Real Estate Simplified

Buying a home is exciting, but it also comes with big decisions. One of the questions I’m asked often is what happens if a buyer wants to walk away from a deal. The answer depends on the type of property and where you are in the process, so let’s break it down clearly and simply.

New Construction vs Resale: Two Very Different Rules

In Ontario, the rules for backing out depend on whether you’re buying a new construction home or a resale property.

A new construction home is a property being built or recently completed that has never been lived in. These are purchased directly from a builder or developer.

A resale home is any property already lived in and being sold by its current owner.

Understanding the difference is important because your rights as a buyer aren’t the same.

Before you get started buying a home, here are a few more posts you might find helpful:

The 10-Day Cooling-Off Period for New Construction

If you’re buying a pre construction home or condo, you’re protected by a 10-day cooling-off period. Once you sign the agreement and provide your deposit, you still get 10 calendar days to change your mind for any reason.

Maybe your lawyer reviewed the agreement and spotted concerns, or maybe you simply got cold feet. As long as you give written notice within that 10-day window, the deal can be cancelled and your deposit is returned with no penalty.

This protection only applies to new construction. Once those 10 days pass, the agreement becomes firm and binding.

Why Resale Homes Don’t Offer a Cooling Off Period

Resale homes work differently. There is no built-in cooling-off period. Once the Agreement of Purchase and Sale has been signed by both parties and the deal is firm, the contract is legally binding.

Backing out at that point can have expensive consequences, including losing your deposit or being sued for damages.

Before you reach the firm stage, your only safety net is whether your offer includes conditions.

Whether you’re house hunting or getting all your ducks in a row, here are a few more home-buying posts you might enjoy:

How Conditions Work in a Resale Offer

When you submit an offer on a resale home, it may include conditions like financing or a home inspection.

If the seller accepts your offer with conditions, you’re given time to complete those checks. You can walk away only if you’re not satisfied with the outcome of those specific conditions.

For example, if you have a home inspection condition and the report reveals major issues, you can notify the seller that the condition isn’t fulfilled. Both parties then sign a mutual release and your deposit is returned.

Conditions aren’t open invitations to back out. There must be a real, condition-related concern that a reasonable buyer would also consider a deal breaker.

When a Deal Becomes Firm

A deal becomes firm in two situations:

When you submit an offer with no conditions
When you waive or fulfill all conditions in an accepted offer

Once the deal is firm, both parties are fully committed to closing.

If a buyer walks away from a firm deal, the seller can pursue legal action to claim the deposit, or damages, whichever is higher. At the very least, the buyer will likely lose the amount of their deposit. In Toronto, deposits are often 5% or more of the purchase price, so the financial risk can be significant.

Can a Seller Back Out?

Sellers don’t have an easy way out either. If a seller tries to walk away from a firm deal, the buyer can take legal action to enforce the sale or seek compensation. A firm deal binds both sides.

So When Is It Too Late to Back Out?

You still have options if:

You’re within the 10-day cooling-off period on a new construction purchase
You’re within the conditional period on a resale purchase

Once the deal is firm, it’s too late to walk away without serious consequences.

Understanding the timelines and the difference between new construction and resale rules will help you make confident decisions before signing one of the biggest contracts of your life.

If you have questions about your specific situation or want guidance on your next move, feel free to reach out anytime. I’m always happy to help. Get in touch today by filling out the form on this page, calling us at 416-909-9235, or emailing info@yaelandco.com.

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