Last Quarter 2022

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Last quarter of 2022 already,

As we evolve back towards a market that is a bit more normal than what we have seen over the last couple years, there can be a bit of risk if things do not go smoothly.

Default on Purchase

There have been some notable anecdotes coming from back east in the housing market. These stories are new because it has been a while since we have seen a market where prices are decompressing. I am not sure it is as pronounced an issue here at home but in some eastern markets there have been some graphic decreases in housing prices over the last couple months. I am not sure how or if that will ever affect us, but I did want to give a bit of a refresher on purchaser default on a purchase. The concern is that there might be a sense that if a purchaser defaults on a purchase of a home, the full extent of liability to them is simply the deposit they put down. This is not accurate. It is understandable as to why some clients might be under that impression because in the past several years, if for any reason, a purchaser defaulted on a signed purchase contract, the vendors could simply re-list the property and very likely achieve a better sale price then they had from the defaulting purchaser, in fact it seemed that even after a contract was signed, sometimes vendors were actively looking, hoping, and even offering, to let purchasers out of contracts because the sale they signed 3 months ago, looked like a bargain once possession day arrived. This reality has really changed in the market and there are stories of purchasers signing contracts of purchase and then come possession date the value of the home has fallen, sometimes quite a bit. I suppose, depending on the timing, this could cause some lenders some pause for their purchasing clients and that could put a purchase in peril as well. Regardless of the reason, remember always that a purchaser who defaults in not just responsible for the deposit but potentially for any shortfall on default if the vendor then sells at a lower price than their original contract with the first purchaser. The gaps in some of the Ontario markets over even a short period from contract signing to possession can be large and can lead to a huge issue for the purchaser. I guess we have the benefit of a less turbulent market and maybe the stakes, price wise, are lower, but I suppose the reality may be that a house purchased today might not be worth quite as much come possession in a few months. It’s ok, the market may come right back, and if everyone can deal with the short term and is informed, it can be managed.

Information Courtesy of Gord Steeves

**as always, every situation is different and laws can change if you have doubts, call us

GORD STEEVES
B.A., LL.B.
Barrister, Solicitor and Notary Public
200‑600 St. Anne’s Road
WINNIPEG, MB., R2M 2S2
Direct Tel: 431.478.1280
Tel: 204.254.3511
Fax: 204.257.5139
Email: gord@avdkslaw.ca
Web: www.avslaw.ca

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