Financing and what happens if it goes wrong?
By Jayson Schwarz

First of all, before you go house hunting, go to your bank, trust company or other financial institution, and see what amount of a mortgage you can qualify for. Take your significant other or partner, if you have one, because everyone's income and assets help. Once you know how much you can borrow, get the best rate you can and have it locked in for as long a time period as possible. Do not be afraid to negotiate, and don't be afraid to shop rates and lockup periods; the banks want and need your business. Get your commitment in writing!!! Remember, time is important. It takes time to have your house ready, and you should allow for extensions or construction delays.

Now we're ready for the builder. Go to the trailer armed with your knowledge and look to see what mortgage rate and term the builder is offering. Take note that the builder may have bought the rate down to make the package more attractive, or negotiated a deal with the bank to offer special packages. Remember, if your bank's offered rate and terms are close, you may be able to negotiate a better deal with the builder. If you don't take the builder mortgage, you may be able to get some leverage in your overall negotiations, as the builder may save money by not having to pay his bank for the better rate. Question this, and make sure you understand all of the financing details.

When we walk into that sales trailer all ready to buy our beautiful new home, perhaps the most important piece of the puzzle we need to have is security in our financial arrangements. It's a tragedy waiting to happen when you sign an unconditional offer, give your hard-earned and saved deposit to the builder and later find out you do not qualify for the mortgage. In other words, don't buy the house unless you have a mortgage commitment or a conditional deal. This leads us into the next part of today' s discussion - What happens if it goes wrong?

An Agreement of Purchase and Sale for the purchase of land is a contract and, once it is unconditional, it binds both of the parties to fulfill the obligations of that contract. If either party does not live up to their part of the bargain, they can be liable to the other party for either specific performance or damages. Firstly, if the Purchasers default, they will likely lose their deposit. The builder will then have the option of suing to force them to close the deal and pay all legal fees related thereto (specific performance), or sue them for any damages the builder might suffer before he resells the house (as the result of interest, changes, price differential, legal fees, etc.) Sometimes in a booming market, kindhearted builders will release Purchasers who have made a mistake or encountered personal tragedies, but don't count on it!!

The moral of the story is to make sure you have financing, or that the offer is conditional for a few days upon both financing and review by a lawyer. It is critical that you get the right advice, and only a lawyer can provide legal advice; this is the law. When you select a lawyer, find one who cares about you and a long term relationship.

Perhaps the most difficult part of writing these articles relates not the actual writing, but thinking of a topic to address. So help me!!! Mail, deliver or fax letters to the magazine or to us, use the web site www.newhomesandcondos.com - look in legally speaking, or E-mail at: schwarzgillen@sprint.ca and give us your questions, concerns, critiques and quandaries. I will try to deal with them in print or electronic form.

Jayson Schwarz is a senior partner with the firm Schwarz Gillen Barristers and Solicitors. He can be reached at (416) 486-2040.