WHAT HAPPENS IF MY HOUSE DOESN’T CLOSE
There have been some recent cases of buyers defaulting on their home purchases long after all the conditions have been met. This is still extremely rare in Ottawa but lawyers are seeing more of it.
This can be attributed to the markets in some major cities cooling off in-between when a buyer bought and when they close on the property. Basically, they buy in the hot early Spring market and by the time they are supposed to close on the property in August they paid well over market value by the time their closing date comes around a few months later. If this happens what can you do?
DEPOSIT: Buyers would surely lose their deposit. However, these funds are held in a trust account and cannot be released without an agreement between buyer and seller or a court order. Almost always the buyer will lose this deposit should they decide not to close. The challenge in Ottawa is that the deposits have been historically low compared with other cities.
LEGAL OBLIGATION: First off, this is one of the reasons I (and my assistant) are such sticklers for paperwork. We don’t want to give the buyer any chance to get out of the deal on small technicalities. We make sure all aspects of the legal requirements of any offer are met. Buyers do have a legal obligation to close on the property.
LEGAL COUNSEL: Should you find yourself in this precarious position my advice is to seek legal advice immediately. In some cases the lawyers can figure out a settlement that works for all parties and the house is put back on the market. If this is not the case then you would put the house back on the market after the buyers breach the agreement and you pursue damages in court.
LIKELY OUTCOME: There has been some precedent setting cases in Canada that a judge would rely on in their decision. Based on these cases it would be reasonable to assume the judge would rule in favour of the seller. A likely compensation being some of the extra moving costs, carrying costs, legal fees, and also potentially the difference in sale price if the seller received less money when they went back to the market. Quick example for you. In one case a buyer walked away from a 1.26 M purchase in Vancouver. The seller later sold to another buyer for $350,000 less. The judged ruled the original buyer who walked from their deal would be responsible to make up the difference. In short, it will cost the buyer if they walk away from their contractual obligations.