Can You Opt Out Of An Offer If You Change Your Mind?
Tags: BUYING A HOME, CONDITIONAL OFFERS, OFFER TIPS, TORONTO MARKET UPDATE, HOUSE HUNTING, HOMES FOR SALE, TORONTO REAL ESTATE, VAUGHAN REAL ESTATE, VAUGHAN HOMES
Let’s say you looked at a number of homes and found one that you are interested in. Once you decide you want to place an offer on this home your real estate agent will prepare an offer (legal contract) to present to the seller. There are two types of offers that you can make:
Quite often I get asked by clients if they place an offer what is the risk? If they change their minds later do they only risk their deposit? The response to the consequences of backing out of an offer is not black and white. It really does depend on the type of offer – is it a firm offer with no conditions or is it an offer with a number of conditions?
But buyers need to be aware that an offer is a legal contract. Walking away from a contract can possibly result in a number of consequences, such as losing your deposit and the possibility of opening yourself up to legal action.
1. A “Firm” Offer
A “Firm” Offer means that the buyer (or potential buyer) is willing to purchase the home as it is with no conditions. Why would a buyer make an offer without conditions such as inspection and financing? Firm offers are normally made in a sellers’ market (when there are more buyers looking for a home than homes available to buy). In these situations there are normally many offers or a number of offers presented on a property at the same time and the seller will normally accept the highest offer without conditions. Since there aren’t any conditions to be met before the contract becomes binding the offer becomes a legally binding contract once accepted and you are legally obligated to purchase the home. This type of offer obviously favors the seller.
2. A “Conditional” Offer
A “Conditional” Offer means that certain conditions need to be met before the sale can be completed hence before the offer becomes a legally binding contract. The most common conditions are home inspections and financing. For the offer to become a legally binding contract buyer normally has to confirm that the conditions have either been fulfilled or agree to waive the conditions in order for the contract to be a legally binding contract.
Conditions are the specific things that the potential buyer wants to be included in the sale. If after the inspection the buyer wishes that the seller pays for any repairs, damages or warranty, etc. they need to be included in the contract. Depending on the wording of the conditions if the inspection finds something that makes the buyer question their decision to purchase the home they can possibly decide not to proceed with the offer and back out of the offer. Or should the financing not go as planned the buyer can possibly make the decision to not proceed. But it all depends on the wording of the condition(s). Quite often conditions include the wording “satisfactory in the Buyer’s sole and absolute discretion” and in these instances, if you have any concerns it is relatively easy to get out of the deal.
Offer contracts can be complex and if you are considering buying or selling a home a real professional can guide you through the offer and contract process to ensure that your best interests are protected.