What happens if the purchaser cannot (or chooses not to) close the transaction?

If the deal is still subject to conditions, and one of the conditions is not fulfilled by the stated deadline, the deal may be void and the deposit returned without deduction, depending on how the condition is phrased. Some unscrupulous buyers will misuse conditions for financing or home inspection to get out of a deal for other reasons.

If the deal is firm - meaning there are no unfulfilled conditions outstanding - the buyer has limited ability to exit the transaction cleanly. If there is a legitimate title issue that cannot be fixed, or a misrepresentation in the Agreement of Purchase and Sale that means the buyer is not receiving what they bargained for, the buyer may be able to call off the transaction.

In many cases, the seller will disagree with the buyer’s stated reason for not being able to complete the transaction, and may choose to ask the court to force the buyer to complete the transaction, or provide compensation for the seller’s damages. In most cases, the deposit will remain in trust with the seller’s Realtor until the parties sign a mutual release, directing the Realtor to release the deposit to one or both of the parties.

If the buyer has no legitimate reason for not completing the transaction, and the seller suffers damages as a result, the seller can sue the buyer for those damages. If, for example, the seller is forced to re-sell the property to another buyer for a lower price, the buyer will likely be held responsible for paying the seller the difference between the price they offered and the price the seller received from the second buyer. The seller can also be compensated for carrying costs incurred by the seller from the original closing date until the time the seller disposed of the property.

The buyer can also be sued by his or her Realtor if the buyer representation agreement indicates commission is payable in the event the buyer withdraws from the transaction without legitimate reason.

The buyer’s lawyer will likely also expect to be paid for their work, and there may be costs due to the buyer’s mortgage broker or lender as well.

It is important that a buyer consult a litigation lawyer if they are considering exiting a transaction under circumstances that could give rise to a lawsuit.