You fell in love with a house and quickly made a decision to make an offer. That’s no surprise: the real estate market in Canada is red-hot, and houses go quickly – and you didn’t want to miss this opportunity. The same could be true for your dream vacation home below the border. But now after some more consideration, maybe you’re having some second thoughts. It looks like the house may need a lot more work than you anticipated. So now you’re wondering, can I back out of this offer? In this post we’ll cover what to expect if you’re considering withdrawing a real estate offer, plus what the implications are if the property is overseas.
Understanding your offer to purchase contract
If you’re thinking of backing out of a real estate deal, it’s important to pore over your contract so you know exactly what your financial and legal obligations are when you decide to cancel your offer.
What to look out for:
Contingencies: A standard contract will often come with a few contingencies, which we’ll discuss in a later section.
Clauses: Watch out for any special or extra inclusions or exclusions from the seller. An example clause could be that both parties agree to a neutral mediator if there is a dispute.
Deadlines: Always take note of any dates in the contract. Deadlines may apply to contingencies or seller acceptance.
Can you back out of an accepted offer in Canada?
The short answer is yes. But the conditions to do so can vary by province. In Ontario, for example, some contracts come with a “buyer’s remorse period” of 10 days. This means buyers have this time to change their mind about the offer. But this mostly applies to condo properties, so it’s always best to consult a real estate agent for the right information specific to your situation. For a more comprehensive guide on what to expect if you want to walk out on an offer, read the full article on Loans Canada.
How to get out of a real estate offer in Canada
The repercussions to backing out on a real estate transaction depends on the contingencies laid out in your offer contract. These contingencies are items in your contract that allow you to retract your offer under certain conditions.
Some common contingencies are:
Financing: Also called a “mortgage contingency”, this gives the buyer the opportunity to secure financing or a loan to buy the property. If unsuccessful, the buyer may back out of the contract.
Home inspection: If a home inspection shows issues with the property, the buyer may cancel the offer depending on the exact terms of the inspection contingency.
Appraisal: The buyer may retract their offer if a property appraisal doesn’t meet the specified amount.
Home sale: The buyer can walk away from the deal if the buyer doesn’t manage to sell their current home.
Many of these conditions usually come with a certain time limit, so a buyer can withdraw an offer without financial consequence before the contingencies expire. For some contingencies, both parties must agree to include it in the contract.
What are the repercussions if I withdraw my offer?
If your reason for backing out of the deal is not included in your contract, you may face either financial or legal consequences. The first thing you would lose is usually your deposit. Most contracts state that the seller would have the right to the buyer’s deposit if that buyer breaches the agreement. If that isn’t stated in the offer contract, usually a third party like the seller's mortgage broker would hold onto the funds until a court decides who the deposit should go to.
Buying a property overseas
When you’re buying a property overseas, you will have to consider that country’s specific laws and regulations around owning property. For example, many Canadians buy property in the US as an investment or a vacation home to escape harsh winters. The Canadian and US markets are similar in many ways but it’s important to note the differences, like deposit requirements and typical length of mortgages. Also keep in mind other financial considerations like taxes and insurance.
Using the US example, you have a couple of options to secure a mortgage, depending on your situation. You could get a loan through a US bank if you qualify, or get a Canadian cross-border mortgage for a US property. Some US financial institutions may have extra terms for international buyers compared to domestic buyers.
When transferring money overseas for your deposit or mortgage payments, you have a few options:
Banks typically charge high transfer fees and higher margins on their exchange rates, while specialists can often offer buyers competitive exchange rates. OFX, for example, offer bank-beating rates and no-fee transfers for over $10,000 CAD*.
What happens if you back out of a property purchase overseas
Real estate regulations in a different country may change without you knowing, so it’s important to talk to an expert in that country so you know what you are allowed or not allowed to do.
Real estate contracts regulations in the US and Canada have similarities, so the information above about contingencies would typically apply to your situation. But US fees are usually higher and a down payment of at least 20% is the norm. Depending on the country you’re buying the property from, you may want to go through your offer contract with a local real estate professional to understand your financial and legal commitments before deciding to cancel the deal.
Also keep in mind the effect of fluctuating exchange rates on your money if you need to send additional payments or if you ever need to repatriate your deposit if a deal falls through. Some transfer services have dedicated teams to help you navigate currency swings. OFX offers 24/7 live support if you need to talk to anyone about your transfer.
A complete version of this blog, What Happens When You Walk Away From Your Offer On a House? was first published on Loans Canada.
*Occasionally, third-party banks may deduct a fee from your transfer before paying your recipient. This fee may vary and OFX receives no portion of it. If you’re concerned, simply talk to one of our team members to discuss your transfer.