Financing Problems. For various reasons the owner could have, or anticipate having, difficulty refinancing the property. For example, possibly the value has decreased resulting in 15% owner’s equity, and the lender requires a minimum of 25% owner’s equity. This could be the motivation to sell the property because any legal action by the mortgage company could result in a distress sale, thereby causing the property to diminish further in value.
Distress Sale. This means that the owner is forced to sell, generally due to legal action by the mortgage company, in the form of a court order for sale or foreclosure litigation. The reason for legal action would be due to breach of the payment terms or other conditions of the mortgage by the owner. The practical effect is that the lender is requiring that the property be sold.
Personal Problems of Owner. The owner could be having personal, marital, health, employment, or financial problems. This could result in the owner wanting to sell the investment.
Change in Investment Strategies of Owner. The owner could have revised his personal investment strategies and goals, and decided to change the nature of the real estate investment or get out of real estate altogether.
More Attractive Investment. The owner may be interested in purchasing a different real estate investment property that is a more attractive investment package in every regard.
Seller’s Market. Possibly the market is an attractive one for selling revenue property and there is more demand than supply, hence sale prices have gone up. The owner could decide to take advantage of the increased market activity.
Concern that a Downturn Might Be Coming. The owner could foresee that the real estate cycle could soon be taking a downturn, and that property values could drop. This concern could result in the property being listed for sale.
As you can see, there are many reasons why a vendor may decide to list the condo for sale. It will help your overall strategic negotiating, whether you are buying for personal use or investment purposes, if you have determined the underlying vendor motivation.
Excerpted with modification, from 101 Streetsmart Condo Buying Tips for Canadians, by Douglas Gray, published by John Wiley & Sons in May, 2006. Copyright 2006 by Douglas Gray. All rights reserved. Any reproduction of this material without the author’s advance written consent is prohibited. The author assumes no responsibility whatsoever for any information provided above, as the purpose of the column is for general information only, and not intended to provide professional advice. If required, independent expert advice should be sought customized to the reader’s own needs.
Douglas Gray, LL.B., is formerly a practicing lawyer in Vancouver, B.C., who morphed into a consultant, speaker, columnist, and author of 22 bestselling books, including the recently released Canadian bestseller, Making Money in Real Estate (The Canadian Guide to Profitable Investment in Residential Property), 2nd edition. In his real estate legal practice, he has advised condo buyers and sellers, condo corporations, lenders, borrowers, investors and developers. He has also been a real estate investor for 35 years.
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