Buying a home is one of the most important decisions any of us will ever make. Finding the perfect home, arranging financing, and negotiating with the sellers all in hopes of an accepted offer. But what happens if you change your mind after your offer is accepted?
An agreement to purchase property is a legally binding contract. Once the agreement has been signed by both parties and acknowledged, they will be bound to the contract. There is typically not much leeway to cancel a real estate transaction, though there are a few exceptions which we explore below.
Cooling off period
In Ontario, if you’re buying a pre-construction condo, you can back out of a purchase under the “cooling off period” without any financial penalties. Under this law a buyer has a 10-day cooling off period where they can rescind the Agreement of Purchase and Sale, and not have to disclose a reason. The 10 days start from the date the agreement is signed, and It’s important to note that the 10 days are not business days and include weekends.
Other Legal Ways of Backing Out
A Mutual Termination Agreement is a document designed to be used when both the buyer and the seller mutually agree to terminate the agreement to purchase. When agreeing to the mutual release the parties release each other from any legal claims, or damages relating to the transaction. They also agree that all, part or none of the deposit will be released to the seller.
An agreement can also become null and void if a lien is discovered on the home, or substantial damage occurred to the property prior to closing, or if the buyer can prove that the seller misrepresented the property in a significant way. This though usually is accompanied by a legal suit of some sort.
The Consequences of Backing Out of the Deal
For all other agreements, once it’s been signed, the buyer has 24 hours to deliver the deposit. If they want to back out of the deal, they may have to forfeit the entire deposit and could be liable for other expenses incurred by the sellers. For example, if a buyer backs out of an accepted offer and the seller eventually sells their home to different buyers, at a lower price than what they would have received in the original offer, they can sue for the difference in price.
Notdelivering the deposit is not an option either. If the deposit isn’t delivered,it’s considered a breach of the agreement and the seller can then sue the buyerfor the deposit and other expenses that they’ve incurred. Walking away, whether youhave delivered the deposit or not, can result in serious consequences.
The bottom line is, you want to be certain you’re making the right choice for you when offering on any home. If you have any questions on how to know whether to proceed on a home, feel free to reach out.
