Toronto: Two weeks before your scheduled move, you receive a dreaded phone call from your attorney. Your buyer is refusing to close. As you catch your breath and attempt to comprehend what is happening, reality begins to set in.
You have already committed to purchasing a new home, the moving trucks have been reserved, and you are imagining complete financial ruin. How can you possibly survive this circumstance?
A small percentage of real estate transactions may fail to close, despite the fact that the vast majority are successful. Although a firm agreement is a legally binding contract that each party is expected to fulfil on its terms, a great deal can occur as the agreement nears its conclusion.
Although there isn’t a specific reason why a buyer would walk away, we’ve seen reasons such as job loss, a drastic change in home values (between signing and closing), the inability to sell their home, and even a family dispute.
What are your rights as a vendor?
In addition to being a very stressful situation, here are the potential outcomes and your rights.
First, a purchase and sale agreement that is legally binding is a contract. When a buyer refuses to close or fails to complete an agreement without justification, the buyer is responsible for making the seller “whole.”
This means the seller is entitled to be placed in the same position as if the buyer had completed the transaction on time. The buyer is liable to the seller for the difference between the original contract price and the price that the seller will ultimately sell the home for, or, if the seller does not sell the home, the market value of the home at the time of the breach of agreement by the buyer, plus any related costs incurred by the seller, such as legal, carrying, moving, or accommodation costs, etc.
As a seller, your damages must be reasonable and foreseeable, and you must do your best to mitigate the amount of damages incurred (staying at Four Seasons, is not your best option). As soon as you sense that the buyer will walk away, discuss your options with your attorney and real estate agent, as there may still be a way to close the deal.
But The Buyer Paid a Deposit, What Happens to It?
In general, buyers are not entitled to the return of their deposit, nor is their liability limited to the amount of their deposit. In general, the seller is entitled to the deposit so long as it is not disproportionate to the damages sustained.
You cannot simply request that your real estate agent send you the deposit. In fact, you may be required to appear in court. The (real estate) Broker holding the deposit in trust may only release the deposit at the request of both the seller and the buyer, or by court order.
This means that a buyer who fails to close a transaction can refuse to direct the Broker to release the deposit and force the seller to incur the cost and time of going to court to obtain an order compelling payment of the deposit. However, the seller is not required to wait for a Mutual Release before relisting the property and may be required to do so in order to mitigate the damages.
A deal falling apart can be difficult for both the buyer and the seller, and the ideal outcome is for the deal to close smoothly for both parties, avoiding the stress and uncertainty associated with this situation. Before letting your emotions get the best of you, it is essential to understand the buyer’s situation and what can be done to get the deal back on track.
At this time, having the right professionals on your team becomes crucial. Your real estate agent and attorney can establish a line of communication with your buyers to better comprehend their intentions and devise a plan of action. In many instances, costly litigation can be avoided by recognizing the interests of both parties and determining how to proceed.
If all parties cooperate, there is a good chance that you will be able to find a solution to the problem quickly and without friction. If you have any further inquiries, call the expert realtor.