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I wasn’t exaggerating when I said, in twenty years I have only ever ‘won’ in competition with a conditional offer once.

It’s just impossible in a red-hot seller’s market.

Now, if you’re listing a condo at Yonge & Finch with an offer date and you receive three offers around the list price, they might all be conditional.

But an under-priced freehold property in the central core, with an offer date, with eight offers, in a hot market?

No chance!

There’s no way that a seller would accept a conditional offer!

Except in Wednesday’s blog post, one seller did.

I felt like I might need to explain why a seller shouldn’t accept a conditional offer, when there are other unconditional offers on the table, but I think you learned the lesson in Wednesday’s post.

If you’re a seller and you’ve got an unconditional offer for $950,000, an unconditional offer for $980,000, and a conditional offer for $1,000,000, you’re crazy if you accept that conditional offer for $1,000,000.

Sorry, not sorry!

It’s a basic risk/reward proposition, and the reward isn’t worth the risk.

Not only that, you could always go back to the buyer and agent with that unconditional offer for $980,000 offer and say, “If you come up to $1,000,000, we’ll accept your offer.”

The experience that I described in Wednesday’s blog made absolutely zero sense.

But as you will have read at the end of the story, my buyer clients, Bram and Mary, wanted to submit an offer on a different property only two weeks after walking away from the first one.

As you also will have read at the end of the story, Bram and Mary wanted to make their offer conditional for five business days on home inspection.

Was this a case of “Once bitten, twice shy?”

Was it “The Boy Who Cried Wolf?”

Or was this, “Hell hath no fury like a seller scorned?”

There were lessons to learn here for sure, and when Bram and Mary told me that they wanted to make yet another conditional offer, I said, “Can we talk about this?”

Now, my critics might say, “Oh, David, you just want them to make an unconditional offer to make sure you get paid.”

But it’s not about that.

It’s about bargaining in good faith.

The Leaside real estate market is a small community.  After our experience with the previous property, I had no doubt that agents had heard about what Bram and Mary did.  Not only did they back out for no reason, but they waited until 4:30pm on the fifth business day to do so.

I was concerned that the Listing Agent for this new property in which Bram and Mary were interested would have learned this and used it against us.

Not only that, if I’m being honest, I was starting to wonder if there was something “off” about Bram and Mary.

We sat in the living room of the house, discussing the terms of our offer.

I said, “Guys, we just went through the home inspection that was provided by the seller.  It’s from Carson Dunlop.  It’s an inspector that I know quite well.  There are no issues here, whatsoever.  Why do you need to do another home inspection?”

Mary simply said, “That’s what we want, David.  And we’re not going to compromise.”

Given that this house was sitting on the market, there wasn’t a concern about the condition being part of the offer.  But the five business days might raise a red flag with the listing agent, so I asked Bram and Mary, “Could we change the condition to 48 hours?  It sounds so much better; it’s hours, not days.  The seller will like that.”

Mary said, “We need five business days, David.  We need all that time.”

I tried my best.  I dare say that I “argued” with them, but it was to no avail.

We put together an offer for this home of $1,100,000, with a $75,000 deposit “herewith,” a two-month closing, and of course, that five business day condition on home inspection.

The listing agent was no rookie.  She had been around a while, but unlike the listing agent on the first house that Bram and Mary offered on, she was very aggressive.

During our first phone call, she opened with, “Well David, thanks for this conditional offer, one-hundred thousand below list!”

She was good.  She was being grateful while being sarcastic.  She was being sincere and thankful while already bargaining with me.

But she was no dummy either.  She had an offer in her hands and this house had been listed for forty days.  After forty days on the market, the best offer you’ve got is the one in hand, every time.  It rarely gets better as you wait longer.

She signed the offer back to us and changed the condition from five business days to two business days, while changing the price as well.

Bram and Mary were willing to go up in price, but they were not willing to budge on their five-day condition.

We signed the offer back-and-forth five times, and I explained to the listing agent, “There’s no difference between two business days and five business days for this condition.  A condition is a condition.  And one condition is the same as five conditions.”

The listing agent relented, and her seller was more interested in the money anyway.

We eventually settled at $1,145,000 with the five-day condition on home inspection, and I handed the listing agent our bank draft for $75,000 as our deposit.

As was the case with the first house, I told Bram and Mary that we should book the home inspection for the next day, and they agreed.

This time, we consummated the deal on a Friday.  So we did our home inspection on the weekend – Saturday, to be exact, and we had until the following Friday at 5:00pm to satisfy ourselves of the condition.

I attended the inspection again, and this time I got out ahead of any potential issues by saying, “Listen, if we’re gonna go ahead with this purchase, we want to sign the waiver today or tomorrow and just nip this thing in the bud.”

I wasn’t being selfish here.  I was trying to test the waters and see what they would say in response.  Because as insane as it would be for buyers to purchase two houses and walk away from both of them, I wasn’t ruling that out as a possibility.

The inspection revealed that the house was exceptionally well-built with many superior building materials, systems, and features, and the inspector told Bram and Mary what a “great house” it was.

He stood in the driveway and shook Bram and Mary’s hands saying, “Congratulations, folks.  You’ve bought yourself an incredible home here.”

Even he assumed that this house was a no-brainer.

When the inspector left, I said to Bram and Mary, “So?  Are we doing this?”

Bram said, “Absolutely, David,” and I breathed a huge sigh of relief!

Again, I’m not trying to make this about me.  Remember, these people came to me and said that they had severely outgrown their small semi-detached house and that they needed more space, in a better location, and they loved the idea of sending their children to the French Immersion program at Northlea Public School.  I knew they wanted this house.  Heck, I knew they wanted the last house!  So when they said, “Absolutely,” I realized that they were finally going to get what they wanted, and that made me quite happy.

I went home on Saturday night and sent them the waiver to sign, and then, given it was 2008, I probably went out to the Brant House or Brassai or something like that…

I didn’t hear from Bram and Mary on Sunday, and for whatever reason, I just decided not to push them.  They were odd.  I can admit it now.  I had got to know them and, well, they were a bit weird.  I figured that this time around, I would just let them have their time, enjoy their weekend, and I’d wait for that signed waiver to appear in my inbox on Monday.

Only it didn’t.

And the listing agent called and lambasted me!

“David, what the fuck is going on here?”

She wasn’t as courteous as the previous agent.

And these sellers weren’t my childhood librarian, nor did they have a son who attended Beavers when my mother, Moonbeam, was the leader of the 82nd division.

“This is fucking bullshit,” she said.  “You did that inspection on Saturday, David.  You should have sent me the waiver on Saturday night!”

Just as I was asked the first time around, she said, “What’s happening here, David?”

And once again, I said, “I don’t know.”

I had an awful feeling.

Let’s be honest, “once bitten, twice shy” rings true here, and as crazy as it is to think that Bram and Mary could walk away again, the fact that I hadn’t heard from them wasn’t a good sign.

I called Bram on Monday afternoon and he answered.

He was so chipper.  He was so enthusiastic.

So when he said, “Oh yeah, David, don’t worry, we’re going ahead with the deal,” I was so relieved!

“We just need another couple of days to go over a few things,” he told me, “And then we’ll sign.”

Huh.

Alright.

Well, on the one hand, he said not to worry and that they were going ahead with the deal, and on the other hand, he said they needed another couple of days.

What in the world did that mean?

I emailed Bram and Mary on Tuesday and said, “Just checking in!”

They didn’t respond.

The listing agent was now calling me three times per day looking for “updates.”

I called Bram on Wednesday and he told me, “We’re going to sign the waiver, David.  I just need to get Mary to sit down with me and we’ll sign it together.”

This was welcome news, but, um, I mean, what was I supposed to think at this point?

On Thursday, the listing agent called me and basically threatened me.

“If your clients think they’re going to take this down to the wire and send me a waiver at 4pm on the Friday of a long weekend, they’ve got another thing coming!”

Yeah, it was a long weekend ahead.  By Thursday, a lot of people had already started to head out of the city.

But when the listing agent said, “They’ve got another thing coming,” it was just an empty threat.  The condition gave the buyers the right to five business days, and there was nothing that the listing agent could do to speed this up.

By Friday morning, everybody on my floor at the office not only knew about this, but they were asking, “Are you gonna get that waiver today?”

They were probably taking bets on it.  I would have if I were in their position.

My colleague, Richard McNutt, said, “I’ve been doing this for twenty-five years and I’ve never heard of anything like this.  Your people are bat-shit crazy, boy.  You’re about to have the longest day of your life.”

With that said, I basically had nothing to do but sit at my desk and wait for eight hours.

I sent Bram and Mary an email at 9:00am and simply said, “Just a reminder that we have until 5:00pm to sign the waiver and firm up this deal, or the offer expires,” and let them know that I was available at their convenience for a phone call.

But they never called.

The listing agent sure did!

She called me every hour, just to mess with me.

By noon, she said, “If they take this down to the wire, you and I are gonna have a hard time working together from here on out.”

At 4:00pm, my office was empty.  It was the Friday of a long weekend and even those friends of mine who wanted to see how this would play out had left.

I was alone in my office.  I think reception had probably gone home.

And at 5:00pm, my phone buzzed.

But it wasn’t my phone, it was my voicemail notification.

The phone never rang though, weird.

I dialed my voicemaail and my heart was in my throat when I heard “You have……..one……new message.”

It was Mary.

And I’m going from memory here, but I believe she said:

“Hello David, it’s Mary, of Bram and Mary, your clients who made the offer on (property address).  Please note that we are not proceeding with the transaction.  I repeat, we are not proceeding with the transaction.  Please note that it is before 5:00pm on Friday, May 16th.  It is now 4:59pm.”

I remember this vividly.

If I close my eyes, I can see myself standing in the basement of 290 Merton Street.  I was facing north.  I was standing in between the door to Richard’s office and the two computer terminals.  I can see the blue carpet.  I can see the open ceiling above me with the ductwork and the brick.

I can see myself there because this stands out as one of the top handful of odd, bizarre, and unexplainable experiences in my entire career.

And after I listened to that voicemail, I immediately called Mary back.

But she didn’t answer.

So I called Bram and he did.

“Bram, what am I missing?” I pleaded with him.

He said, “I dunno, David.  I dunno.”

I was starting to think that they weren’t just weird.  There had to be more to this.

It was just silence on the phone.

Then Bram said, “Maybe, I dunno.  I mean, maybe for the next house……..maybe brick instead of stucco?”

Holy shit.

It was like the first house all over again.

“But Bram,” I calmly said, “This house was stucco.  Not brick.  And you guys knew that.”

He just said, “Yeah.  Yeah.  Uh-huh.  Yeah.  Yeah.”

Maybe not the best time, but I couldn’t help saying, “Bram, the last house you bought, you said after the fact, ‘Maybe the next house won’t have a pool,’ but you had bought a house with a pool.  Now you’re saying maybe the next house shouldn’t be stucco, even thought you bought a stucco house?”

He said, “Yeah, David.  For sure.  You got it.”  So confidently.  So calmly.

I hung up and immediately called the listing agent, not wanting to waste any time.

“I’m sorry,” I told her.  “They’re not going ahead.”

I expected her to tear a strip off me, or worse.  I expected to hear curses, threats, and personal attacks.

But none came.

She was so calm.

She said, “Okay, well, David, enjoy your weekend.  I can’t help what happens next.”

I was relieved.  I said, “Thanks, you too, and sorry,” and then hung up.

I had an awful May-two-four weekend.  I remember that one very well as I couldn’t shake this experience and I couldn’t stop analyzing it in my mind.

On Tuesday, after the long weekend, I had Bram and Mary sign the Mutual Release to get their $75,000 back, and I sent it to the listing agent.

I never heard back from her.  She never confirmed receipt.

I called her the next day and said, “Did you get the mutual release?”  She confirmed that she did.

I said, “So when can we get the deposit back?”

She answered, “I have no idea, but that’s got nothing to do with me.”

I said, “What do you mean?”

And she answered, “Well, it’s with the lawyers now, hun.”

Suddenly, I realized that when she told me the previous Friday, “I can’t help what happens next,” she already knew that if Bram and Mary didn’t firm up this deal, the seller wasn’t going to return their deposit.

I waited two more days and then called her back to ask, “Any update?  Any changes?”

She said, “No, sorry, hun,” and was now being really nice for some reason.

She asked, “What did the buyers say when you told them we weren’t returning their deposit?”

I told her that I hadn’t spoken to them yet.

“Well, you’d better do that, David, because they’re not getting this money back any time soon, and I’d love to know how they feel about that.”

There was the vengeance within the niceties.

I called Bram and said, “So…..the seller isn’t going to return your deposit,” and he was very surprised.  He asked why not and I said, “I’m not sure.”

But I was sure.  I was so sure, in fact.

The seller was pissed that a buyer submitted a conditional offer on his property, conducted a home inspection the next day, then waited until one minute before the deadline, on a long weekend, to inform the seller that the deal was falling through.

Not only that, the seller knew that Bram and Mary had done this before.

That’s what the listing agent told me the next day when I called her.

“So this is just a thing they do?” she said sarcastically.  “They like buying houses conditionally, fucking with people, then walking away?”

What could I possibly say in response to that?  She was right.

By the following Monday, Bram called to say that he was “concerned” about his deposit.

I called the listing agent and she said, “I have an idea!”

I was all ears.

She said, “Why don’t they buy the house?”

Sigh.

She said, “David, I’m serious.  They love the house.  They bought the house.  They just did something stupid and tried to walk away.  So call them and tell them that they only way they get this deposit money back is if it goes toward the home purchase.”

So I did that.  I called Bram and told him what the listing agent said, and Bram told me, “David, we don’t like the house.  We want our deposit back.”

Then he asked me, “Why are they doing this?”

So I had to come clean and be honest with Bram.  For his benefit, and mine.

“Well, Bram, the thing is…” I slowly explained, “You have now purchased not one but two houses, both with five-day conditions, and you’ve walked away from both purchases, but you’ve waited until the very last minute to do so.”

Bram said, “I don’t understand, David.”

And at this point, I realized that he would never understand.

“Bram, I think the seller is upset that you never acted in good faith.  You went from walking away from a home purchase after five business days, when there was nothing wrong with the home, to buying his home and doing the exact same thing.”

“David, that’s not what happened,” Bram said, and I waited for a much-anticipated explanation of what the hell was going on.

“We have complied with every aspect of the Agreement of Purchase & Sale, and we’ve acted within our rights.”

Geez.

He was technically correct.

But he didn’t see how bizarre his and Mary’s actions were.

I told him, “Bram, you’re going to have to get a lawyer in order to get the $75,000 back,” and then offered him a conversation with my manager and our in-house legal counsel.

Bram ended up hiring a lawyer but I wasn’t privy to the communications.

Bram called me two weeks later and said, “We don’t have the funds back yet.  Would it be worth one more call with the listing agent, maybe?”

So I tried.

I called her and said, “Do you think your seller is ready to release the deposit funds?”

She said, “Do you think your buyer is ready to purchase the house?”

It took three months for Bram to get his deposit back, but I only know this because I received a fax of a signed mutual release from the listing brokerage’s office.  I can’t imagine how much money Bram spent on legal fees and how that ate into his deposit funds.

I never heard from Bram again.

I never heard from Mary again.

And to this very day, they still live in the same house in the Beaches Triangle.  I know this because I looked them up in Land Registry.

They never bought a house.  They never expanded their home size.  They never moved neighbourhoods.  And they never got their children into a different school district.

It was odd.  It still is.

And the kerfuffle at the end with the deposit made the story all the more memorable.

Did the seller have the right to refuse to release Bram and Mary’s deposit?

Not legally.

But as the listing agent told me when I ran into her a year later, “That’s what can happen when you fuck with people.”

That’s a real estate motto that I hold near and dear to this day.

As for what and why with respect to Bram and Mary, honestly, folks, your guess is as good as mine.

And something tells me, based on the interest in this story and the conclusion, that the guesses on this one will be entertaining…

The post What Happens When You Back Out Of A Conditional Deal In Bad Faith? (Pt2) appeared first on Toronto Realty Blog.