Especially in today’s rising interest rate environment, it’s not always easy to sell a house. Negotiations occasionally fall through even after a contract has been signed. Therefore, it’s essential to hire a real estate lawyer to review and draft legal documents, explain your purchase and sell agreement, look out for your best interests and represent you during the transaction. The reputable lawyers at Bernard Lau and Co. will advise you on your legal rights and obligations under the purchase agreement.
Reasons a Buyer May Withdraw from a Transaction
Buyers might back out of real estate transactions for a number of reasons, including:
- Financing problems: Unforeseen changes in buyers’ financial circumstances, like job losses or significant decreases in income, can lead to collapsing transactions.
- Property issues: During inspections, buyers may discover issues with the property. These can include structural, mechanical or environmental problems such as oil tank discoveries.
- Market conditions: Buyers may reconsider the purchase due to market conditions. For example, if the market has cooled, buyers may no longer want to purchase the property at the agreed-upon price as they may suffer from buyer’s remorse.
- Cold Feet: Buyers can get nervous about making large purchases and back out of the transaction for unrelated or unforeseeable reasons.
- Better deals: If buyers find a property they prefer to the one they’re contracted to purchase or find a similar property at a lower price, they may try to terminate the contract.
How to Protect Yourself During a Real Estate Transaction
There are a few ways sellers can protect themselves in case of or reduce the risk of collapsing transactions. They include:
Requesting a deposit
Requesting a deposit or earnest money from the buyer can protect you from potential financial losses if they back out of the transaction. You can use the deposit as compensation for costs incurred during the transaction or any losses that may arise due to the transaction falling through. You may even ask for the deposit to be paid directly to you as the seller, or ask the buyer to increase the deposit, although be careful asking for too much – too large of a deposit may not be enforceable.
Keeping detailed records
Maintain detailed records of all correspondence and transactions between you and the buyer and his realtor. These records can include emails, text messages and other forms of communication. If a dispute arises, they can help resolve the issue by giving clarity to the circumstances that precipitate a collapsing transaction and sufficient evidence may also deter a buyer from considering backing out of the transaction if it’s clear that he had no legitimate grounds for doing so but simply changed his mind.
Buyers may often try to back out of a contract by claiming that the seller was not truthful to him in describing the property by playing down certain risks or even outright lying about the condition of the property. Oftentimes, a seller’s best defence is to be honest about the state of the property and to respond truthfully if any concerns from the buyer are raised. That being said, a seller usually has no obligation to disclose absolutely everything that he knows about the property due to the principle of caveat emptor (or buyer beware). Sellers have an obligation to disclose latent material defects but it can be tricky to know what constitutes such a defect that must be disclosed. Consult with your lawyer if you are unsure about whether certain disclosures are necessary.
Contacting a lawyer
You should immediately seek legal advice if a buyer backs out of the transaction. An experienced property law lawyer can guide you through the legal process and ensure your rights are protected. They can also help you navigate the dispute resolution process and represent your interests in negotiations or court. Furthermore, they’ll identify and mitigate legal risks arising from the transaction.
Are You Looking for a Real Estate Lawyer in Richmond and Metro Vancouver, BC?
If you’re a property seller dealing with a collapsing transaction, contact Bernard Lau and Co.
Our experienced lawyers will review your purchase agreement and all communication between you and the buyer. They will explore all options to get the transaction back on track and protect your interests if it falls through.
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