What Happens when Buyers change their mind and want out of a Real Estate Transaction?
Here are some answers to common questions, answers courtesy of Mark Weislander, Toronto Real Estate Lawyer:
Can a Buyer change their mind and just get out of it ?
If you are buying a new condominium from a builder, then you have 10 days to change your mind. You do not need a reason. This does not apply if you buy a new house from a builder and does not apply if you are buying a re-sale home or condominium.
Can a Buyer change their mind and just not pay the deposit?
No. Once an offer is accepted, the Buyer cannot just change their mind and not pay the deposit. They can be sued by the Seller for any loss that the seller might incur.
For example, the Buyer offers $300,000 which the seller accepts. The Buyer changes their mind and does not pay the deposit. The Seller re-sells the property for $275,000. The Seller can sue the Buyer for the difference, or $25,000.
Can Buyers change their mind and just not waive their conditions?
Most real estate contracts are conditional on the Buyer being able to obtain financing, being satisfied with a home inspection report, or being satisfied with a condominium status certificate when buying a re-sale condo. Many buyers think that these conditions give them the automatic right to just change their minds and say they were not satisfied. It is not that easy. Case law has demonstrated that Buyers must try and satisfy any condition in good faith meaning that they need to have a legitimate reason why they found the home inspection report or condominium status certificate unsatisfactory.
What happens to the deposit when the Buyer changes their mind?
In most cases, the deposit is held by the Seller’s real estate brokerage, in trust. Under the law, when a deal breaks down, the brokerage cannot pay the deposit to anyone without both the Buyer and the Seller agreeing on how the money should be paid out and to whom. If the parties to the sale cannot agree, they can take the matter to court and have the court decide on the disposition of the funds.
Is there a “legal” way for a buyer to get out of a deal?
This is not an easy answer. If for example, there was a major easement on title that was not disclosed to the buyer in advance, they can usually cancel the agreement without penalty. However, there have been other cases that indicate that if there is a problem with a city work order or title problem for which the seller can obtain title insurance to protect the buyer, then the buyer cannot refuse to close. A buyer can also cancel if there has been substantial damage to the property before closing, such as a flood that was not repaired. You can’t refuse to close if the oven is not working on closing.
The better answer in all of these situations is to be very careful and serious before you make any decision to buy a home. Changing your mind later can be very expensive.
Mark Weisleder is a Toronto real estate lawyer.
Contact him at email@example.com.
To obtain a quote for his legal services, please call (905) 454-5411, extension 231.