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Nov 30, 2017

Lack of a cooling-off period can put you in the hot seat

Deciding to buy a house and looking for the ideal property can be an exciting time. However, it is a significant step to take, and it needs careful consideration. Signing an Agreement of Purchase and Sale is a commitment from which you might not be able to walk away. So, before signing on the dotted line, advisers suggest you read the fine print and consult with a professional who can answer any questions you may have.

Backing out of a real estate deal can have serious consequences. Once you and the property seller have both signed the Agreement of Purchase and Sale, that document will be an agreement that is legally binding. If you want to back out of it, you might lose your deposit, and the seller may choose to take legal action against you. The brokerage that represented you in the transaction might also sue you for the commission they lost.

Buyer's Remorse

Under some circumstances, Ontario laws allow consumers who have a sense of regret after making a major purchase the option of cancelling a real estate transaction, citing buyer's remorse. This could be from feeling guilty over extravagance, fear of making a wrong choice, or you might suspect the seller coerced or influenced you into signing the agreement.

In Ontario, real estate transactions do not typically allow cooling-off periods. However, one exception exists under the Condominium Act for purchases of newly-built condominiums -- if it was bought directly from the condo builder. This is the only real estate transaction that has a mandatory cooling-off period.

How do you cancel the agreement?

The option is only available if you purchased a pre-construction condo before the registration of the condominium corporation -- or if the agreement of any other property purchase contained a clause that would permit cancellation. If you want to take advantage of the option to walk away, you must advise the sellers or their legal representative of your intention to cancel the agreement in writing. They must receive your written notice no later than 10 days after you signed the legal documents.

How can you avoid this situation?

Excitement or an impulsive nature can cause over-eagerness when it comes to purchasing a home -- especially if there is also an overeager real estate agent involved. The following may allow you to better do your due diligence and prevent the signing of deals that you might regret later:
 
  • Legal advice -- Every step of the process can benefit from the sound advice of an experienced real estate lawyer.
  • The agreement -- Make sure you understand every last word in any documents the seller or agent asks you to sign.
  • Budget -- Carefully consider the price of the home and whether the mortgage payments will be affordable.
  • Suitability -- Does every aspect of the property meet the needs of you and your family?
  • Neighbourhood -- Is the property in a neighbourhood that you like and one that will allow easy access to work, school and other needs?
  • Condition -- If it is not a new property, is there any need for repairs, and what would be the estimated cost?

The most valuable advice before you finalize your house hunting endeavour may be that which is offered by experienced legal counsel. A lawyer can sit down with you in advance and answer any of your questions and concerns, and he or she can thoroughly examine any legally binding agreements before you sign them. Also, skilled support and legal guidance might help you to get out of a real estate transaction in which you signed documents that you did not fully understand.