I agreed to buy a pre-construction condo from a builder, but I’m having second thoughts. What kind of penalty is there for backing out of the purchase?
Buyers sometimes don’t realize that there is no cooling-off period for most real estate transactions in Ontario, which means that “buyer’s remorse” can be costly. Fortunately in your case, there’s one notable exception under the Condominium Act: there is a cooling-off period for newly-built condos purchased directly from the builder.
To take advantage of the mandatory cooling-off period for pre-construction condos, you must provide written notice that you intend to cancel the Agreement of Purchase and Sale. The builder or their lawyer need to receive it within 10 days of the date you received the disclosure statement, or the signed Agreement of Purchase and Sale (whichever you received later). You should strongly consider hiring a real estate lawyer to guide you through this process.
It’s fortunate that you have this option, but it’s not something you would be able to do with any other type of real estate purchase. Unless you’re buying a condo from a builder or developer before the condominium corporation is registered, or the agreement includes a provision that would permit you to cancel it, you can’t back out of a real estate purchase without consequences.
And those consequences can be serious. Once a buyer and a seller sign an Agreement of Purchase and Sale, the signed document becomes a legally binding agreement. If you decide to walk away from the deal, you risk losing your deposit, potential legal action from the seller and legal action to recover commission from the brokerage that is representing you.
So when you’re buying real estate, it’s important to carefully read and understand everything you’re signing and to make sure you’re making the right decisions. Take your time and go through the fine print before you sign your name on the dotted line. If you’re unsure about something written within the agreement, ask your salesperson or real estate lawyer, to explain it to you.
A few key questions you should ask:
- Is the home within your budget?
- Does it meet your needs?
- Do you like the neighbourhood?
- Does the property need any repairs, and if so, how much will they cost?
Buying a home is an expensive endeavour, so it’s normal to have doubts during the process. Especially in today’s uncertain real estate marketplace, you should never rush into an agreement without carefully considering your personal wants and needs, and whether short-term market changes could make you regret your purchase.
A real estate professional can be a valuable asset. They can help you set realistic expectations before you embark on the house hunt. They can also help you identify your likes and dislikes so that you can get a home that meets your needs while staying within your budget.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.