I recently purchased a home and have now been laid-off due to COVID-19. I also wonder now if I paid too much for the property. Can I walk away from the Purchase Agreement?
I am sorry to hear that COVID-19 is impacting your purchase. The COVID-19 pandemic and the resulting state of emergency has created a financially precarious situation for some buyers and sellers in the province.
With many businesses shuttered and only essential services in operation, it is reasonable to understand why some buyers are weighing “walking away” from an agreement of purchase and sale (APS) as an option. Walking away under the impression that all you stand to lose is your deposit, is very risky – and most likely untrue. Remember, an APS is a legal contract.
While there are circumstances that may allow buyers to terminate an APS – like not meeting an existing financing condition stipulated within an agreement – the current pandemic may not be one of them.
The circumstances of the pandemic may not allow anyone to walk away from an existing APS for which all conditions have been fulfilled or waived. Ultimately, you should consult your real estate lawyer about conditions and other relevant clauses in your specific APS. If you have an agreement in place and all conditions have been waived, you will likely need to work with your salesperson, lawyer, lender and the seller to see if an alternative solution can be reached between parties.
It is important that you, and all buyers, understand that “walking away” from a deal could result in the seller taking legal action against you. For example, were a buyer to withdraw from an APS, and the seller were to later sell the property for less than the amount agreed upon in the abandoned agreement, a court could order that the original buyer not only lose their initial deposit, but also pay the difference between their agreed upon purchase price and what the property was ultimately sold for, plus additional expenses.
All of this is not to say that it is impossible to void a deal. With professional assistance and a seller open to finding a solution, you may have options to terminate your agreement. However, there may also be costs or paid incentives required to achieve a termination of the agreement. This is a situation where both your salesperson and your real estate lawyer play a critical role in promoting your interests. Be open and honest with them. They are well-equipped to explore your options and provide advice so that you can make an informed decision.
My colleagues and I at the Real Estate Council of Ontario (RECO), encourage all parties to approach such situations with a desire to be flexible and understanding and with full consideration that these are indeed extraordinary times.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
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.