You got the offer. You counter-offered. They accepted. You both signed on the dotted lines. Then, the inevitable happened and your agent tells you they’ve pulled out of the agreement. What do you do?
Obviously you’ll start with feeling some initial disappointment. The feeling of selling your home is like unbuttoning your tight pants at the end of the day — instant relief — and having to put them back on sounds like complete torture. Not only did you miss out on potential offers and showings, you feel like you are starting completely over. But, there are some repercussions for the buyer in these cases.
In Ontario, the real estate contract gives a buyer 24 hours to pay the deposit once the offer is accepted. If the buyer decides to pull out or just change their mind, it is the seller’s right to sue for profits lost. This means if they end up selling for less than the offer that was given, the buyer may be liable for the difference in the two amounts.
Many offers are conditional upon a few factors and these can include financing and home inspection. If the buyer is unable to secure adequate financing, they’ve really no choice but to back out. Because this is a condition in the offer, the buyer does have a right to back out, as long as it is within the allotted time as specified in the offer (usually seven days). Even having a pre-approval done before submitting an offer doesn’t necessarily mean that a buyer will get approved. Extenuating situations such as job loss or unexpected expenses could mean that their financial standing could have changed from the time of the pre-approval. As well, if the financier sends out an appraiser and finds that the home is not worth the amount of the mortgage, they’ll turn down the buyer. This often happens in a hot real estate market like what we have now, where people bid way over asking in an attempt to secure a house — any house.
The other condition on an offer that allows a buyer to back out of the contract is the home inspection clause. If the home inspector finds massive damage or repairs that need to be done, a buyer has a right to ask the seller for the money to cover the repairs or to walk away. In this case, as a seller, you will either have to lower the price of the home or get the repairs done so you do not run into this with other buyers.
If your buyer has already submitted a deposit, it can be a hassle for the buyer to get it returned. This does not mean you will get to keep the deposit either, as it sits in trust with the lawyers.
While having an offer turn bad is one of the worst things that can happen when selling your home, it happens rarely. Speak to your Collingwood real estate agent and/or your lawyer to find out what to do next.