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1. I can back out of an agreement to purchase a home.

If you’ve made an offer to purchase a home conditional on getting financing, or being satisfied with a home inspection, or having your lawyer review the condo’s status certificate, you can back out of the deal and get your deposit back if the financing/home inspection/status certificate review don’t work out. But if you’ve already waived those conditions (thus making the offer ‘firm’) or you initially made an offer with no conditions (also ‘firm’), you are legally bound to that offer and must close. If you back out – you will likely lose the deposit you provided and will probably be sued for breach of contract.

If your circumstances have changed and need to back out of a firm agreement to buy a property, talk to your lawyer and your REALTOR right away to understand the consequences.

2. Land transfer tax is paid by both the Seller and the Buyer.

Only the Buyer pays land transfer tax (both the Ontario tax and the city of Toronto tax). In most cases, the Seller pays the real estate commission. You can read more about Land Transfer Tax here.

3. If the home inspection doesn’t go well, I can renegotiate the price or force the Seller to make repairs.

In Ontario, the standard home inspection condition clause in the Agreement of Purchase and Sale usually gives the Buyer the right to walk away from the offer if they aren’t satisfied with the inspection, and in turn, get their deposit back. In a Buyer’s market where the Buyers are in control, a Seller might prefer to re-negotiate the price or agree to do the repairs vs. risk having the Buyer walk away; but in a Seller’s market, where the Sellers are in control, it’s extremely rare for renegotiations to take place – the Sellers know there’s another Buyer out there who won’t likely ask for the same concessions. Most Toronto Buyers have to choose between walking away from the offer and home or dealing with and financing any repairs themselves. In the past 10 years in Toronto, I’ve only seen prices renegotiated after inspection a handful of times.

You can read more about what to expect  in a home inspection here.

4. If the bank’s appraiser doesn’t value the home at the price I agreed to pay, I can renegotiate the price.

Almost every bank or lender will appraise a property before it closes, usually in the last week or two before you take possession. It’s their way to protect their investment – if you paid $1.2 Million for a house that they think is only worth $1.1, they won’t give you a mortgage for the equivalent of $1.2 Million. Assuming that the appraisal happens after your offer is firm –  meaning there are no more conditions for you to waive – you can’t renegotiate the price. You have 2 real options:

  1. Find another lender to send in another appraiser and hope that the second appraisal value comes in at what you offered.
  2. Come up with the $$$ for the difference. Beg, (don’t steal) or borrow the funds to make up the difference.

You can read more about bank appraisals here.

5. The agent and their brokerage always have my best interests at heart.

In Ontario, real estate Salespeople can represent Buyers and Sellers in a few different ways. An agent only works exclusively in your best interests if:

  1. You’ve signed a Buyer’s Representation Agreement, confirming that they work in your best interests. (you can read more about that here); and
  2. They are not also working for the Seller; if they are representing both the Buyer and the Seller, the Salesperson has obligations to both sides and plays more of a mediation role vs. exclusively representing your interests.  (you can read more about that here)

So, if you talk to an agent at an open house, they aren’t working in your best interests. They are, in fact, working for the Seller. If you make an appointment with the Listing Agent to give you a private tour of a home: they are working for the Seller. If an agent takes you out to see homes but you haven’t signed the Buyer’s Representation Agreement: the agent isn’t supposed to give you any information (including opinions of value) that aren’t in the Seller’s best interests.

If you want to make sure that an agent is working exclusively for you, sign a Buyer’s Representation Agreement.

Pro Tip: Choose your agent wisely  – while the real estate rules define when and how a Salesperson represents a Buyer or Seller, they fall short of controlling the shady agents who are more concerned with themselves than with you.

6. If the Sellers scratched the floors while moving out, I can refuse to close.

Refusing to close – in other words, not paying for and taking possession of the property on the agreed-to closing date – is a really big deal. If there are issues with the legal title of the home – that can be a valid reason not to close. But issues like scratched floors or an appliance that doesn’t work aren’t generally valid reasons not to close – and attempting to do so might cost you your deposit and land you in court. When situations arise at closing, the lawyers for the Buyer and Seller either negotiate a price abatement (in other words, a discount to you) or agree to a holdback.

Holdback Definition: A holdback occurs when the Buyer’s lawyer keeps part of the money that should have been paid to the Seller on closing until a certain set of conditions are satisfied, then releases it.

For example: On the day before closing, a Buyer discovers that the furnace in their soon-to-be-home has stopped working. Through their lawyers, the Buyer and Seller agree to hold back some of the funds to help facilitate the closing. So rather than transferring the $900,000 the Buyer agreed to pay the Seller for the home, the Buyer’s lawyer might holdback $8,000 until the Seller has the furnace repaired or replaced, so the Seller gets $882,000 on closing. The $8,000 stays in the Buyer’s lawyer’s trust account and is released after the Seller repairs or replaces the furnace. Note: both the Buyer and Seller have to agree to a holdback – one side can not arbitrarily do it.

In more serious situations discovered at closing (eg a major flood in the basement),  everyone may agree to delay the closing until the situation can be rectified.

Also important to note: a Buyer is entitled to receive the home in the same condition it was in when they agreed to buy it – so if the floors were already scratched, you won’t get anything for that at closing. Price abatements and holdbacks happen for things that occurred between the date of the offer and closing.

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