Buying a home is like boarding a plane: there's a window where you can still hop off at the gate, but once the doors close and the plane is on the runway, leaving becomes very difficult (and expensive).
In Ontario and Alberta, an offer is a legal contract. You can’t simply cancel because you found a "nicer" house the next day. Here is how to know if you can safely walk away.
1. The "Safety Net" Period (Conditions)
Most offers aren't "firm" right away. They usually have Conditions, which are like safety hatches that let you exit if something goes wrong.
Example: The "Foundation Surprise"
Sandy puts an offer on a charming older home in Calgary. She included a Home Inspection Condition. The inspector found a massive crack in the foundation hidden behind some boxes.
Because Sandy had that inspection condition, she was able to back out, get her full deposit back, and walk away without owing the seller a cent.
What are the mos common conditions we see on offers?
- Financing: If the bank says "no" to your mortgage, you can leave, within a reasonable time period
- Status Certificate: For condos, if the building’s finances are a mess, you can exit.
- Inspection: Your offer is conditional on having a home inspector go through the property and ensure it is in good shape
- Home Sale: This one is rare and is market dependent. If you can’t sell your current home, you aren't forced to buy the new one.
2. The "Point of No Return" (Firm Offers)
Once you "waive" your conditions, the deal is Firm. For example, you made the offer conditional on financing and inspection. If your bank said yes and the inspector gave you a thumbs up on the condition of the property, you now "waive" your condition and your offer becomes the real deal (or better known as "Firm"). The plane is now in the air. If you back out now, the consequences are heavy.
Example: The "Job Loss" Nightmare
Mark signed a firm offer on a $600,000 home in Toronto. He waived his financing condition. Two weeks before closing, he unexpectedly lost his job. He couldn't get his mortgage anymore and tried to cancel the deal.
The Consequence: Mark didn't just lose his $30,000 deposit. Because the seller eventually sold the house to someone else for only $550,000, they sued Mark for the $50,000 difference, plus their extra mortgage interest and legal fees. Mark ended up being out over $100,000 and without a property.
3. The 3 Ways You Can Still Back Out
If the deal is firm, you generally need a legal "out." This is usually a good time to engage an experienced Real Estate Lawyer, who will review your contract and circumstances. A real estate lawyer looks for these:
- The Seller Failed: If the seller promised to fix the roof and didn't, or if they can't prove they actually own the house (Title issues), you may have a way out.
- Mutual Agreement: Sometimes, the seller is sympathetic. If both sides sign a "Mutual Release" , the deal ends. However, the seller will often keep part of your deposit for their trouble.
- The Irrevocable Clock: If you send an offer and the seller doesn't sign it by the deadline (the "Irrevocable" time), the deal is dead automatically. You don't have to do anything.
Important tip: As soon as you may have an inkling that you may not be able to close, engage an experienced Real Estate Lawyer. The consequences of defaulting on your closing can be costly and extremly stressful. You'll want to obtain legal advice as soon as you possibly can.
How to Protect Yourself
- Don't skip conditions: In a "hot" market, it's tempting to drop the inspection or financing condition. This is the biggest risk a buyer can take.
- Check your "Irrevocable": Don't give the seller three days to think about it if you’re still looking at other houses.
- Talk to a Lawyer FIRST: Most people call a lawyer after they have a problem. Having a lawyer review your offer before you sign ensures your "safety hatches" are actually functional.
At Deeded, our experienced and friendly Real Estate Lawyers can help you protect yourself by reviewing your offer, or providing advice of you find yourself unable to close. Simply contact us to setup an appointment with one of our lawyers.
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