Real Estate: Can the purchase contract be cancelled?

Brigitte Sedelot, a Toronto real estate agent, says high mortgage rates have dampened buyer appetite. Interest rates affect the purchasing power of individualsshe explained.

The sales strategy is to set a specific date for the receipt of (popular) purchase offers Show datein English) brings much less than usual, she notes.

Brigitte Sedelot, real estate agent at the Royal LePage Signature in Toronto.

Photo: Radio Canada / Philippe de Montaigne

With the drop in prices, some buyers are starting to regret their purchase, especially those who made an agreement a few months ago and who will soon have to acquire a property that has already depreciated in value.

There are many buyers who bought not too long ago who feel they have paid too much and are even trying to get out of their contract. »

Quote from Brigitte Sedelot, real estate agent in Toronto

Nationally, the number of properties sold fell 25.7% last month compared to April 2021, according to the Canadian Real Estate Association. The median sale price fell 3.8% from March to April, to $771,125.

The decrease in the average price is more pronounced in some Ontario cities, including the areas of Toronto (-6.4%), London (-5.5%) and Hamilton (-4.2%).

Anguish and despair

Mark Morris, a real estate attorney, says that in recent weeks, more and more of his clients want to cancel their real estate transactions. Between 5% and 7% of the deals his company runs are now in this position, versus 1% overall.

I don’t think most of them want to quit because they think they can get a better deal. I better think it’s a sign of despondencyLawyer fired.

I haven’t really seen what we’ve seen for the past two or three weeks. »

Quote from Mark Morris, real estate attorney

We see hesitant buyers and nervous sellersThe lawyer adds.

Besides the high rates that undermine the purchasing power of borrowers, it indicates that banks and other lenders have tightened the money they provide to buyers in the form of mortgages.

Attorney Mark Morris.

Mark Morris is an attorney specializing in real estate law.

Photo: Radio Canada / Philippe de Montaigne

Attorney Lawrence Dutel-Richard stresses that the situation is particularly dire for those who have committed to buying property before selling their property. When you buy and sell, you need the money from the sale to be able to make the purchaseas you say.

The problem is that activity has slowed down a lot in recent weeks and some sellers are struggling to attract buyers. The offers are less and less attractive than before.

A month ago, we didn’t think about it. Everything sold out in about six or seven days, especially if you’re in a good spot in Toronto. »

Quote from Lawrence Dutel-Richard, attorney specializing in real estate law

000or $100000A dollar more than it’s worth now, will be back. This is not pressure. Emphasis is that no one is making offers,” text ”: “Even if they buy $50,000 or $100,000 more than they are now worth, they will come back. This is not pressure. The assertion is that no one is making offers “}}”>Even if they buy $50,000 or $100,000 more than they’re worth now, they’ll come back. This is not pressure. The stress is that no one is making offersas you say.

Attorney Lawrence Dutel-Rickard is sitting at her desk.

Laurence Dutil-Ricard is an attorney who specializes in real estate law in Toronto.

Photo: Radio Canada / Philippe de Montaigne

How to exit the purchase contract

Cancellation of the purchase contract is a risky bet because in some provinces, such as Ontario, the deposit required will go to the seller.

000$US to buy a home and you withdraw from the purchase agreement without good legal reason, you risk losing your deposit and possibly more”, text: “If, for example, you deposit $100,000 to purchase a home and you are withdrawing from the purchase agreement without valid legal reason, You risk losing your deposit and maybe more.”}}”>For example, if you deposit $100,000 to purchase a home and withdraw from the purchase agreement without good legal reason, you risk losing your deposit and possibly more.says Toronto attorney Lawrence Dutil-Rickard.

Sellers can also claim compensation. Real estate is on the market for several days. Every day is a lost opportunity cost, so they can claim more due to the downturn in the marketwhich is officially recognized by the courts, the lawyer confirms.

An extract from a purchase contract showing a 0,000 deposit.

In Ontario, buyers who want to cancel a real estate transaction are more likely to lose their deposit, which can be up to around $100,000.

Photo: Radio Canada / Philippe de Montaigne

It is always possible to negotiate an agreement providing for the refund of the deposit, either in part or in full. The alternative is to go to the courts, which can take years and be very costly for both parties.attorney Mark Morris confirms.

Either way, experts expect this slowdown in the real estate market to be temporary. They say this is just a shock response to higher interest rates.

The serious shortage of goods in the market remains a fundamental problem, which lies at the root of the imbalance between supply and demand.

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