Can You Back Out of a Real Estate Deal Due to Covid-19?
Monday Apr 20th, 2020Share
Many unforeseen issues can arise, between the time the seller signs the sales agreement to the closing date, due to Covid-19. Not the least of which is buyer’s remorse. But all issues are being worked out with ingenuity and co-operation by all parties.
“It really is down to a lot of open communication. It’s not adversarial." Ms. Esteves1
Issues may affect lenders, appraisers and movers and this creates a trickle-down effect. If a snag occurs, every step must work together to solve the issue to ensure the process works.
Here are some issues and suggested solutions:
The buyer looses his/her job or their income falls before the closing date
- the lender will not cover the entire purchase amount
A: Rather than loose the sale, the purchase price could be re-negotiated
A: The seller could extend a loan to the buyer for the difference of the selling price and the amount the lender will provide. The loan must be paid in “x” years.
Parties are sick
A: The exit or entry date could be re-negotiated
Suggested addition to sales agreement: requires buyers and sellers to agree that both sides need to provide flexibility around the closing date for the reasons above or, for example, if one party is sick or in quarantine inside a house or condo unit.2
The deal is conditional on a home inspection
- home inspection companies are closed
- the home inspector is not willing to visit the home
A: The inspector wears a mask and gloves and the visit is short
A: The appraisal is done from the outside
A: The seller offers warranties against flaws in major elements such as the heating and air conditioning system or the roof.1
- The property was purchased in late February when the prices were high ... will the value of the home come down?
- How will prices and values be affected
- You are reluctant to move during the crisis.
A: Buyer's remorse doesn't only happen during a pandemic. They are not valid reasons to back away from a deal.
Walking away is not an option
It is not just a matter of loosing your deposit. Legally, you could be forced to pay the seller’s losses.
Registering title at the land registry
The land registry office is still functioning however if this changes…
A: Many buyers also acquire title insurance to protect against loss or damages from things such as liens and encumbrances. So-called gap coverage, is designed to bridge that time between closing and registration.1
Key transfers are happening through a lock box at closing, after the money has been transferred electronically.
Changes are still on hold where banks are concerned: The seller’s bank expects a certified cheque for paying off the mortgage. An electronic transfer has been suggested, but at this time, has not been accepted by most banks.
Real Estate Agents, financial institutions, lawyers, land registry offices, and movers are currently open for business if you are considering buying or selling your home. Standard operating procedures have been modified to protect the health and safety of all included.
What has changed:
Open houses are not taking place but private showings are (in selected cases).
Live virtual get-togethers are operating where one member takes the viewer on the tour of the home followed by an associate with a camera.
Serious sellers and buyers are looking but tire-kickers are not.
Parties for whom sales are essential:
Notice on a rental has already been given
What hasn't changed:
Life goes on