In this Blog, we're going to tackle a common question many Buyers grapple with: Can I actually back out of a Real Estate Transaction? We're going to demystify this process, outlining the obligations of all parties involved.

Have you ever found yourself in a situation where you notice everyone else making certain decisions and, almost instinctively, you feel compelled to do the same? However when you are able to secure the contract or product, you question your decision, this is called 'buyer's remorse'. Real Estate is no different and this feeling tends to kick in after your offer has been accepted by the Sellers, leading you to question your judgement and even consider cancelling your purchase.

In Ontario, once a real estate resale agreement becomes firm - meaning the conditions have been lifted from the offer - there's no turning back, for either buyer or seller. Let's break this down with an example:

Imagine you, as a buyer, place a conditional offer on a property, contingent on finance and inspection, valid for 5 business days. Concurrently, you'd be getting your mortgage approved by furnishing necessary documentation to the financial institution including your accepted agreement of purchase and sale, along with your salary supporting and tax documents. Meanwhile, also contacting a qualified home inspector to complete the home inspection within this period.

Once both conditions are met and you decide to proceed, you'll provide a signed document called the 'Notice of Fulfillment'. This is essentially your commitment as a buyer to fulfill the two conditions in the original offer, thereby cementing the offer as a firm agreement. Once this notice is handed to the Sellers, the deal becomes 'firm'.

At this stage, the agreement of purchase and sale morphs into a legally binding contract. Your deposit is held in trust with the listing brokerage. If you decide to back out after this point, be prepared for legal consequences. Moreover, your initial deposit stays locked in the listing brokerage's trust account until a court decision is made, or a settlement is reached between the Seller and Buyers. Until then, this deposit remains untouchable by both parties.

Now, let's suppose a buyer has an offer for $800,000, but later decided not to get it closed; meanwhile, the market dipped. The Seller is now forced to sell to another buyer for $750,000. In this scenario, the Sellers can sue the original buyer for breach of contract, potentially demanding the shortfall in the agreed purchase price, along with any carrying costs for the property extension and any legal/selling costs incurred due to the delays.

The key takeaway? In Real Estate, only place an offer on a property when you're fully confident and committed to the purchase decision. Treat it like any other contract: sign with prudence and conduct your due diligence properly. That way, the buying and selling process in real estate will feel like a smooth sailing journey, without any surprises.

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Off: 416-816-6001 | [email protected]