollars lying around and lives a nice lifestyle you must take him for his word.
The subject property was a commercial plaza with residential apartments up top located in Roncesvalles. The asking price was 2.5 million dollars and it was being sold under power of sale by the second private lender. There were two mortgages registered against the property, the first was in the amount of just less than a million and the second for just over a million dollars.
My client always insisted that he had the money to qualify for a first new mortgage plus all the extra fees that come with buying a commercial property.
To save my client from a 2.5% brokerage fee I asked the seller if he would be interested in financing the deal, after many weeks of negotiating I was able to attain a first mortgage for 2.3 million dollars at 3% for three years. That's unheard of! Just the mortgage was worth money if my client decided to flip the property. All my guy had to do was come up with the original first mortgage amount of just less than a million dollars on closing, no brokerage fees, no environmental or an appraisal fee.
My client was ecstatic with the deal and complimented me for my efforts.
This property was high in demand as it was being promoted as a Toronto mls listing and also because it was a power of sale.
Now; because it was a private, during the negotiation he insisted on meeting my client face-to-face as that's just how he does business. During the meeting they exchanged contact info as you would have to expect that, as a Toronto real estate agent I knew this could become an issue if a buyer and seller are speaking with one another prior to closing.
One week prior to closing all was going smooth and my client decided to take a short holiday with his family down in Mexico. As my client returned home he called me and says "I don't have the million dollars to close tomorrow” I bet you can imagine the expression on my face, he went on to say that he was short about 100k and that he was talking to the seller which will also become his lender and he was asking for the lender to take back an extra 100k!
In the interim the original Mortgagor came up with the finds to redeem the mortgage, the lender did not want the original Mortgagor to take back the property as he lost his right to redeem due to the fact my guy had a bona Fide firm agreement of purchase and sale in place.
The lender is a business man and I believe he pulled the trigger a little early with some bad advice from his lawyer, he allowed the Mortgagor to redeem and we lost the deal.
When I spoke to the lender he said that again he was gracious for the hard work that both Toronto Realtors had done but he was spooked when my client asked for an extra 100k the day before closing and he was shocked that. Y client would go on holidays so close to the completion date. He did not believe my guy could pull it.
Today both my client and the lender regret that decision as the mortgage is again in arrears and it just a matter of time before it goes power of sale again.
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