You’re two weeks from your move date and a dreaded phone call comes in from your lawyer. Your buyer refuses to close. As you catch your breath and try to understand what’s going on, reality begins to set in.
You’ve already committed to buying a new home, the moving trucks have been booked, and in your mind, you’re imagining total financial ruin. How in the world can you get through this situation?
Although the majority of real estate transactions do close, there’s always a small percentage that may fall through. Although a firm agreement is a binding contract to which each side is expected to fulfill on its terms, a lot can happen as the deal marches to a close.
Although there isn’t a particular reason why a buyer would walk away, we’ve seen reasons such as losing their job, a drastic change in home values (between signing and closing), the inability to sell their home, or even a family dispute as some of the reasons why a buyer would walk away.
What Are Your Rights As a Seller?
Aside from being a very stressful situation, here is what can happen next and your rights.
First, a firm agreement of purchase and sale is a binding contract. When a buyer won't close or does not complete an agreement without cause the buyer will be responsible for making the seller “whole”.
This means that the seller is entitled to be put in the same position as the seller would have been had the buyer completed the transaction as scheduled. 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 the 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 suffered (staying at Four Seasons, is not your best option). As soon as you sense the buyer will walk away, speak to your lawyer and Realtor to discuss your options as there may still be a way to get the deal done.
But My Buyer Put Down a Deposit, What Happens To it?
Buyers are generally not entitled to a return of their deposit, nor is their liability limited to the amount of they put down as a deposit. In general, as long as the deposit is not out of all proportion to the damages suffered, the seller is entitled to the deposit.
Getting your hands on the deposit is not just a matter of asking your real estate agent to send it to you. In fact, it may require you to go to court. The (real estate) Broker who is holding the deposit, in trust, can only pay out the deposit on the mutual direction of the seller and the buyer, or by court order.
This means a buyer who fails to complete a transaction can refuse to direct the release of the deposit by the Broker and force the seller through the expense and time of going to Court for an order compelling payment of the deposit. However, the seller does not have to wait for a Mutual Release to re-list the property and in fact may be obliged to do so in order to mitigate, or lower, the damages.
Having a deal fall apart can be a tough situation for both the buyer and the seller and the ultimate outcome is to have the deal close smoothly for both parties, avoiding the stress and uncertainty that comes with this ordeal. But before you let your emotions run high, it is important to understand the buyer’s situation and what can be done to get the deal back on track.
This is a time where having the right professionals working for you becomes critical. Your real estate agent and lawyer can establish a line of communication to your buyers to better understand their intentions and come up with a course of action. In many situations expensive litigation can be avoided by understanding the interests of both sides and figuring out a way to move forward.
If all sides are cooperating, then there is a good chance you might be able to reach a compromise solving the issue quickly and seamlessly. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can.1