Mortgage 101 – Special Guest Danielle MacLean: Real estate lawyer’s perspective | November 2021 Part 7

In this special episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7, the guys bring in real estate lawyer, Danielle MacLean, to give her perspective on Nova Scotia’s market. They discuss the top three things every buyer should do before purchasing a home, the competitive market and how many people are waving conditions, and take a deep dive into what’s happening with new construction homes.

Danielle MacLean is a lawyer and partner with DLC law Dartmouth, Nova Scotia. She has been practicing since 2004 and specializes in real estate, title insurance, wills, estate planning, contracts, and corporate law. She also participates in many associations, societies, groups and committees related to her field:

• Sits on the Board of Directors for the Real Estate Lawyers’ Association of Nova Scotia (RELANS)
• Chair of the Nova Scotia Barristers’ Society Professional Standards (Real Estate) Committee
• Chair of the Nova Scotia Barristers’ Society Real Estate Practice Working Group
• Member of the Land Registration Act Agreement Committee
• Past co-chair of the Real Property Law Section of the Canadian Bar Association (Nova Scotia)

You can learn more about Danielle, or get in touch with her here.

Mortgage 101 with Clinton Wilkins & Todd Veinotte: Real estate lawyer’s perspective | November 2021 Part 7

Don’t feel like watching the video? Check out the transcript below.

Transcript:

Top three tips from a real estate lawyer

Todd Veinotte: [00:00:00:07] So we want to pick your brain when it comes to the law and some of the, first of all, let’s talk about some things that you would just like people to know flat out, who are buying homes, they’re in the process and they don’t know what the closing and that side of it. What are some things that you would go Law 101: Home Buying? These are some things I want you to know bullet point it.

Tip one: Prepare, prepare. prepare

Danielle MacLean: [00:00:26:05] The first thing would be to just don’t jump into something. You want to have your ducks in a row before you start. So we get a lot of people that are trying to do private transactions that come in, they’re not pre-approved. They have no idea what the market actually is looking like. And it just causes a whole lot of trouble. So step one would be to talk to a professional, get pre-approved, ideally go with a realtor as well. Because these private deals…

Clinton Wilkins: [00:00:51:25] Are a mess.

Danielle MacLean: [00:00:52:19] They’re a mess. They’re difficult to borrow on. Usually, somebody is losing, it’s usually the buyer or the seller, but generally, somebody is not getting a good deal in there. So that will be your first thing.

Tip two: The process takes time

Second thing would be to just slow it down, even when you go to make that offer. So people are going in at 100 miles an hour, really tight conditions. There’s no time for lawyers to look at things. They’re not doing inspections, they’re not giving themselves enough time to get financing. And again, they’re finding themselves in really difficult positions.

Tip three: Listen to the people you pay

And the third thing would be just to listen to your lawyer and listen to your mortgage broker and take the advice of the people that you’re paying.

Waiving conditions to be competitive

Todd Veinotte: [00:01:34:09] Well, but one of the challenges, as you’re mentioning all of these things, is this market that we’re in when inventory is very small: People are in some cases desperate to get an accepted offer. So this is the result, is it not?

Danielle MacLean: [00:01:46:21] Well, yeah, it’s a very competitive market in this last year and a half, I’ve never had so many deals in the whole time I’ve been practicing where there haven’t been any conditions at all.

Clinton Wilkins: [00:01:55:15] Like no lawyer review, no nothing?

Danielle MacLean: [00:01:57:23] No lawyer review. So no opportunity for me to look at the property title or the agreement and say that it’s okay. No time to get financing, even though they need financing. So people are coming in, there’s no financing conditions. So I’m saying, “Oh great, there’s no mortgage cash deal.” “Oh, no, no, there’s a mortgage.” No inspection, which then we get the call a month later because something’s gone sideways.

And a lot of that is because we have a lot of people coming from Ontario and past Ontario, and those markets have been like that for a long time. So I think there’s those kinds of deals coming here and now Nova Scotians are starting to compete in that same way. All of this is fine if you’re comfortable with it, but at some point, I can’t get you out of it. So you may find yourself in a deal that you can’t complete.

Todd Veinotte: [00:02:40:11] Right, you said no inspection. Is there any recourse if you waive that inspection? Is there any recourse if in fact, you find out that you’ve got a termite infested, leaky roof, sewer-backed-up house?

Choosing to wave an inspection or disclosure document

Danielle MacLean: [00:02:54:21] It would always depend on an individual situation, so I would start by saying that. But generally, if you don’t have an inspection and somebody’s not giving you a disclosure, which is another thing that everybody is waving, so typically somebody would complete a disclosure document that says, I don’t have termites and I don’t have an oil spill.

Todd Veinotte: [00:03:14:20] And sometimes those things aren’t filled out properly though are they?

Danielle MacLean: [00:03:18:01] They’re not. They’re not. But there’s something. But if you’re closing a transaction with none of that, it’s very much buyer beware.

Clinton Wilkins: [00:03:25:08] Is as is, where is.

Danielle MacLean: [00:03:26:22] Buyer beware. So you’ve taken it and you wear it, unless you can somehow show actual fraud and I don’t know how you would if you didn’t have any of that documentation.

Todd Veinotte: [00:03:35:22] Alright, so how much of this is happening? Sounds like it’s happening a lot based on what you bringing this stuff up.

Danielle MacLean: [00:03:42:26] It’s happening a lot. It’s slowing down a little bit the last few months, but I suspect it’s going to go again in the spring. Just, it’s just there’s nothing for anybody to buy right now.

Clinton Wilkins: [00:03:55:17] And I think sometimes people are getting desperate. I don’t know what you’re seeing, Danielle, but like, we have people that we have pre-approved that have made like 20 offers on properties. And you know, once you’re at that 21st, unless you’re completely exhausted and going to like exit out of that process, you’re kind of going all in.

Many desperate buyers in the market

Danielle MacLean: [00:04:13:10] People are buying things that they don’t even like because they need somewhere to go. Either they’re, we’ve got a lot of people that are getting displaced because they’re their rentals are being sold or they’ve already sold their existing home and they just have, they have nowhere to go.

So I’ve had clients and kind of question me saying “am I buying… is this the three bedroom that we bought or the four… the four bedroom that we bought?”

Clinton Wilkins: [00:04:35:03] Just like, “Which one is this?”

Danielle MacLean: [00:04:35:28] Or just “I absolutely, I hate this house, but I think it’ll be a good investment and we had to go somewhere.” Or, I’m saying this house has terrible XYZ, are you sure that this? Is what you want to do? and they’re like, “Oh, we have to buy it. We have to buy something.” So there is a lot more of that than I’ve ever seen.

Todd Veinotte: [00:04:51:08] So is this buyer’s remorse? I’ve heard that before with vehicles and other things. Is there an opportunity for somebody to back out?

Backing out of a deal

Danielle MacLean: [00:05:00:05] Not without a penalty. So a typical contract would have time for financing, if you need it, for lawyer review, for inspection. All these good things. Once those timelines are up or if those timelines never existed, you have a firm contract, so you have a legally binding contract and you have to fulfill it. And if you don’t, then there’s legal consequences for that.

Todd Veinotte: [00:05:19:13] Lose your deposit?

Danielle MacLean: [00:05:20:13] Not just your deposit, you’re actually on the hook for any of their carriage costs until they resell the property. And if they sell it at a loss, then you actually have to make up that loss as well.

Todd Veinotte: [00:05:30:17] Wow.

Clinton Wilkins: [00:05:30:29] It can be significant, right?

Danielle MacLean: [00:05:32:01] It can be huge.

Todd Veinotte: [00:05:33:00] How much does that happen?

Danielle MacLean: [00:05:33:20] Well, it does happen. You know, if I do 1,000 deals, I might have 10 that will fall apart, sometimes at the eleventh hour and sometimes, you know, fairly quickly, but after the deal is firm. It’s really hard to quantify those losses for a client because you know, you don’t know what your seller is doing and your seller might be also buying with that money. So it can really kind of go down the line.

Clinton Wilkins: [00:05:57:17] The dominoes keep on falling. I’ve seen it. I’ve seen it, like Danielle, we’ve had deals together that, everything was fine with our buyer, but the vendor couldn’t get their act together and then the dominoes keep on falling.

Danielle MacLean: [00:06:11:06] Yeah.

Clinton Wilkins: [00:06:11:25] Right? Because one may impact the next one, may impact the next one. And we don’t really know, you know what the full scope may ever be.

Danielle MacLean: [00:06:18:26] If you’re lucky, you can buy your way out of it. If you’re unlucky, you’re not going to know for a few years what the loss is going to be. But yeah, it’s not typically just your deposit. It’s typically a whole lot more.

Get your documents to your professionals on time

Todd Veinotte: [00:06:27:28] So, but for the most part, deals go pretty smoothly? Closing costs are there, realtors, mortgage advisers give the people the right advice? I would say for the most part, things go pretty smooth, right? That you’re run of the mill deal?

Danielle MacLean: [00:06:42:00] Yeah, for the most part, things go pretty smooth. These, the last year and a half, things have been very, very busy. So, you know, people kind of are their own worst enemy on this, what they’re doing really tight close conditions or they’re closing at the same time.

There’s more than two days in a month, you know, everyone’s trying to close on the 1st and the 15th, and you would see that to Clinton. Yeah. So, you know.

Clinton Wilkins: [00:07:04:10] We can only do so much.

Danielle MacLean: [00:07:05:22] At some point, you can’t. Everybody can’t close on the same day because the banks are slow and you know anyone, I’m slow, the brokers are slow, everybody slow because we’ve got 40 other people trying to do the same thing.

But for the most part, everything’s going to go smoothly as long as you get everything in to your broker or your mortgage specialist or your lawyer.

Clinton Wilkins: [00:07:24:12] Well, well in advance.

It’s rare that a deal won’t fund

Todd Veinotte: [00:07:25:18] How about getting those deals funded at the last minute? Sometimes lenders just don’t fund the deal on the closing date. Does that happen?

Clinton Wilkins: [00:07:33:10] I would say that’s rare.

Danielle MacLean: [00:07:34:18] It’s rare.

Clinton Wilkins: [00:07:35:22] If the file is completed, it funds. I think the only time it doesn’t fund and I mean, Danielle, you can speak to this, is when maybe there’s some conditions that are outstanding.

Danielle MacLean: [00:07:43:14] And a lot of times that’s, it goes back to the client not getting the information in to their mortgage specialist, their broker, or to their lawyer. So we’re waiting on things. So, the lender can’t move as fast. You know, some lenders are slower.

Clinton Wilkins: [00:07:57:06] Some take 10 days.

Danielle MacLean: [00:07:57:26] Some lenders are slower than others. And you recognise that. And if you’ve got experienced professionals that know these lenders, they know their quirks.

So I know if I have a certain lender, everything has to be in five days in advance and if it’s not, I’m going to have trouble, but I know who to call if I have trouble. So it’s really just kind of, it’s knowing the lender.

Lawyer’s perspective on new home construction

Clinton Wilkins: [00:08:14:08] Now I have a question and I’m going to just jump in here and I want to ask because I think our listeners may be intrigued. We’ve heard of stories in Ontario and I think maybe also here in Nova Scotia, where developers will have an agreement with a buyer, but then suddenly magically before closing, even though there weren’t any maybe adjustments, they want more money because of what’s happening with supply chain, but also with the market. And have you seen some new construction kind of go sideways and, you know, has there been any remedies or like what advice do you have out there?

Builders asking for more money

Danielle MacLean: [00:08:43:08] So new construction, that was happening up to even kind of before the summer, but it’s kind of died down now. So I would say about a year ago, we started getting we started getting these emails from the builders saying, “Well, our costs are way up. So now it’s going to cost $80,000 more. And also, it’s not closing in July. Now it’s going to close next July. Sorry, take it or leave it. You can have your deposit back.” And of course, clients come and they say, “Well, this isn’t fair!” and I say, “Absolutely. It’s not fair. And you know, they have a firm contract.”

The problem is there’s generally no specific performance in real estate, so that means you can’t force someone to sell you that exact house. You can take them to court and you can say, “Okay, well, you should have done this contract,” and maybe you can get money and maybe you can’t. That costs a whole lot of money and at the end of the day, in the meantime, the house is probably worth $200,000 more and they were only asking for $80,000 more. So it was really difficult conversation to have with clients, and it was very much, you know,

Clinton Wilkins: [00:09:49:17] Do you want or do not want it, really.

Danielle MacLean: [00:09:51:28] Where else are you going to go? If you try to find the same house somewhere else going to cost you $200,000 or more. And in a lot of those instances, we just kind of went back and negotiate it with the builder and said, “Just show me where this breakdown is.” And then magically, a lot of those costs went down a little bit.

Closing delays and changing designs

The bigger problem we’ve been having with builders is closing delays, and that’s really none of this is on the builder. And a lot of these instances are legit. They were going to lose money if they went ahead. And, you know, we have a builder call and say, “I’m going to go bankrupt if I do these 10 properties at the at this price.” And the closing delays is they can’t get the supplies.

You know, we’ve also had a lot with new home construction with builders switching things out. So you’ll have a client call and say, “I went to see my house and it has a whole new picture window. I didn’t order it.” and the builder says, “Well, the other one was going to take a year to come and I have the right to change that.” Or again, it’s take it or leave it. We’ve had a lot of take it or leave it discussions.

Clinton Wilkins: [00:10:42:07] When the market’s so hot, they can resell a lot of these homes again. And I think that’s the challenge. But, you know, I think you kind of hit the nail on the head here a little bit, Danielle: I think some of these builders are having a very hard time financially because, just think, they made some of these contracts a year and two years ago and they weren’t estimating for, you know, the lack of supply or the increase in the cost. Somebody needs to eat it. And I think in a lot of cases, the builder does eat it, but they can only eat so much.

Someone has to eat the cost

Danielle MacLean: [00:11:08:15] True. And you know, some of it is, some of it could be that they were trying to take advantage of a situation, but it’s probably both. But there was somebody that was litigating. It was not anything out of my office. It still hasn’t gone anywhere as far as I’m aware. Most people just kind of paid the difference if they go or took the deposit and walked.

Clinton Wilkins: [00:11:28:02] I think, yeah, and maybe some cases it would be more costly to litigate than maybe the difference would be.

Danielle MacLean: [00:11:33:24] This is this is the problem, and the delays with it. New home construction is really difficult right now.

Clinton Wilkins: [00:11:40:11] Yeah, I agree. It’s good for a lot of people, but maybe not everybody.

Thanks for coming on the show, Danielle!

Todd Veinotte: [00:11:43:16] How do people get hold of you?

Danielle MacLean: [00:11:45:14] You can find me online at dcllaw.org, or you can call me at 902-404-3150.

Todd Veinotte: [00:11:54:05] Did you have a good time with us today?

Danielle MacLean: [00:11:55:20] I always have a good time with you guys.

Todd Veinotte: [00:11:57:08] Always!

Clinton Wilkins: [00:11:58:08] We can’t wait to have you back. We’re going to have to! Same time same place in 2022.

Todd Veinotte: [00:12:02:10] Exactly.

Clinton Wilkins: [00:12:03:01] Alright. Well, get it on the calendar now.

Todd Veinotte: [00:12:04:20] See you in the year. That’s Daniel MacLean and it is DCL Law. We’ll be right back.

If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.

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