Buyer’s Remorse – It’s so easy to get caught up in the momentum when there are numerous agents with their buyers sitting in their cars, or standing in huddles in front of the property. Everyone is anxiously waiting to see if their offer is accepted or not. Their emotions kick in and the buyer really wants to win the competition. Then afterwards the buyer regrets the decision almost immediately.
Or shortly thereafter, find out from their lender that the appraiser has stated that they paid too much and the lender cannot not provide the funds to close the deal. In order to close the deal as is they would have to come up with the difference in funds. It’s not uncommon for buyers to max out or over-extend themselves financially in this hot market.
Can the buyer refuse to pay the deposit? Many bidding wars in today’s market the sellers are asking for certified cheques or bank drafts to be provided along with the offer. If the buyer puts a stop payment or refuses to deliver the deposit cheque (if not accompanied with the offer) they can still be liable for damages. The seller can sue the buyer for the difference in price if the seller ends up selling if for a lower amount. Or, they can be sued for the amount of the deposit that they did not deliver.
One option to resolve the issue is that the buyer can assign their contact to a new buyer if there is sufficient time before closing. In order to break even financially they would have to include not only the purchase price but the price for a Realtor’s commission to sell the property.
The Seller however, in most cases does not have to agree to this, unless the original offer contained a seller take-back mortgage. In which case many lenders will not recognize the new buyer unless there is an amendment made to the original agreement of purchase and sale changing the original buyer name to the new buyer. The seller would have to provide consent. With the right documentation provided by the real estate lawyer it should state that the original buyer is still liable if the new buyer cannot close the deal.
The original buyer may be able to list the property on the MLS system if the sellers allow the property to shown. If not, most real estate board rules require that in order to list a property on their system you must be able to view it.
The benefit to the seller is that the deal can close and prevent very expensive legal fees! A lawyer can also stipulate that the original buyer could not make any profit on the re-sale and that they could only recover the cost of the commission for the resale.
Make sure to use a real estate lawyer than can solve problems when the need arises!
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