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Buyer’s Remorse – Backing Out of a Deal the Next Day

The 2022 Ontario court case of Pollard v. Perry shows the dangers of making unconditional offers to purchase a property.

On June 21, 2021, the Seller and the Buyer entered into an agreement of purchase and sale (APS) for a bungalow in Collingwood, Ontario. The price agreed to was $1,050,0000 and the Buyer was required to pay a deposit of $50,000 the following day. There were no conditions in the APS and the closing date was set for September 17, 2021.

The very next day, the Buyer realized she would not be able to afford the purchase price. She asked for an extension of time to close and also to make the sale conditional on financing. The Buyer also refused to pay the deposit unless the Seller agreed to reduce the purchase price by $100,000. The Seller refused all these demands and so the deposit was not paid and the purchase was terminated.

The Seller re-listed the property on MLS for $1,100,000 and received no offers. He lowered the listing price to $995,000 and within two months received two offers, the highest being $910,000. The Seller accepted this offer and the sale closed a few months later. He then sued the Buyer in court for damages of $140,000, being the difference between the price that was agreed upon on June 21, 2021 and the lower amount the property was resold at.

The Buyer argued in court that it would be unfair for her to have to pay over $140,000 in damages because she had informed the Seller the very next day that she wouldn’t be able to afford the property. She also argued that the Seller should have kept the property on the market longer so that he could have resold at a higher price – in other words that he resold the property at below fair market value.

The Court rejected the Buyer’s argument and cited past court decisions which held that the “best evidence as to the market value of a property is the price that an independent third-party purchaser is willing to pay to the vendor.” The Court found that the fact that there were only two offers after the price had been reduced was sufficient evidence that the resale price was fair market value. The Court also noted that the Buyer had not provided evidence that the bungalow would have sold for higher had it been left on the market longer and that this argument was “speculative”.

The Court also ruled that just because the Buyer had very quickly (the next day) advised the Seller that she could not complete the transaction did not reduce her responsibility for the Buyer’s damages.

The Court ruled that the Buyer was required to pay the Seller $140,000. The Court also awarded the Buyer $886.11 in additional carrying costs to cover the time from June 21, 2021 to when the property was resold. The Buyer was also required by the Court to pay $20,000 in legal fees to the Seller.

MORAL OF THE STORY:  Do not think that you can change your mind on a signed irrevocable agreement to purchase the property just because you break the deal the deal the very next day.  If there is even a tiny chance that you won’t be able to secure financing for the property then ensure the sale is conditional upon financing.

If either a Buyer or Seller won’t close, send me an email to info@wontclose.com and click below to schedule a free confidential consultation about your case.

Mark Yazdani