What Happens When a Buyer Backs Out of a Home Sale?

You’ve accepted an offer. You’ve started planning the move. You may have already told friends and family the house is sold. Then the buyer sends a message to their Realtor or lawyer saying they can’t close. Or worse, they stop responding altogether.

Your stomach drops.

This situation is far more common than most sellers realize, especially in shifting markets where financing tightens, buyers hesitate, or deals depend on multiple moving parts. When it happens, sellers almost always ask the same questions:

What happens now? Can I keep the deposit? Can I force them to close? Do I have any real leverage?

The answers are rarely emotional or intuitive. They’re contractual.

Here’s the hard truth: when a buyer backs out of a home sale, everything comes down to one document — the Agreement of Purchase and Sale, commonly called the APS. Not fairness. Not intent. Not how stressful the situation feels. The wording, the conditions, and the timing inside that contract decide whether a buyer can legally walk away or whether they’re in breach.

When a buyer backs out, the contract — not guesswork — determines the outcome.

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When a Buyer Can Actually Walk Away

Despite how it may feel “in the moment”, buyers do have legitimate exit routes, especially early in the transaction.

Most offers include conditions such as:

• Financing approval
• Home inspection
• Condo status certificate review

These conditions exist to protect buyers while they complete due diligence. During the conditional period, buyers can walk away as long as they act within the deadline and provide proper written notice. That notice must be delivered in the manner specified in the APS and before the condition expiry.

From a seller’s perspective, this window can feel generous. You’ve taken your home off the market. Showings may have stopped. You may have emotionally “moved on.” Yet legally, the buyer still has an exit ramp.

That said, buyers cannot cancel casually. Conditions must be exercised properly. Missing a deadline, failing to provide notice in writing, or attempting to back out after a condition has already been waived can change the entire legal outcome.

Buyers may also have legal grounds to terminate a deal if the seller cannot deliver what the contract promised. Examples include:

• Title issues that cannot be resolved
• Failure to deliver vacant possession when required
• Serious undisclosed defects where disclosure was legally required
• Seller inability to close on the agreed date

These scenarios are less common, but when they occur, they can flip the leverage entirely. This is why disclosure, documentation, and clean title matter far more than most sellers realize.

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The Moment Everything Changes: When the Deal Goes Firm

Once all conditions are waived or fulfilled in writing, the deal becomes firm.

This is the turning point.

At this stage, the buyer cannot simply change their mind because:

• They got nervous about interest rates
• They found another property they prefer
• They lost confidence in the market
• Their personal situation changed

Cold feet are not a legal exit.

If a buyer backs out of a firm home sale without a valid contractual reason, they are typically in breach of contract. That’s when real legal and financial consequences begin.

Many sellers assume that a firm deal means the problem is solved. In reality, it simply changes the nature of the risk. The deal is no longer fragile, but enforcement may be required if the buyer doesn’t perform.

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The Deposit Isn’t Automatically Yours

One of the most common misconceptions is that if a buyer walks away from a firm deal, the seller automatically keeps the deposit.

That is not how it works in Ontario.

Deposits are held in trust by a brokerage or lawyer. If a deal collapses, the funds remain frozen until one of two things happens:

1. Both parties sign a mutual release agreeing on where the deposit goes
2. A court issues a decision directing the release of funds

Even when the buyer is clearly in default, the deposit does not instantly transfer to the seller. Until the dispute is resolved, that money is effectively locked.

In many cases, buyers refuse to sign a release, not because they believe they’ll win, but because delay gives them leverage. This can drag the process out for months or longer, especially if legal action is required.

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Buyer Delays: The More Common and More Dangerous Problem

Most sellers focus on buyer defaults, but in practice, buyer delays are far more common — and often more damaging.

A buyer may not formally cancel the agreement, yet still fail to close on time because:

• Financing isn’t finalized
• Lender conditions weren’t satisfied
• Documents weren’t prepared properly
• The buyer’s own sale fell through

From a legal standpoint, a delay can still be a breach. But from a practical standpoint, it creates immediate financial stress for sellers.

If you need sale proceeds to close on another property, even a short delay can force you into:

• Bridge financing
• Penalty interest
• Emergency borrowing
• Extension negotiations under pressure

Even when the law is on your side, enforcement takes time. During that gap, sellers are often forced to carry the costs while waiting for resolution. This is where many sellers feel the most exposed — not because they’re wrong, but because timing matters.

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Can Sellers Claim Losses Beyond the Deposit?

Yes, under the right circumstances.

If a buyer breaches a firm agreement and the seller suffers financial losses, those losses may be recoverable. The deposit is often treated as partial security, not a cap on damages.

Examples of claimable losses may include:

• Carrying costs while the property is resold
• Additional mortgage interest or bridge financing costs
• Property taxes, utilities, and insurance
• Legal fees related to enforcement
• Costs associated with relisting and resale

If the property eventually sells for less than the original price, the difference may also be claimable, depending on timing and market conditions.

Courts expect sellers to mitigate losses, meaning they must act reasonably. Relisting promptly, pricing appropriately, and avoiding emotional decisions all matter. Claims are assessed based on documentation, market evidence, and whether the seller acted in good faith.

Legal rights exist — but exercising them can be slow, expensive, and uncertain. This is why prevention and preparation matter more than courtroom victories.

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What Sellers Should Do Immediately

When a buyer backs out or begins delaying, the first steps matter more than most people realize.

Get everything in writing. Verbal explanations don’t protect you.
Review the APS with your listing agent to confirm whether the buyer actually had the right to cancel.
If the deal is firm, speak to a real estate lawyer immediately. This is not a DIY moment.
Start documenting all losses right away. Carrying costs add up faster than expected.
Relist strategically, not emotionally. Acting reasonably protects your legal position.

Calm, timely action preserves leverage. Delay and emotion erode it.

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The Bottom Line

Why Preparation Matters

When a buyer backs out of a home sale — or delays closing — the outcome isn’t random.

It’s determined by the contract.

Some exits are allowed. Others carry serious financial consequences. The difference often comes down to a few lines in the Agreement of Purchase and Sale and whether conditions were satisfied properly.

Sellers who understand these mechanics, and who get the right advice early, are far better positioned to protect themselves, reduce risk, and make informed decisions when a deal starts to unravel.

The quiet question for most sellers isn’t “What went wrong?”, it’s whether they knew where they stood before things changed.

Most seller risk doesn’t show up when an offer is accepted. It shows up later, when timelines tighten, money is already committed, and options shrink.

Tools like Secure My Offer exist for that exact reason. They don’t change the contract. They don’t stop disputes. They simply help sellers absorb the financial impact when a buyer delays or defaults disrupt a closing.

Because once the problem is obvious, it’s usually too late to prepare for it.

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