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Don’t Lose Your Deposit!
Posted August 27th, 2021 under pitfalls, smart buying.
In June, I wrote about the danger of firm offers, which can cause you to lose your deposit if you’re unable to close the deal, regardless of the reasons. A recent court case highlights these risks.
In 2008, a buyer bought a condo under construction, to be completed in 2010, with a deposit of $214,000.
The builder extended the closing date several times for various reasons, all the way out to 2014. This was a breach, but the buyer never complained.
In 2013, the lender for the buyer cancelled the mortgage, and the buyer tried unsuccessfully to assign the agreement of sale to another buyer.
On June 27, 2014, the builder once again extended the closing date, this time from July 30 to August 20. The buyer made no objection prior to July 30.
On August 7, the buyer’s lawyer sent a letter trying to rescind the deal and get the deposit back. The builder refused. On August 20, the deal failed to close, because the buyer had lost their mortgage financing in 2013. Shortly afterward, the builder sold the condo for $93,000 more than the original price.
The buyer went to court to get his deposit back. However, the court ruled that since the buyer had failed to notify the seller of the breach in a timely manner, he effectively had allowed the agreement to stand.
As a result, the buyer was in breach when the deal failed to close, and forfeited his deposit. A decade later and $214,000 lost in what will hopefully be a cautionary tale for buyers considering firm offers.
Want to know more about offers and conditions? Just ask me, I'll be happy to help.