Residential real estate purchases are not always a straightforward process. Sales can take weeks between offer, acceptance and the deal “closing”.
During these uncertain times, a lot can change between signing an Agreement of Purchase and Sale (“APS”) and closing. A buyer may experience buyer’s remorse, feel they have overpaid for the property, or have their financial circumstances change unexpectedly.
For whatever reason, a buyer wanting to back out of a transaction should realize that the process is not without risks and potentially significant consequences.
What happens if someone walks away from a real estate deal?
Once the offer or counter-offer has been formally accepted, the buyer and seller are bound legally by its terms.
What happens when you back out is similar to a ‘domino effect,’ whereby breaching the agreement by not closing on time triggers a series of events where multiple parties then may end up having to breach their other obligations.
If you walk away from a deal you will not only lose your deposit but may also be liable for any damages suffered by the other party.
Damages may include the lost opportunity to sell to someone else, expenses arising from a delayed move, or the seller’s loss of deposit on another home intended for purchase. In addition, changes in the real estate market may create significant losses for the seller, in addition to ongoing carrying costs for the residence and any mortgage registered on it. These can all add up to a significant claim that may go well beyond what the deposit was.
Overall, know that backing out of a real estate deal can be a very expensive decision and may affect your ability to close real estate transactions in the future.
If you cannot negotiate an amicable termination of the agreement there are two legal options to terminate the transaction.
What are the two legal ways to back out of a real estate deal?
The first is if the house sale was conditional and the conditions that the two parties agreed to cannot be fulfilled in time.
Another way a buyer can back out of a deal is if they can show that the seller knowingly misrepresented the property in some material way — perhaps by not being truthful about whether the property had ever experienced a fire, flood, or serious mould issues.
Unfortunately, there’s no way to know how many sellers have been left stranded by buyers who backed out of deals as transactions between buyers and sellers are considered private and are not required to be reported to any level of government.
Why is having a lawyer during a real estate deal important?
Buying a piece of property is a huge investment that you want to go as smoothly as possible.
Unfortunately, some unpleasant legal situations may be inevitable, that even the most qualified realtor, will not be able to give you the right advice. This is why having a lawyer is extremely important, as only a lawyer can give you legal advice.
If needed, lawyers will also represent you in real estate litigation and assist with drafting documents and legal pleadings, participating in hearings and a trial before judges, when necessary.
For these reasons having a lawyer on your side can be the best decision you can make when purchasing a property.
To learn more about real estate law or the processes of acquiring a real estate lawyer please visit our website and contact us today.