Anyone who has ever purchased anything is familiar with the term “buyer’s remorse.” It happens with shoes and clothes or even impulse buys at the grocery store.
Naturally, a significant purchase like a house can be intimidating. It’s one of life’s most exciting moments, but it is often accompanied by a few sleepless nights as the buyer wonders if they did the right thing.
Since real estate transactions are legal and binding, you won’t see many fall through simply because a buyer got cold feet, and houses do not come with a return policy. However, buyers can and will occasionally try to back out once the papers are signed and finalized. It’s a rare occurrence, but it becomes more common during challenging economic times when many people feel uncertain about the future.
What happens if your buyer tries to renege after all is said and done, and what recourse do you have? While we are not real estate lawyers, and this post should not be construed as legal advice, we can help you explore a few of your options.
Conditions: A Buyer’s Legal Way Out
There’s a reason most homeowners prefer unconditional offers. If you and the buyer agree to an amount, it’s a done deal, and you can both begin moving toward the next stage of your life.
Conditions can certainly throw a wrench into your plans. If you’ve already committed to purchasing a new home, the last thing you want to hear is that your own house isn’t sold after all.
Though a buyer can include any contingencies they want, the most common ones are the sale of an existing home, the ability to secure financing, and the completion of a home inspection.
If you accept a conditional offer, there will be a period of time before the sale officially becomes final. If a buyer backs out because one of the conditions isn’t met, their deposit is generally returned and you have very little recourse. Alternatively, you can protect yourself by placing conditional offers of your own. In the unlikely event that your buyer backs out, you at least have the assurance that you won’t have to carry the costs of two mortgages at once.
Whether or not you receive conditional offers depends heavily on what the market is doing at the time. In hectic conditions where buyers are competing for few available listings, unconditional offers typically become the norm.
Want to do everything you can to ensure your sale is successful? The resources below will help you in any market:
- What Are the Worst Mistakes When Selling Your House?
- Refining Your Offer Strategy When Selling First House
- Home Inspections: Friend or Foe When Selling Your Home?
Other Buyer Breaches
Outside of waiting for the conditional period, accepting an offer is usually a seamless and straightforward process. Breaches at this point are rare, but it is always wise to be prepared for last-minute hiccups. What are some of the other rare reasons a buyer may try to back out?
- If the market drops after the agreement, they may feel that they have overpaid and want to renegotiate. The law is not on the buyer’s side, but this situation can still be a headache for the seller.
- A buyer may submit an unconditional offer only to find out after the fact that they can’t get financing or sell their existing home. This can happen in a busy market where many homeowners are receiving multiple offers.
- The buyer may experience an illness, personal issue, or job loss that makes them unable to close on the transaction.
- On very rare occasions, a buyer doesn’t enter the agreement in good faith, and they had very little intention of finalizing the transaction. For example, they may place unconditional offers on multiple properties so that they can take their pick. You can prevent this situation by asking for a higher deposit upon accepting an offer. An experienced real estate agent can also protect you from bad-faith players.
- The real estate lawyer may discover a lien or encumbrance on the property that stops the transfer of ownership from taking place.
- The buyer may wish to cancel the transaction if significant damage occurs to the property after the seller accepts the offer.
What Are Your Rights?
In the event of a legal issue or damage, you may need to cancel the transaction and refund the buyer’s deposit. If the buyer is otherwise unable to proceed, they forfeit those funds, and you may be able to sue for damages.
All the same, just because you can take legal action doesn’t necessarily make it the best path. Consider whether the current market allows you to relist and sell your home quickly, at the same or even greater value than the original price.
If so, moving on could be more straightforward and less stressful than going to the courts. The time and effort of taking legal action is often more trouble than it’s worth.
On the other hand, you may find yourself seriously out of pocket if housing values fall in the meantime and you sell your house for less than the original agreement. Suing the buyer for breach of contract may be worth it in this case.
For example, let’s say your buyer agreed to pay $800,000 for your home, but backed out just before your closing date. Upon relisting your home, your highest offer is $750,000. There’s a good chance that the courts would award you the extra $50,000. You may even be able to recoup many of your closing costs and legal expenses. Only you can decide how to proceed, but an experienced real estate lawyer can direct you toward the best possible outcome.
The real estate market can change on a dime. Here are some interesting resources that will help you thrive no matter what:
- Can You Buy or Sell a Home Using an App?
- From Buyers to Sellers: The Intricate Dance of Inflation, Interest Rates, and Real Estate
- How to Ignore Bad Real Estate Advice Without Losing Friends
Prevention Is Best
Life is unpredictable, and there’s no way to completely eliminate the risk of either a buyer or seller trying to breach a contract. All the same, thoroughly examining all offers and vetting potential buyers with strategic questions can go a long way to ensuring your sale proceeds without a hitch. An experienced local real estate team can help you avoid potential issues so you can move forward with peace of mind.
Do you have questions about selling your home in Guelph or the Tri-Cities this year? Our experts are happy to help you get started. Reach out today to 519-826-7109 or info@gowylde.ca to take the next step.
