Canada

Canadian Real Estate Buyers Trying To Walk Away From Purchases Become “Rampant”

Canadian real estate buyers are starting to ghost sellers, after making offers. Marvin Alexander, president of Keller Williams Realty Centres, a Greater Toronto-based brokerage, notes an unusual uptick of buyers not delivering deposit cheques. He’s not alone. The broker is hearing similar stories from other brokerages across Greater Toronto, and suspects it might be a Canada-wide trend.

Toronto Real Estate Buyers Ghosting Sellers

Greater Toronto real estate buyers are placing offers on homes, then failing to close. Once a buyer places an offer, they are typically obligated to follow through with the buy. This usually means dropping off the “deposit cheque,” a few days after its been accepted – as per the contract. Unless the buyer has a reason in the contract, they are usually bound to purchase the house.

In a piece penned for REM, a real estate industry magazine, the broker claims he is seeing a “disturbing trend.” In September, he’s seen an uptick in buyers with accepted offers, not delivering a deposit. His brokerage alone has seen “nearly 30” of these cases last month. He also notes he’s heard other Toronto brokers observing a similar trend. He also suspects this is a more widespread issue.

Why Is It Happening?

There’s likely more than one reason this happens, but the broker believes this a result of multiple offers. He speculates buyers might be placing offers on more than one place, just in case they don’t get the first one. He adds, some of these buyers have also placed these bids during bidding wars – likely not expecting to “win.” Many of the offers are “firm,” without condition though. That means it doesn’t matter if the buyer changes their mind, they can still be on the hook for the house

Buyers Usually Can’t Just Walk Away From An Accepted Offer

Buyers, sometimes on the bad advice of an agent, place an offer on more than one house, thinking they can walk away. It gets even more complicated if that offer is “unconditional.” Sellers can (and do) sue buyers if they fail to resell at a higher price. Without a valid reason for walking away from the contract, this number can be a lot more than the deposit.

There was a wave of similar situations over the past few years, largely in BC and Ontario. For example, in BC one buyer that attempted to walk away was ordered to pay $360,000 to the seller, after the home they bid on, later sold for 28% less. In a Toronto suburb, a buyer was ordered to pay $470,000 to make up the difference in a similar situation as well. In both cases, this was probably much more money than the buyer expected to pay to ultimately get nothing. 

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20 Comments

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  • Jamie Cass 2 months ago

    Even if the buyer delays the purchase, and still follows through, they can still be on the hook for penalties for not following through on a timely close, no? i.e. addition mortgage interest, etc..

    • Quon 2 months ago

      Good agent can more than pay for itself. I don’t know any that would say place and offer on more than one home at a time. You spent 10 years (?) saving up for a downpayment, why would you rush the buying process into 30 days?

      It sucks to not get a property, but it sucks even more to lose your downpayment and then some, because your agent really wants to get rid of you in a few days.

      • DownToFinance 2 months ago

        What does that have to do with an agent? It’s just common sense.

  • OM 2 months ago

    Expected to see this kind of stuff in the condo market, not out in the suburbs.

  • Trader Jim 2 months ago

    I bought my house a while ago, on a binge. I remember not really having a grasp on how much cash I needed to have on hand to close so quickly. I could obviously find it, but I can see how other young people think “it’s just $x,” and put in an offer without realizing how much they needed.

  • Taryn 2 months ago

    Okay. “multiple offers” for multiple houses. *eye roll*

    You know there’s a lot of people that bought without thinking it through, and have regrets.

    https://betterdwelling.com/us-real-estate-sales-have-been-booming-since-the-pandemic-over-half-regret-buying/

  • Kathleen Thomson 2 months ago
  • Chris Owens 2 months ago

    The Standard APS in Ontario for resale states the deposit to be delivered to the Listing Brokerage within 24 hrs of acceptance, Not in a “Couple of days”. A wise Realtor will insist on the deposit accompanying the Offer and in “Certified Funds or Bank Draft” . The APS reads either “upon Acceptance ( read within 24hrs )” or “Herewith”. The failure to deliver the deposit places the Buyer in breach and consequences arise for the Buyer.
    This is Not a Huge problem if Realtors follow Fiduciary duties properly. Please save the “Yes, But comments. 🙂

  • straw walker 2 months ago

    Again all relates to bad and unprofessional advice from Real estate brokers…
    or this is all part of a scam.. ghost bidders being used in the market to push prices higher.. an
    old trick used at auctions..
    A ghost bidder forcing a real bidder to bid higher.

    • Carlton 2 months ago

      Welcome to Brampton!

      At least 3 ghost bids per home driving prices to the moon.

      It’s a bubble within a bubble out here in the 905

      Most Homes are purchased using rental income, not actual income

      It’s almost impossible finding a single family home in Brampton without a finished basement And tenant Occupied

  • The Truth Shall Set You Free 2 months ago

    This isn’t ghosting by buyers. This is the presentation of purchasers who do not exist to create the false sales in order to keep the averages up. This is done so that agents and Brokers can sell their own properties before the bottom falls out as they know that home prices are on the brink of collapse and there is no demand. Fact is there isn’t anyone to punish them. No agency…no government entity…no one. So whatever they do right now will continue and will not stop until the government implements measures to punish them BUT THIS WONT HAPPEN as the real estate industry and those in control of the industry donate to the campaigns of the elected officials.

    • Paul 2 months ago

      Wouldn’t the offer have to have identification attached to it? Or do they just supply false identification and no one checks?

      • Joseph 2 months ago

        Such crime is usually staged by the real estate agent. Not necessary to be a fake person, just have no intention of buying it.

  • Kolf 2 months ago

    The longer the government prop up this bubble the worst it is for everyone. Time to let real estate prices fall atleast 50%. We need to stop using tax payer money to fatten speculators wallets.

  • backwardsevolution 2 months ago

    I know the seller is compelled to complete the sale. I believe this is called “specific performance”.

    But the buyer? If he’s an offshore buyer? Good luck getting him to complete if he doesn’t want to. If you don’t have a deposit in hand – and a substantial one – then you really don’t have a deal.

    Sounds like these guys have no intention of “buying”, just trying to create the appearance of a bidding war in order to reel in the last sucker.

    Probably a new scam. Could be the agents (and possibly even the sellers) AND the ghost buyers are colluding.

    What used to separate the West from the Third World was the “rule of law”, the honouring of contracts. Now we have money laundering, ghost buyers, citizenship buying, and shell corporations.

    What a downfall.

  • Dale Gribble 2 months ago

    Hahaha …. what did those poor innocent sellers expect when they are driving the prices to astronomical levels. spare me they are the innocent victim card, there are no innocents in this game. everyone is equally guilty. This is what happens when real estate prices become out of control. For one I’m delighted to see so many sellers getting screwed.

    • Groot 2 months ago

      Government needs to put an end to this.
      1- Bring in a tax on equity for 2nd homes and residential investment properties to properly capture tax revenue on refinance equity take outs on these properties. The way the system is designed someone can refinance an investment property and withdraw the funds tax free as the tax is deferred till when they sell and realize it as a capital gain. Theoretically someone could do an equity take indefinitely and not pay a penny of tax on those funds till they die and their estate realizes the capital gain which in itself is has preferential tax treatment. Or even worse if the mortgage and the property are held in a hold co. or numbered company tax may never be paid if the property is never sold. This is a massive loop hole in the tax system that needs to be plugged.

      2- Bring in a speculation tax / Value tax – tax the equity in residential investment properties and second homes at a rate of 1% per year based on the appreciation of it’s value. This can be measured by MPAC which tracks average property values as it is.

      3-Foreign buyers tax – Add an additional tax on closing and sale of these properties. Also a tax on speculation of 1% per year.

      The only exemption to the above would be commercial real estate.

      Bottom line is as a country we have a massive debt to pay and we can’t continue with the current deferred capital gain tax system we have on investment real estate and second homes as the debt needs to be paid down now. If we don’t take these measures future generations will be massively screwed.

  • Joseph 2 months ago

    All that responsibility lies in the Real estate association, big companies like Remax etc. They have no interest in being ethical and honest. Those are not ghost buyers but more like fake bidders hired by the real estate agents in order to inflate the prices

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