Real estate home or condominium agreements may be the largest contractual obligation that a buyer and seller may ever sign. It is a serious obligation and both buyers and sellers must understand the consequences of changing their minds once the contract has been signed and accepted.
Most offers written in Ontario provide that the deposit is to be paid within 24 hours of acceptance of the offer by the seller. That means that if a seller accepts the offer at 4 p.m. on March 15, then the deposit must be paid to the seller's listing brokerage no later than 4 p.m. on March 16. The only way to extend this deadline is if there is an agreement by the seller and the buyer in writing.
However, I have heard of many situations where buyers have had a "change of heart," during this 24-hour period and decide that they will not pay their deposit and that will be the end of the matter. Not true. By not paying the deposit, the buyer has breached the agreement. The seller can then bring an action to sue them for any damages they may incur.
For example, let's say a buyer puts in an offer today for $300,000, which the seller accepts. Then the buyer changes his or her mind and refuses to pay the deposit. Now the seller states that the buyer has breached the agreement. The market changes and the seller resells the property to a second buyer for $280,000. The seller can then sue the original buyer for the $20,000 loss. Sellers can conduct such a lawsuit by themselves in Small Claims Court, because the limit in Small Claims Court in Ontario was increased on Jan. 1 to $25,000.
Nevertheless, sellers should always seek legal advice before embarking on any legal process. Now let's use the same example, an agreement to sell for $300,000, but it is the seller who has a change of heart and refuses to either accept the buyer's deposit or just refuses to close the deal altogether. The buyer can now start legal proceedings to tie up the seller's property and sue for specific performance of the agreement.
This means that the buyer is asking the court to force the seller to sell the property at the original agreed upon price of $300,000. This court case can take years to resolve and if the buyer wins, he or she will get the property for $300,000 as well as most legal fees paid. The seller will not be able to sell the property to anyone else during this time period.
What this demonstrates is that buyers and sellers need to be properly prepared and obtain the right advice before they even think of signing or accepting any agreement. Sellers must hire the right listing salesperson to make certain they know what their property is worth and ensure the property is marketed to reach the most potential buyers before considering any offer.
For buyers it means working with a buyer salesperson to make sure that they also know what the property is worth, not only so they don't overpay, but also to make sure they are protected from any surprises about the property after closing, such as hidden defects.
By being properly prepared in advance, there will be no need to change your mind later.
Email: firstname.lastname@example.org Mark Weisleder is a lawyer, author and public speaker for the real estate industry who is a regular contributor to Real Estate News.