With rising interest rates, tougher loan restrictions, and a looming possible recession vendors and purchasers need to best protect themselves when entering into Agreements for Sale and Purchase of Real Estate. These protections are vital in a housing market where prices are declining. Below we outline some common issues that we have encountered thus far in this declining market.
In the rising market, it was common to see purchasers on selling properties. However we warn that in a declining market, things are not so rosy. On the occasion of default and/or unlawful termination of such an Agreement for Sale and Purchase of Real Estate in a declining market, the purchaser is liable for the difference in value in price on the resale, within the 12-month period, specified in the standard ADLS form.
From a vendor’s perspective in a falling market the importance of “get out” conditions in an Agreement for Sale and Purchase are equally important. There is little point in incurring the costs of and involved in the sale process only to have your purchasers back out through poorly drafted clauses.
Clarity in relation to pre-disclosure documents including qualitative issues of the building/home is important. Increasingly purchasers who wish to back out seek to use the compensatory provisions, challenging whether the home is to be provided in good order or provided as promoted. You will need to refer to your contractual obligations in this respect and need to make sure that you have obtained legal advice about the kind of warranties that you are in fact providing a purchaser/vendor. We encourage all prospective vendors and purchasers to contact us as soon as possible to avoid any costly mishaps.