What Happens When an Ontario House Deal Doesn't Close?

When an Ontario real estate deal does not close it can set off a horrible chain reaction of events as helpless and frustrated buyers and sellers are left stranded.

It goes something like this: Buyer Joe is buying a home from seller Smith, who is using the money from the sale to buy from seller Tim. Seller Tim is using this money to buy from seller Kate and seller Kate is using the money to buy from seller Henry.

Now on the closing date, buyer Joe is unable to close because of a financing problem. This results not only in his own deal not closing but has a domino effect: all the other deals not unable to close as the needed closing funds are no longer available for each subsequent purchase. One buyer not closing causes four deals to fall apart. Hence the train wreck.

The clause in the standard Ontario agreement that governs this situation is called the tender clause.

1. If the buyer defaults: If a buyer defaults, the seller must be able to show that he or she was ready and able to close the deal on the closing date. This is important if the seller plans to sue later. This is called tender and means the sellers lawyer must contact the buyer or buyers lawyer to show that they had all the paperwork to close the deal.
2. If the seller defaults: If a seller does not close for any reason, the buyer must show he had the money to close the deal. The proof is a copy of the certified cheque or money order.

What can the Home Seller Do?

Ontario Sellers should always make sure that any interested buyer has qualified for a mortgage. When buyers are working with professional salespeople, most of the time the salesperson has already made sure of that. If the seller is selling privately, you may want to consider a credit check before accepting an offer.

After the offer is accepted, make sure your sales representative, Sherry Rioux is in contact with the buyers agent to ensure any appraisal is conducted in a timely manner. If no inspections are scheduled, it is a sign the buyer may be having trouble getting ready for closing.

Sellers should always look into "bridge financing" as a last option if the deal looks like it wont close. In this situation, if a buyer fails to close at the last minute, the seller is in a position to take out a short-term loan from their bank in order to close their own purchase.

They can then put their existing home on the market again and sell it quickly to try and reduce their damages, and then sue the buyer for all damages suffered.

In this way, they can prevent a lawsuit against themselves by their own seller. Although it will be stressful to have to carry two mortgages for a while, it is still preferable to defaulting on your own purchase and losing the home that you want to move into and opening up yourself to a lawsuit from the seller that you are buying from.