You found a home you love, made an offer and the seller accepted. But then something changes. Maybe you have second thoughts about the purchase, your financing has become uncertain, or a home inspection has raised concerns about the property.

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Can you simply back out of the deal? In typical lawyer fashion, the answer is “it depends.”   

 

An Offer to Purchase is a written agreement where a buyer offers to purchase a property from a seller under specific terms and conditions. Typically, a buyer puts down a deposit of a few thousand dollars with the agent.  Once the seller accepts the offer, it generally becomes a legally binding agreement.  It then shifts from an “Offer to Purchase” to an “Agreement for Sale.”

 

However, it is not necessarily instantly binding. Offers to Purchase often contain provisions to allow the purchaser to meet certain conditions before it is binding, such as the requirement to firm up their financing, or get a home inspection, or perhaps sell their existing house by a certain date. Until those conditions are met or waived, a buyer can rescind the contract, provided they have made good faith efforts to meet the conditions.     

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A common condition is a satisfactory home inspection. If the inspection reveals a serious problem with the property such as a rotting roof or damaged foundation, the buyer may have the right to end the agreement.  Another common condition is financing.  A buyer’s bank may not accept the value of the house, or the loan-to-value ratio, and may refuse an otherwise qualified buyer. 

 

There may also be other circumstances that affect a buyer’s obligation to proceed with the purchase. For example, the buyer may discover an outstanding lien on the property, significant damage may occur before closing, or the seller may have provided inaccurate information about the property. In these situations, the buyer may have legal options depending on the circumstances.

 

However, once you have met your conditions, and there is a binding agreement, a buyer cannot just walk away without consequences. If they do, they will certainly lose their deposit. Additionally, the seller may sue them for their losses. If the seller has to re-sell for less money, then the seller has a claim against the buyer for their losses and carrying costs. By way of example, if a house was agreed to sell at $500,000.00 and the buyer refuses to close the deal, and the seller can only re-sell if for $450,000.00 then the original buyer is exposed to a claim for $50,000 and all of the additional mortgage, taxes, insurance etc. that the seller had to “carry” in the meantime.  

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​So… “it depends”... on whether you have waived conditions and it is a binding offer or not.  After it is binding, it still depends on whether a buyer is prepared to accept the risk of getting sued or not. 

 

There are steps you can take to protect yourself before signing an Offer to Purchase. Having appropriate conditions in place can help protect you if unexpected issues arise during the purchase process. If you have questions about an Offer to Purchase or are considering backing out of an accepted offer, speak with a lawyer to help you review the agreement and understand your rights and obligations as a home buyer or seller.

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