Canadian Housing Deals That Fall Through
Selling a house is clearly not an easy or simple process, but it can become more complicated and expensive if the initial deal falls through. As a seller, here are tips on how to protect yourself if the housing deal falls through.
Ways In Which Buyers Back Out
Generally, in a home sale, buyers fully accept to buy the house when a contract is signed between both buyers and sellers. Thus, a home sale or purchase is not complete until both parties have signed all the necessary legal documents transferring ownership of the home to the buyer.
Buyers often have contingency clauses added to their contracts. These are legal ways of “backing out” of the contract without incurring any nominal cost to the buyer. The most common contingencies include:
#1. Mortgage Loan Contingency: The buyer must be able to obtain a mortgage loan for the property, usually within a specific period of time of signing the contract.
#2. Home Inspection Contingency: The home for sale/purchase must either pass inspection or the seller must agree to make any necessary repairs noted by the inspector.
#3. Sale Contingency: The home purchase depends on the buyer selling his or her property.
#4. Appraisal Contingency: The price of the home for sale must either meet or be less than the official appraisal price.
When a deal falls through, it is because either the buyer or seller has a change of mind or certain terms in the contract has not been met.
What Happens When Your Buyer Backs Out?
There are just a few things you may lose if your buyer backs out.
#1. Interest From Other Qualified Buyers– For buyers who were interested in buying your home, you may not be able to entice them back when your initial deal falls through.
#2. Time– Once your housing deal falls through, you are back where you started, finding another buyer. This is frustrating and takes time which may affect your plans to purchase another home.
#3. Money- You may lose money as a result of the deal falling through if you:
- Failed to include a contingency in your next home purchase contract and you need to break it
- Need to continue making the mortgage payment on your current home and make a mortgage payment on a new home or pay rent
- Have to continue paying to keep the property up (i.e. utilities, lawn/landscaping, cleaning, etc.) to show the home when it’s put back on the market
Protect Yourself
You can protect yourself from such buyers by being an informed and empowered home seller. You should know all the details of the contract and make sure that your agent knows how to get what you’re entitled to. You may even go ahead and hire a real estate lawyer to review the terms of the contract and give you legal advice in the event of having to sue your buyer if necessary.
