26 Feb Backing out of a real estate deal – what happens?
What happens if you back out of a real estate deal?
You found the perfect house, you put in an offer, and your offer was accepted. What happens if you suddenly have second thoughts? How bad would it be if you decided to back out of the offer?
Walking away from a real estate deal is not unheard of. While the majority of Canadian homeowners are happy with their purchase, seven percent have felt buyers’ remorse after purchasing a home, either because they had reservations about the particular property or had doubts about buying in general, according to Mortgage Professionals Canada.
Whatever the reason, deciding to walk away after committing to a deal means you could face some of these serious consequences.
You forfeit your deposit.
Deposits are usually submitted during the offer process to show good faith to the seller. It tells the seller you’re serious about buying, and it’s usually paid at the time you make the offer or 24 hours after the seller accepts your offer. Once the deal is accepted, the seller keeps the deposit, even if you’re no longer interested in buying the house for whatever reason. Since deposits are typically 5 percent (GTA) of the purchase price, you could end up losing thousands of dollars.
You can be sued for damages.
Changing your mind on a home purchase isn’t considered cold feet, it’s considered a breach of contract, which means the seller can sue for damages. Say the seller puts the house back on the market and it sells for less than what you agreed to purchase for, the court may require you to pay the difference in the prices of the two deals, plus legal fees. You may also be on the hook for other losses incurred by the seller. For example, if the seller is unable to close on their next home because you failed to close on your purchase, it would be within their right to seek damages for their lost deposit and other expenses.
This information should not be relied on as legal advice, financial advise or a definitive statement of the law in any jurisdiction. For such advice, please consult your own legal counsel or financial representative.
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