A boutique Toronto law firm serving
clients across Canada since 1987

Sep 28, 2017

Why Do Residential Purchase And Sale Agreements Fail?

Buying or selling a home can be an exciting time. Excitement can quickly turn into stress and discontent if the transaction fails to close.

A residential purchase deal may fall through for many reasons. Purchase agreements often contain conditions that make the real estate deal conditional. A deal can fail where a condition was unfulfilled.

For instance, if there was a home inspection condition in the agreement and the purchaser is not satisfied with a home inspection report, then he or she may rescind the purchase offer.

There are other reasons or conditions that can result in the failure of an agreement, which include:

  • The purchaser fails to qualify for a mortgage
  • The purchaser includes a condition that they can sell their property first and are unable to do so
  • The lender appraisal shows a substantially lower value for the home

If the purchase agreement fails, then sellers have to restart the process of putting their homes up for sale. Buyers on the other hand seek to reclaim their deposit.

What Happens To the Buyer’s Deposit?

If a condition in the agreement was not satisfied, then the purchaser is usually entitled to get their deposit back. For the buyer to get the deposit back, a mutual release form must be signed.

If the seller believes that the condition was not fulfilled on purpose, then he or she may be unwilling to sign the mutual release. In that case, the buyer may have to take legal action to get his or her deposit back.

If you have a failed real estate deal and the other party claims you acted in bad faith, you should seek legal advice.