Real estate: Market downturn brings remorse to buyers in Canada
Tara Deschamps, The Canadian Press
Posted Wednesday, May 18, 2022 at 5:17 a.m. EDT
Last updated Wednesday, May 18, 2022 at 5:17 a.m. EDT
TORONTO — A wave of buyer’s remorse is brewing in several heated real estate markets, after housing prices began to decline and the number of sales slowed over the past two months.
Real estate agents and lawyers in Toronto and Vancouver say they’ve noticed buyers looking at their options for backing out of a purchase and sellers hoping to ensure a purchase goes through because terms have drastically changed. changed from previous highs and the breakneck pace.
The country has seen a 25.7% drop in the number of homes sold over the past year and a 3.8% drop in house prices between March and April, the Canadian Real Estate Association said on Monday. . The average home price last month was $741,517.
Figures like these have prompted some sellers to consider lawsuits to ensure deals move forward and other buyers to worry about the value of pre-sale properties they bought years ago but can’t afford. have not yet taken possession.
“With today’s house prices, there’s really no choice but to go all-in and if you go all-in, and then all of a sudden you realize you might have made a bad bet and that there is a way out of that bet, you’ll do whatever you can to get out of it,” said Mark Morris, a Toronto real estate lawyer.
In recent weeks he has seen nine instances of buyers wanting to walk away from deals, but on Monday alone he was approached by three sellers keen to use legal channels to stop buyers walking away.
Morris isn’t calling dating a trend because it’s unclear how many other attorneys are seeing the same surge, but three queries in a day is his new record. He used to see a case of this nature every few months.
“Buyers are looking at the existing crisis, and at best they feel like they paid too much, but now they have objective proof that they did because the markets started to beat and to drop and really show no signs of slowing down,” Morris said.
“A lot of these buyers are faced with the option of going ahead or getting on and walking.”
People are ‘frightened’ whenever the market turns and explore what they can do with the deals they’ve signed, but few end up walking away because it’s hard to get out of such deals, said Phil Soper, CEO of Royal LePage.
He believes the exception to this pattern came in 2020, when the COVID-19 pandemic hit and people willing to exit trades had so many unknowns on their side.
Most buyers trying to end a deal this year won’t be successful because there’s no legal way out, but such cases are also inconvenient for sellers, Morris said.
“Is a seller really ready to sue a buyer who has no assets? Is the seller really going to spend three years in court only to find they have a judgment that cannot be sued? he mused. “Are they really ready to put the amount of money it will take to go to the end of the world if they are able to resell? Maybe not.”
In cases where the buyer has placed money in a seller’s trust account, that money can only be released with legal action, completion of the transaction, or a mutual agreement not to sue. the sale, Morris said. He has seen buyers agree to give the money to the seller, if the seller mutually agrees to end the transaction.
If a trade ends, brokers can sue for their lost commission, but few explore this avenue as it’s “not a good idea” to take legal action against a client, who could always turn to you when trying to sell the failed house. transaction again, Morris said.
While Tirajeh Mazaheri hasn’t been sued in Vancouver, agent Coldwell Banker Prestige Realty has seen buyer’s remorse and concern arise among investors who bought pre-construction homes ago a few years but who have not yet taken possession of it.
“A lot of these people are thinking, ‘Will the market be able to justify this price or follow the price I paid and can I get that money back if I want to sell in a year?’ she says.
People who bought early in a building’s pre-construction sales are already ahead of the curve, but those who bought later will have to wait longer to break even or turn a profit, he said. she declared.
Even though the concern is at its height, Mazaheri and Soper agree that markets are rebounding and homes remain a valuable investment.
“Anyone who bought a house in 2021 in this country, if they bought anywhere near market price, their house will be worth more in 2021,” Soper said.
“Will it be worth more in a year? It’s harder to predict, but even a year from now, the likelihood that this house will be worth less than it is today is lower.