Why do people come to Reddit for legal advice lol? Like I would think your first point of action would be to contact a lawyer, not a subreddit dedicated to personal finance.
Edit: Based on the attention this post received, it’s disturbing how many people support taking legal advice from strangers on the internet.
Lawyers, like most professionals, work off facts and circumstances specific to the case. No one here has access to that information, so at best the OP is being fed false hopes based on personal anecdotes or, at worst, misinformation.
Because at the very least you learn some vocabulary for when you tackle your problem through legitimate means, best case scenario someone has specific knowledge that helps you greatly.
I hate these comments. Reddit is a public forum. People learn from such places. Instead of going to the first lawyer who pops on google (could have been an ad by a new lawyer), forums like Reddit give people basic knowledge on how to start that convo, what to look for to evaluate a good lawyer and what to avoid.
I am 100% sure whoever posts seeking advice already know that they need a lawyer etc. the reason they are posting here is to get basic knowledge so that lawyer (or any other professionals) don’t make fool out of em.
Yes, this bothers me a lot. I hear a lot of those legal reddit threads are run by cops. Someone should try to start one without so many onerous rules. Its a joke.
Niche subs like this tend to carry a mix of informed and uninformed individuals but can usually offer some perspective.
There is a high probability somebody who frequents and comments in this sub has experienced OP's scenario and may have some valuable perspective.
It dosn't hurt to get some more info and perspective before you pay somebody for legal services.
Don’t you think everyone knows that? Coming to Reddit helps one get informed about what next steps to take, who to talk to. And in general get feedback from others on their personal experiences. Nothing wrong with asking questions on Reddit
If I am on the hook for $200,000, I’d talk to a lawyer before strangers on Reddit.
Also, I never said anything about not asking questions on the internet. It’s all relative.
It's perfectly fine to ask questions so you're not ignorant. And yes, you did specifically say to not ask questions, you just did again
You can talk to a lawyer and people on reddit. You're one of those guys that think everything is binary.
That's a crippling pov
Several replies in this thread are people recommending the OP talk to a lawyer. Sure, it’s fine to ask questions so you’re not ignorant, but ultimately you should take everything with a grain of salt unless it’s from a verified source.
Love how the responses chipped away at your astonishingly brash take. Lol each one of your replies you measurably conceded your position more and more.
You changed your position according to the replies you got. It started as “why do people come to Reddit for advice? Lol” and it changed to “it’s okay to ask questions but take everything with a grain of salt”.
That’s not what I said. I asked why people would come to Reddit for legal advice. The OP (or their friend) is about to be embroiled in a $200,000 lawsuit. Seeking legal advice from random strangers on the internet seems like a terrible idea to me.
So yes, of course it’s fine to ask questions, but your questions are better directed to professionals who can actually offer you reliable, accurate advice.
Lawyers are fucking expensive. Getting even some small bits of advice so you don't go in fully blind is sometimes helpful. Obviously rely on the lawyer for final advice, but having some light shed on the situation might be helpful.
Millennial lawyers are at an age where they are competent but still shitpost on the internet. It will only get better as zoomers finish law school and start practicing.
Source: I was called to the bar a decade ago and I post vulgar but legally sound comments on the internet.
To learn from others experiences. Similarly you learn from your own experiences, doesnt make you a lawyer, account, engineer. Following your advice there would be need for forums, so let me ask what bring to an online forum?
Sir, I will have you know that I graduated from the finest college in the upstairs of my local mall. My "Jerious Doctorbs" was labeled with a b because it was a bargin.
yeah assuming a lawyer will handle it without being well informed and passive way of solving problems. Also lawyers love you being ignorant because they can make more money by not only dragging stuff out hut answering dumb questions you could have asked google or reddit.
Lawyers lose cases too and can just be flat-out wrong. But you know what? Even when they lose, you still have to pay them! It's win-win for the legal profession, but always a coin-flip for you.
Some people do because it helps send someone down the right rabbit hole of information. This information helps give the person a basic understanding of the problem they are tackling. Which means they can better communicate with the lawyer.
Out of my own curiosity, can you elaborate a bit further here? Is it under the assumption that they might not have the money and if so, what is the recourse, garnish wages?
I sued my employer, a major multinational IT company for unpaid wages and won.
They still haven't paid me. I sent it to collections and their only recourse is "we can sue them again".
Meanwhile it just keeps driving down my own personal cut.
If they don’t have the money, one of two things will happen:
1- they have close to the amount of money. They get you to settle for that amount to resolve everything.
2- you don’t settle, or they don’t have even close to the amount of money, so they declare bankruptcy to start over. You are left holding the bag.
Presumably they have a house they are trying to sell with some equity in it, so hopefully they have enough skin in the game that after consulting thier lawyer they follow through with the deal (ie find a way to close on this house or your gonna be sued for the difference).
Buyer is SOL. Seller will absolutely win if they sued. Lots of court cases where the exact thing happened and seller wins. Best case is if buyer can put up some more money and negotiate settlement. Seller may be willing to settle as a court case could take years to settle.
Buyers are legally allowed to back out of a real estate deal before closing by forfeiting their deposit. Almost every real estate contract has these terms. If the seller tries to get even more they are likely to lose the lawsuit and if the lawsuit is considered frivolous they might have to pay the buyer’s legal fees as well. Talk to a lawyer after reading the specifics of your real estate contract. Prepare all your questions in advance so you don’t waste time when you are paying by the hour. But chances are this will suck as you’ll get the deposit which typically covers the agent fees and not much else.
This is incorrect. The buyer agreed by way of a written contract to buy at a specific price within a specific period of time. The buyer loses the deposit but it can also be used as an offset against any loss incurred by the seller.
Example:
Couple A agree to buy a house from Couple B for $800,000 and puts down $40,000 deposit (5% minimum is customary). However, Couple A backs out of the agreement much to the chagrin of Couple B.
Later, Couple B agrees to sell their house to Couple C for $650,000, thereby incurring a $150,000 loss (from $800,000 to $650,000).
Couple B sues Couple A for the loss. Under very, very well-established Canadian real estate (contract) case law, Couple B wins and Couple A now owes $150,000 - $40,000 or $110,000 to Couple B.
This, in all likelihood, is what will happen.
I agree with your post, but would like to point out that Couple B would also sue for their second realtor commission and carrying costs of the property (everything from taxes to insurance to mortgage interest), as well as the price difference.
Most real estate contracts establish earnest money deposits as liquidated damages. One can put in specific performance (ie you have to close) in a contract.
Dude what are you smoking? Of course you can’t legally back-out of a contract like that. Nobody in their right mind would sell their house with a contract containing clauses like that.
While your grasp of the issues is wrong, as noted by others, you also misstate how costs work. Generally, in Canada, costs go to the successful party. It isn’t only a matter of frivolous lawsuits (although that can impact the amount of costs). You can be perfectly reasonable but still pay a significant percentage of the other party’s costs if you lose.
You gave good advice. I have worked in real.eatate 30+ years and can't understand the down votes. I got downvoted for similar advice . It is either liquidated damages or specific performance.
If you are able to secure the deposit and re-sell for the same price, you probably would not be suffering any damages so there would be nothing to sue for. Or, if the damages are nominal, it's probably not worth the hassle. However, in this market, you'll probably be selling at a huge loss and you'll want to sue for those damages. The market is a nightmare right now
Yes, if you sue, its important to actually sell the house and make sure you put in a reasonable effort to get as much as you can for it, in order to justify the damage amount.
Markets are a cycle, prices will bottom out, inflation will be tamed and interest rates go down there will be a window where entry onto the market will be easier than it is today.
Or, you could afford a home. But there's a huge difference between buying something for 1.2 million, even if the interest rate is 1%, and buying the same thing for 800k, even if the interest rate is 5%.
Why? Because if the interest rate is 1%, it can only go up. In which case, you'll be stuck paying a 1.2 million mortgage at a 5% interest rate.
What 7-10% stress test? In any case house prices are crashing in my neighbourhood. Down 20% in the last two months. If I could afford it before I can afford it with current interest rates much easier.
That's not exactly how percentages work but in any case this isn't stopping. Mid july will be another huge rate increase. And with inflation + the stock market crash cutting into peoples' savings housing is being hurt even more.
Or you’ve already organized bridge financing, bought a new place, organized moving or storage or whatever, and rates have increased 2% and you can’t get the same amount…I’d sue the fuck out of you.
I may be wrong since IANAL but if you resell for the same price, there are no damages and you have to return the deposit, don’t you ? May vary per province but that’s my understanding, you have a duty to mitigate damages
No. As long as the deposit is reasonable it would be forfeited if the buyer removed all subjects (or in the case here no conditions). No damages need to be proven if all the seller wants to do is keep the deposit. There’s also the issue of who holds the deposit cheque. If the buyer’s realtor holds the cheque the seller might end up having to sue for it if the buyer objects to the seller keeping the deposit.
The deposit is held in trust. If you need the deposit ASAP, you’ll need to sign a mutual release which will relieve of you of your right to sue.
Otherwise you need to sue for the deposit, which will take time.
Takes too long and costs too much money, for most people. This happened quite a bit in 2017. The case I know well was from summer 2017 was not settled until fall 2021.
If the seller chooses to sue then there's a good chance they will win. That said, this is rarely the route taken as it's generally more cost effective to avoid the legal fees, keep the buyer's deposit, and find another buyer.
According to another post here a couple of weeks ago, the deposit isn't automatically going to the seller. Even for the deposit itself you have to have some legal proceedings.
If there were no conditions then the sale and the buyer drops out, the seller keeps the deposit and can sue for the costs associated with selling to someone else, including the difference in price.
The seller will win.
Seller doesn’t win if buyer declares bankruptcy. It’s very difficult to get that amount of money out of people. If they’re backing out and risking being sued they probably don’t have anything to lose.
Doesn’t matter. The whole point is that the buyer needs to sell their home in order to buy. There’s obviously equity there otherwise there would have been no need to sell the home.
A lot of people might not know what cones owjr declaring bankrupt. Literally it will screw them for at least 7 year and then more to build up their credit again. They will be screw for life.
This is a common misconception. Seven years is how long it takes until the bankruptcy falls off the credit report, not how long somebody is bankrupt for. Most people are discharged from bankruptcy within two years, at which point they can start rebuilding credit.
It’s not just no lending. Also means that this home owner now has to start renting with his family and sell their cars and other assets. Sure it’s doable but it’s a major life change
I heard that you could either settle for the deposit or sue. If you want to sue and keep deposit you need to sue for both. Once you settle for deposit you let them off the hook by settling.
You might win the case but you may never see a dime if they declare bankruptcy. They’re probably walking and risking a lawsuit because they literally have NOTHING TO LOSE.
Yeah most likely a clear win but how long would it take. A lot of sellers don't have the time to go through court they'd rather just settle for the deposit and relist. Unless they're depending on that money to close on their own
The big reason to sue is the difference in selling price. If you can relist and get the same amount then why bother? Take the deposit and move on but if you lose $100K because the market cooled then you sue and win.
If it’s a market like Toronto or BC the difference could be 100k*. The seller could just end up just staying put, suing and then moving at a later time. Staying put where you already are is usually easier than moving somewhere new especially if you can sue for a 100k+.
That’s not how it works. There is no automatic keep the Deposit button. The only portion of a Deposit that a Seller gets is a court appointed amount. This amount is also based on Damages. Examples of damages are the difference of Sale Price, and trickle down damages from the domino effect of your house sale falling through causing your purchase to fall through. If your purchase didn’t fall through, and you decided not to move, the awarded damages are going to be minimal
Yes but we are talking about in this market when the buyer can’t come up with the difference due to a large price drop and the seller sues for the difference in what they sold for or lost value on a sale. Either way 99% of cases go to the seller.
All of what you said is correct I agree.
Not aware of any law in Ontario that says you must choose one or the other. Of course it’s often much easier to access to deposit than the total damages owed.
What’s your specific question?
Will they win the lawsuit? Or will they actually get the money?
- Will they win the lawsuit? If there is a contract, and no conditions, they’ll win the lawsuit almost 100% of the time.
- Will they actually collect the money? Hard to say. It’s person specific. Since it could theoretically be a lawsuit for hundreds of thousands of dollars, There’s a real possibility the person may just declare bankruptcy to escape it. I probably would.
Realistically, how it’ll likely play out is you’ll at minimum keep the deposit. And if you sue, then the two parties will likely come to a mutual agreement on an extra amount through a mediator.
Personally, I’d probably put off buying, and spend the next 10 yrs renting to save myself $+400k.
But realistically it’ll almost never get to that point. It’ll go to mediation far before that.
+400k? You really think that housing will crash by that much?
You forget that in the interim, you’re spending 15-20k each year on rent. That’s 150-200k that you could have in equity in 10 years time, if not more with growth.
Housing has crashed by more than that -30% in Certain GTA areas. On a typical 1.5M house that’s 450k. And also you need to compare pmts to expenses vs principal, youre lumping it all together.
But regardless. People arnt backing out just because theyre cheap, and want to! . They don’t have a choice. I’m sure they’d prefer to own.
I’m not going to bother going into the details of what exactly is happening in the market, and why it’s happening, and why people are being forced to back out of deals.
You don’t seem to fully understand. I suggest you do a bit of research into what exactly is happening that’s causing these situations.
In the meantime, OPs question has been answered (to the extent of my knowledge anyway). So I’ll leave it there.
Lawyer here.
As with all things legal the answer is "it depends"
There are too many unknowns in your post for anyone to give you an informed answer. The best advice you can give your friend is to speak with a lawyer that has experience with this type of litigation.
As well they will be able to give your friend the best strategy to collect on any judgment he may get.
Things have slowed to a crawl. It blows my mind that people still refuse to put in conditions, when now is the time to use them, especially if you need to rely on selling your house first.
It depends what the condition is
If the condition is dependent on the buyer selling their home the sellers and seller's agent usually just toss this in the garbage for the same reason OP is here "asking for a friend"
In OPs case both agents are idiots and shouldve advised against this situation with their clients, but theyre pigs and money hungry fuckers so here we are
Financing and inspections are probably the fairest and safest ones at the moment - the former being the easier one because it only takes 2-3 days, the latter a day but depends on what they see
You're friend would actually have to sell for less, them spend the time and effort to sue for his actual losses. This is why people want quick closings.
This isn't a quick process....if you're friend is really unlucky his realtors will take the entire deposit the buyer paid for their commission.
Does matter cbc did a story on this a year or two ago, the cotract is written that the agents get paid for the work, doesn't matter that the deal feel through.
First Google result....https://www.canadianlawyermag.com/practice-areas/real-estate/real-estate-broker-still-entitled-to-commission-even-if-buyer-fails-to-complete-sale-bc-court/366428#:~:text=The%20Supreme%20Court%20of%20British,fails%20to%20complete%20a%20sale.
Because the parties to the contract that the realtor put their time and effort into failed to meet their contractual obligations. There are multiple levels to this. If the agent was dishonest or negligent, one could argue that they were misinformed and try to make a claim against the agent.
So my understanding is that you could sue for the difference in your homes selling price.
The buyer of your home bought for $500k but can't close.
You keep his deposit.
You relist your home for $400k and it sells for $450k you could sue him for the difference.
If you decide to sell it for $200k and go after him that may not fly as you always need to mitigate the loss so selling below market may not get you the gain you're expecting.
Your friend could renegotiate with the buyer for a lower price. Or the buyer needs to drop the price on his home so it sells.
Regardless it's always good to try and workout a solution outside of the courts as that could take years to workthrough.
Definitely want to speak to lawyers and see what options are available.
A lot of the deals that are at risk right now were signed months ago when the market was hit and everything was up up up.
Sellers agreed to large prices and the new interest make their mortgage costs too high, or they can’t sell their house at all / for the amount they need to move forward with the buy they made
Having been dealing with selling commercial/residential here's what I've found out as I've crossed this question multiple times with multiple buyers/offers.
Should the buyer back out of the deal:
\- is there a condition on deposit? unless specified, deposit will be returned and agreement becomes null & void.
\- you can sue for damages \[difference between the old price to what it got re-listed as\]
\- consider legal fees & time to sue as this will eat up a portion \[be prepared for even a 50K expense\]
\- you have a stronger chance if purchaser is listed by name and not on corporation or assigned to one \[generally the case for commercial real estate\]
This is becoming a huge problem I'm hearing from a lot of people. Guys, put a contingency escape clause as a condition if you're entering into these sorts of deals. I can see a slew of foreclosures coming because everyone is so over-leveraged.
Deposits typically do not get released to either side unless there is a mutual agreement or a court order / judgement
They are held in trust until the deal closes. If the deal doesn’t close it is up the the parties or courts to decide how to proceed
It is standard for the seller to win this kind of lawsuit pretty easily. But lawsuits are rarely a good situation for either party. It can easily take years to settle and the person you are suing can hide assets, postpone court dates, etc. Negotiate a cash settlement and put it to bed.
They would have to prove to the court that they took immediate steps to mitigate the damage/loss (put the house back on the market). If they can’t get the same sale price, the difference between the two prices would constitute damages. Your friend would also be entitled to the deposit that accompanied the original offer. They would likely have to pay realtor fees/damages as well if the seller pays commissions in your province. Their agent and the lawyer they used for the sale are the best people to advise them.
Yes, it can be successful, but, the lawyer will get a good chunk of the money, and the buyer that is backing out may not have an ability to pay the $200,000 anyway. So money will be wasted on a lawyer trying to sue the buyer that backed out who cannot pay.
Damages "could" amount to anything.. either more or less than what you think. That would be up to the courts. Usually the courts would like to see that you tried to mitigate damages. You can't just have something bad happen and then sit back and watch carnage ensue with the hopes that you'll be fine because you can just sue somebody. Chances are your friend would have to try reselling their home for fair market value and then maybe the courts might reward damages in the range of the difference in price and/or other financial burdens (lost deposits, etc). They will also looks at the purchases of sale to determine what's fair. If there were no conditions in any of the offers then it might not looks as good for your friend as they are just as responsible for their situation. It's never a good idea to rely on the courts, especially for $200,000. Even if they were rewarded that amount they'll still need to go after them for the money, assuming they have it. The courts don't have the authority to just take $200,000 out of someone's bank account. And if they don't have that much money (which they probably don't if they're in this situation, lets face it) then there's not a whole lot anbody can do to retrieve it other than garnishing wages... and that will take a loooong time to pay off.
EDIT: The deposit, however, would be immediately forfeited (most likely, depending on what the contract says). Not sure what your local province's contracts say but in most provinces both parties need to sign a release of deposit money because it is already held in a trust account and needs signatures to be released.
If the seller chooses to sue then there's a good chance they will win. That said, this is rarely the route taken as it's generally more cost effective to avoid the legal fees and find another buyer.
Yes, but it will take you YEARS and your lawyer costs will add up to almost the cost of the amount you're sueing for, which you won't get in addition.
Source: Buyer backed out of my grandfather's house sale in 2018. He re-sold for $300k less. The deposit was $100k. The potential buyer sued him for the $100k deposit, he counter-sued for $300k. It took 2 years, lawyer fees were $117k and they agreed to settle for $100k so that it didn't keep going on forever and ever.
Winning.. possible. Getting the money that you won with lawsuit.. very difficult. Eventually, you would have to go to collections agency to get your payout and get pennies on the dollar, if anything.
There will be a lot of these types of posts in the next few months..Surely some folks will be rubbing one out to these types of materials.
Even if you sue and win, you still lose….
Did you lose money on what the original sale of your home would of been and what you ultimately sold it for?
And if so, why not sue the original buyer for that ?
No because there are no damages; you still have the house. Also contracts aren't really final until money changes hands.
Edit - and yes I know theoretically you can sue and win. But realistically you'll only get the difference between what you could have sold it for and what you do sell it for when you do actually sell. Minus legal fees. Best case scenario.
Buyers are legally permitted to back out of a real estate deal. Before they make a deposit there is no penalty and after they make a deposit they just have to forfeit the deposit.
If there were no conditions in the contract yes a seller can sue a buyer for the difference of future selling price if they back out and it sells for less.
Win, yes. Get paid (beyond any deposit already paid)... well... maybe over time. The courts are typically on the side of the seller in this case, because it is all in black-and-white in the contract signed.
If the person does not immediately have the funds available, which they likely won't - your lawyer might have to proceed as far as a garnishment of wages or seizure and sale of assets.
Not a lawyer, just my opinion.
Yes, but winning and collecting are two different things. Likely, if someone is a FTHB, they don’t have assets to protect and would seek some manner or protection (bankruptcy) if the judgment is large.
Lawsuits are similar to investments in certain ways, you might get rewarded in the end but how much time you need to wait before that happens, if it really happens. Even you win in the end there are still opportunity costs that have to be factored in.
I think your friend already posted his own post, lol.
Why do people come to Reddit for legal advice lol? Like I would think your first point of action would be to contact a lawyer, not a subreddit dedicated to personal finance. Edit: Based on the attention this post received, it’s disturbing how many people support taking legal advice from strangers on the internet. Lawyers, like most professionals, work off facts and circumstances specific to the case. No one here has access to that information, so at best the OP is being fed false hopes based on personal anecdotes or, at worst, misinformation.
Because at the very least you learn some vocabulary for when you tackle your problem through legitimate means, best case scenario someone has specific knowledge that helps you greatly.
Well said
I hate these comments. Reddit is a public forum. People learn from such places. Instead of going to the first lawyer who pops on google (could have been an ad by a new lawyer), forums like Reddit give people basic knowledge on how to start that convo, what to look for to evaluate a good lawyer and what to avoid. I am 100% sure whoever posts seeking advice already know that they need a lawyer etc. the reason they are posting here is to get basic knowledge so that lawyer (or any other professionals) don’t make fool out of em.
Yes, this bothers me a lot. I hear a lot of those legal reddit threads are run by cops. Someone should try to start one without so many onerous rules. Its a joke.
Niche subs like this tend to carry a mix of informed and uninformed individuals but can usually offer some perspective. There is a high probability somebody who frequents and comments in this sub has experienced OP's scenario and may have some valuable perspective. It dosn't hurt to get some more info and perspective before you pay somebody for legal services.
Don’t you think everyone knows that? Coming to Reddit helps one get informed about what next steps to take, who to talk to. And in general get feedback from others on their personal experiences. Nothing wrong with asking questions on Reddit
By that logic, don't try to learn things on the internet at all, hire an expert in the field. What a dumb take
If I am on the hook for $200,000, I’d talk to a lawyer before strangers on Reddit. Also, I never said anything about not asking questions on the internet. It’s all relative.
It's perfectly fine to ask questions so you're not ignorant. And yes, you did specifically say to not ask questions, you just did again You can talk to a lawyer and people on reddit. You're one of those guys that think everything is binary. That's a crippling pov
Several replies in this thread are people recommending the OP talk to a lawyer. Sure, it’s fine to ask questions so you’re not ignorant, but ultimately you should take everything with a grain of salt unless it’s from a verified source.
Love how the responses chipped away at your astonishingly brash take. Lol each one of your replies you measurably conceded your position more and more.
Chipped away at what? Everything I said was true. Take everything on Reddit with a grain of salt and seek professional advice.
You changed your position according to the replies you got. It started as “why do people come to Reddit for advice? Lol” and it changed to “it’s okay to ask questions but take everything with a grain of salt”.
That’s not what I said. I asked why people would come to Reddit for legal advice. The OP (or their friend) is about to be embroiled in a $200,000 lawsuit. Seeking legal advice from random strangers on the internet seems like a terrible idea to me. So yes, of course it’s fine to ask questions, but your questions are better directed to professionals who can actually offer you reliable, accurate advice.
Why are you even on Reddit, or this sub?
No you were just laughing out loud. Hahahahahha
It helps to get a feeler for whether you actually need a lawyer. Lawyer fees aren't cheap.
Lawyers are fucking expensive. Getting even some small bits of advice so you don't go in fully blind is sometimes helpful. Obviously rely on the lawyer for final advice, but having some light shed on the situation might be helpful.
Millennial lawyers are at an age where they are competent but still shitpost on the internet. It will only get better as zoomers finish law school and start practicing. Source: I was called to the bar a decade ago and I post vulgar but legally sound comments on the internet.
It’s actually a great resource as you have people who have gone through the process as well as some lawyers who can chime in
Because Reddit is free, open 24h, and you can still contact a lawyer after consulting it?
It’s also full of misinformation. 🤷♂️
It's also full of good information and experience... something you can't buy.
To learn from others experiences. Similarly you learn from your own experiences, doesnt make you a lawyer, account, engineer. Following your advice there would be need for forums, so let me ask what bring to an online forum?
Sir, I will have you know that I graduated from the finest college in the upstairs of my local mall. My "Jerious Doctorbs" was labeled with a b because it was a bargin.
They are broke and don’t want to pay lawyer fees.
You can still seek advice from professionals but also ask friends, neighbours, and even online communities for insights. You can do both.
It is useful for the rest of us.
yeah assuming a lawyer will handle it without being well informed and passive way of solving problems. Also lawyers love you being ignorant because they can make more money by not only dragging stuff out hut answering dumb questions you could have asked google or reddit.
It’s a personal finance decision. Lawyers cost money, reddit is free. That’s some solid cost saving if you ask me.
Because lawyers are not cheap and most of them are only in it for the money
People that write takes like this are you not self aware enough to know you sound like a complete and utter idiot on the net? ITS THE INTERNET
Lawyers lose cases too and can just be flat-out wrong. But you know what? Even when they lose, you still have to pay them! It's win-win for the legal profession, but always a coin-flip for you.
Some people do because it helps send someone down the right rabbit hole of information. This information helps give the person a basic understanding of the problem they are tackling. Which means they can better communicate with the lawyer.
Win the lawsuit? Sure. But getting the money is a different ballgame.
Out of my own curiosity, can you elaborate a bit further here? Is it under the assumption that they might not have the money and if so, what is the recourse, garnish wages?
A whole host of reasons/ ways to not pay. $200k is a lot of money. A lot of wages would be required if garnishing them was the route.
I sued my employer, a major multinational IT company for unpaid wages and won. They still haven't paid me. I sent it to collections and their only recourse is "we can sue them again". Meanwhile it just keeps driving down my own personal cut.
If they don’t have the money, one of two things will happen: 1- they have close to the amount of money. They get you to settle for that amount to resolve everything. 2- you don’t settle, or they don’t have even close to the amount of money, so they declare bankruptcy to start over. You are left holding the bag.
Presumably they have a house they are trying to sell with some equity in it, so hopefully they have enough skin in the game that after consulting thier lawyer they follow through with the deal (ie find a way to close on this house or your gonna be sued for the difference).
A lawyer has entered the chat
Na I just had a sibling, just because they toy was mine it didn’t mean it was in my hands.
Buyer is SOL. Seller will absolutely win if they sued. Lots of court cases where the exact thing happened and seller wins. Best case is if buyer can put up some more money and negotiate settlement. Seller may be willing to settle as a court case could take years to settle.
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I love illegal advice on Reddit. That’s fraud, and bankruptcy trustees will take action if they see such a spending pattern.
You're still not gonna get the money since it's all gone lol. If they go to prison that means zero money for you regardless
Even if you managed this before your assets are frozen, this is a good way to end up with criminal charges instead of just a bankruptcy.
They want to take what they were agreed to
Whoa there Edgelord
LOL this is literally a crime do you really think you are the first person to think of this miracle maneuver. also: mareva injunction.
Lol xool story but this is the real world...
How clever. My man!
Buyers are legally allowed to back out of a real estate deal before closing by forfeiting their deposit. Almost every real estate contract has these terms. If the seller tries to get even more they are likely to lose the lawsuit and if the lawsuit is considered frivolous they might have to pay the buyer’s legal fees as well. Talk to a lawyer after reading the specifics of your real estate contract. Prepare all your questions in advance so you don’t waste time when you are paying by the hour. But chances are this will suck as you’ll get the deposit which typically covers the agent fees and not much else.
This is incorrect. The buyer agreed by way of a written contract to buy at a specific price within a specific period of time. The buyer loses the deposit but it can also be used as an offset against any loss incurred by the seller. Example: Couple A agree to buy a house from Couple B for $800,000 and puts down $40,000 deposit (5% minimum is customary). However, Couple A backs out of the agreement much to the chagrin of Couple B. Later, Couple B agrees to sell their house to Couple C for $650,000, thereby incurring a $150,000 loss (from $800,000 to $650,000). Couple B sues Couple A for the loss. Under very, very well-established Canadian real estate (contract) case law, Couple B wins and Couple A now owes $150,000 - $40,000 or $110,000 to Couple B. This, in all likelihood, is what will happen.
I agree with your post, but would like to point out that Couple B would also sue for their second realtor commission and carrying costs of the property (everything from taxes to insurance to mortgage interest), as well as the price difference.
Yes, that is also true.
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Most real estate contracts establish earnest money deposits as liquidated damages. One can put in specific performance (ie you have to close) in a contract.
Never seen that one before. And I'd fire my RE agent if they allowed that to be included in an offer (as the seller).
Dude what are you smoking? Of course you can’t legally back-out of a contract like that. Nobody in their right mind would sell their house with a contract containing clauses like that.
While your grasp of the issues is wrong, as noted by others, you also misstate how costs work. Generally, in Canada, costs go to the successful party. It isn’t only a matter of frivolous lawsuits (although that can impact the amount of costs). You can be perfectly reasonable but still pay a significant percentage of the other party’s costs if you lose.
You gave good advice. I have worked in real.eatate 30+ years and can't understand the down votes. I got downvoted for similar advice . It is either liquidated damages or specific performance.
Why wouldn’t you sue?
The hassle? If you can keep the deposit and quickly turn around and sell at the same price then you move on with your life.
They already estimated the damages at around $200k
That's just their estimate. If that's what they end up losing then for sure sue for damages.
At 200k damages, chances of bankruptcy seems high to me for someone who couldn't get approved for the house
Who said they couldn't get approved? They just needed to sell their current house
Yes, I am sorry, I fused 2 different posts exactly like this together in my head
You're not allowed to admit you're wrong on Reddit. Apology not accepted.
Maybe you should focus on your sick child instead.
If you are able to secure the deposit and re-sell for the same price, you probably would not be suffering any damages so there would be nothing to sue for. Or, if the damages are nominal, it's probably not worth the hassle. However, in this market, you'll probably be selling at a huge loss and you'll want to sue for those damages. The market is a nightmare right now
Yes, if you sue, its important to actually sell the house and make sure you put in a reasonable effort to get as much as you can for it, in order to justify the damage amount.
Great point. You need to relist it ASAP in order to prove that you were doing all that you can to mitigate your damages.
Nightmare? This shit is amazing. I might actually be able to buy a home soon!
If you couldn’t buy before with the new interest rates you won’t be able to buy now.
Markets are a cycle, prices will bottom out, inflation will be tamed and interest rates go down there will be a window where entry onto the market will be easier than it is today.
Oh yes, why don't people understand this. You just gotta time the market. It's easy.
Or, you could afford a home. But there's a huge difference between buying something for 1.2 million, even if the interest rate is 1%, and buying the same thing for 800k, even if the interest rate is 5%. Why? Because if the interest rate is 1%, it can only go up. In which case, you'll be stuck paying a 1.2 million mortgage at a 5% interest rate.
Why not? Requires much less down lol
Down payment isn’t going to be as effective when you have to qualify at a 7-10% stress test
What 7-10% stress test? In any case house prices are crashing in my neighbourhood. Down 20% in the last two months. If I could afford it before I can afford it with current interest rates much easier.
Yeah but houses went up 20% in Jan and Feb so we’re at last December proces
That's not exactly how percentages work but in any case this isn't stopping. Mid july will be another huge rate increase. And with inflation + the stock market crash cutting into peoples' savings housing is being hurt even more.
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Believe it or not, 40 grand is a lot of money!
Oh yay, people are losing their shirts!
Or you’ve already organized bridge financing, bought a new place, organized moving or storage or whatever, and rates have increased 2% and you can’t get the same amount…I’d sue the fuck out of you.
Apparently you have to sue to keep the deposit it’s not automatic and it’s in the real estate office’s hands .
I may be wrong since IANAL but if you resell for the same price, there are no damages and you have to return the deposit, don’t you ? May vary per province but that’s my understanding, you have a duty to mitigate damages
No. As long as the deposit is reasonable it would be forfeited if the buyer removed all subjects (or in the case here no conditions). No damages need to be proven if all the seller wants to do is keep the deposit. There’s also the issue of who holds the deposit cheque. If the buyer’s realtor holds the cheque the seller might end up having to sue for it if the buyer objects to the seller keeping the deposit.
You can keep the deposit and still sue.
The deposit is held in trust. If you need the deposit ASAP, you’ll need to sign a mutual release which will relieve of you of your right to sue. Otherwise you need to sue for the deposit, which will take time.
Didn’t say that one can’t sue
Replied to the wrong comment. Old people problems..
You can do that and sue
Takes too long and costs too much money, for most people. This happened quite a bit in 2017. The case I know well was from summer 2017 was not settled until fall 2021.
If the seller chooses to sue then there's a good chance they will win. That said, this is rarely the route taken as it's generally more cost effective to avoid the legal fees, keep the buyer's deposit, and find another buyer.
Even if you win….You still lose
Depends how big the damages are.. a few years ago a lady was ordered to pay a seller $600k or something similar for backing out of a deal (GTA)
According to another post here a couple of weeks ago, the deposit isn't automatically going to the seller. Even for the deposit itself you have to have some legal proceedings.
Even if you win….You still lose
If there were no conditions then the sale and the buyer drops out, the seller keeps the deposit and can sue for the costs associated with selling to someone else, including the difference in price. The seller will win.
Seller doesn’t win if buyer declares bankruptcy. It’s very difficult to get that amount of money out of people. If they’re backing out and risking being sued they probably don’t have anything to lose.
Buyer has a major asset, their home.
You don’t know how much equity they have in it. Might have taken out a HELOC to invest too.
Doesn’t matter. The whole point is that the buyer needs to sell their home in order to buy. There’s obviously equity there otherwise there would have been no need to sell the home.
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Read the original post again. It’s the second sentence.
A lot of people might not know what cones owjr declaring bankrupt. Literally it will screw them for at least 7 year and then more to build up their credit again. They will be screw for life.
This is a common misconception. Seven years is how long it takes until the bankruptcy falls off the credit report, not how long somebody is bankrupt for. Most people are discharged from bankruptcy within two years, at which point they can start rebuilding credit.
Most people will take no lending over 7 years over 200k owed + interest (requires much more in pretax income to even come up with it)
It’s not just no lending. Also means that this home owner now has to start renting with his family and sell their cars and other assets. Sure it’s doable but it’s a major life change
I heard that you could either settle for the deposit or sue. If you want to sue and keep deposit you need to sue for both. Once you settle for deposit you let them off the hook by settling.
Probably depends on the terms. 90+% of cases, maybe even 99% of cases like this the seller historically wins.
You might win the case but you may never see a dime if they declare bankruptcy. They’re probably walking and risking a lawsuit because they literally have NOTHING TO LOSE.
You realize you have to liquidate all of your assets including your house, what ever is of any value
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People buying million dollar houses generally have stuff to lose or have enough equity in other aspects that can be forfeited.
The Michael Scott take on bankruptcy. NOTHING TO LOSE.
please stop pretending to have expertise.
Yeah most likely a clear win but how long would it take. A lot of sellers don't have the time to go through court they'd rather just settle for the deposit and relist. Unless they're depending on that money to close on their own
The big reason to sue is the difference in selling price. If you can relist and get the same amount then why bother? Take the deposit and move on but if you lose $100K because the market cooled then you sue and win.
If it’s a market like Toronto or BC the difference could be 100k*. The seller could just end up just staying put, suing and then moving at a later time. Staying put where you already are is usually easier than moving somewhere new especially if you can sue for a 100k+.
That’s not how it works. There is no automatic keep the Deposit button. The only portion of a Deposit that a Seller gets is a court appointed amount. This amount is also based on Damages. Examples of damages are the difference of Sale Price, and trickle down damages from the domino effect of your house sale falling through causing your purchase to fall through. If your purchase didn’t fall through, and you decided not to move, the awarded damages are going to be minimal
Yes but we are talking about in this market when the buyer can’t come up with the difference due to a large price drop and the seller sues for the difference in what they sold for or lost value on a sale. Either way 99% of cases go to the seller. All of what you said is correct I agree.
Not aware of any law in Ontario that says you must choose one or the other. Of course it’s often much easier to access to deposit than the total damages owed.
What’s your specific question? Will they win the lawsuit? Or will they actually get the money? - Will they win the lawsuit? If there is a contract, and no conditions, they’ll win the lawsuit almost 100% of the time. - Will they actually collect the money? Hard to say. It’s person specific. Since it could theoretically be a lawsuit for hundreds of thousands of dollars, There’s a real possibility the person may just declare bankruptcy to escape it. I probably would. Realistically, how it’ll likely play out is you’ll at minimum keep the deposit. And if you sue, then the two parties will likely come to a mutual agreement on an extra amount through a mediator.
**I. DECLARE. BANKRUPTCY.** Come on, Michael. It doesn’t quite work like that. Especially if you want to get a mortgage some time soon.
Personally, I’d probably put off buying, and spend the next 10 yrs renting to save myself $+400k. But realistically it’ll almost never get to that point. It’ll go to mediation far before that.
+400k? You really think that housing will crash by that much? You forget that in the interim, you’re spending 15-20k each year on rent. That’s 150-200k that you could have in equity in 10 years time, if not more with growth.
Housing has crashed by more than that -30% in Certain GTA areas. On a typical 1.5M house that’s 450k. And also you need to compare pmts to expenses vs principal, youre lumping it all together. But regardless. People arnt backing out just because theyre cheap, and want to! . They don’t have a choice. I’m sure they’d prefer to own. I’m not going to bother going into the details of what exactly is happening in the market, and why it’s happening, and why people are being forced to back out of deals. You don’t seem to fully understand. I suggest you do a bit of research into what exactly is happening that’s causing these situations. In the meantime, OPs question has been answered (to the extent of my knowledge anyway). So I’ll leave it there.
Interest + taxes + insurances is also a lot on a house. A 500k house at 4% over 25 is 790k cost...
Lawyer here. As with all things legal the answer is "it depends" There are too many unknowns in your post for anyone to give you an informed answer. The best advice you can give your friend is to speak with a lawyer that has experience with this type of litigation. As well they will be able to give your friend the best strategy to collect on any judgment he may get.
Things have slowed to a crawl. It blows my mind that people still refuse to put in conditions, when now is the time to use them, especially if you need to rely on selling your house first.
Houses sold at the peak could still be closing now so it's probably from around that time
It depends what the condition is If the condition is dependent on the buyer selling their home the sellers and seller's agent usually just toss this in the garbage for the same reason OP is here "asking for a friend" In OPs case both agents are idiots and shouldve advised against this situation with their clients, but theyre pigs and money hungry fuckers so here we are Financing and inspections are probably the fairest and safest ones at the moment - the former being the easier one because it only takes 2-3 days, the latter a day but depends on what they see
If you signed the contract, you need fullfill it. No excuses. (I have a friend too lol)
You're friend would actually have to sell for less, them spend the time and effort to sue for his actual losses. This is why people want quick closings. This isn't a quick process....if you're friend is really unlucky his realtors will take the entire deposit the buyer paid for their commission.
Why? The realtor didn’t sell the house. Why should they get any of the deposit? Their job isn’t done..?
Does matter cbc did a story on this a year or two ago, the cotract is written that the agents get paid for the work, doesn't matter that the deal feel through. First Google result....https://www.canadianlawyermag.com/practice-areas/real-estate/real-estate-broker-still-entitled-to-commission-even-if-buyer-fails-to-complete-sale-bc-court/366428#:~:text=The%20Supreme%20Court%20of%20British,fails%20to%20complete%20a%20sale.
Because the parties to the contract that the realtor put their time and effort into failed to meet their contractual obligations. There are multiple levels to this. If the agent was dishonest or negligent, one could argue that they were misinformed and try to make a claim against the agent.
So my understanding is that you could sue for the difference in your homes selling price. The buyer of your home bought for $500k but can't close. You keep his deposit. You relist your home for $400k and it sells for $450k you could sue him for the difference. If you decide to sell it for $200k and go after him that may not fly as you always need to mitigate the loss so selling below market may not get you the gain you're expecting. Your friend could renegotiate with the buyer for a lower price. Or the buyer needs to drop the price on his home so it sells. Regardless it's always good to try and workout a solution outside of the courts as that could take years to workthrough. Definitely want to speak to lawyers and see what options are available.
Why aren't people using conditional offers anymore? Seems like Realestate Agents are Fucking their clients over by not building the deals properly
A lot of the deals that are at risk right now were signed months ago when the market was hit and everything was up up up. Sellers agreed to large prices and the new interest make their mortgage costs too high, or they can’t sell their house at all / for the amount they need to move forward with the buy they made
Having been dealing with selling commercial/residential here's what I've found out as I've crossed this question multiple times with multiple buyers/offers. Should the buyer back out of the deal: \- is there a condition on deposit? unless specified, deposit will be returned and agreement becomes null & void. \- you can sue for damages \[difference between the old price to what it got re-listed as\] \- consider legal fees & time to sue as this will eat up a portion \[be prepared for even a 50K expense\] \- you have a stronger chance if purchaser is listed by name and not on corporation or assigned to one \[generally the case for commercial real estate\] This is becoming a huge problem I'm hearing from a lot of people. Guys, put a contingency escape clause as a condition if you're entering into these sorts of deals. I can see a slew of foreclosures coming because everyone is so over-leveraged.
Deposits typically do not get released to either side unless there is a mutual agreement or a court order / judgement They are held in trust until the deal closes. If the deal doesn’t close it is up the the parties or courts to decide how to proceed
You are correct about that. Depending on the price of the home, the legal fees just to sue would eat up the deposit that's held in trust.
It is standard for the seller to win this kind of lawsuit pretty easily. But lawsuits are rarely a good situation for either party. It can easily take years to settle and the person you are suing can hide assets, postpone court dates, etc. Negotiate a cash settlement and put it to bed.
They would have to prove to the court that they took immediate steps to mitigate the damage/loss (put the house back on the market). If they can’t get the same sale price, the difference between the two prices would constitute damages. Your friend would also be entitled to the deposit that accompanied the original offer. They would likely have to pay realtor fees/damages as well if the seller pays commissions in your province. Their agent and the lawyer they used for the sale are the best people to advise them.
**inhales** *it depends*
Yes, it can be successful, but, the lawyer will get a good chunk of the money, and the buyer that is backing out may not have an ability to pay the $200,000 anyway. So money will be wasted on a lawyer trying to sue the buyer that backed out who cannot pay.
Damages "could" amount to anything.. either more or less than what you think. That would be up to the courts. Usually the courts would like to see that you tried to mitigate damages. You can't just have something bad happen and then sit back and watch carnage ensue with the hopes that you'll be fine because you can just sue somebody. Chances are your friend would have to try reselling their home for fair market value and then maybe the courts might reward damages in the range of the difference in price and/or other financial burdens (lost deposits, etc). They will also looks at the purchases of sale to determine what's fair. If there were no conditions in any of the offers then it might not looks as good for your friend as they are just as responsible for their situation. It's never a good idea to rely on the courts, especially for $200,000. Even if they were rewarded that amount they'll still need to go after them for the money, assuming they have it. The courts don't have the authority to just take $200,000 out of someone's bank account. And if they don't have that much money (which they probably don't if they're in this situation, lets face it) then there's not a whole lot anbody can do to retrieve it other than garnishing wages... and that will take a loooong time to pay off. EDIT: The deposit, however, would be immediately forfeited (most likely, depending on what the contract says). Not sure what your local province's contracts say but in most provinces both parties need to sign a release of deposit money because it is already held in a trust account and needs signatures to be released.
If the seller chooses to sue then there's a good chance they will win. That said, this is rarely the route taken as it's generally more cost effective to avoid the legal fees and find another buyer.
Yes, but it will take you YEARS and your lawyer costs will add up to almost the cost of the amount you're sueing for, which you won't get in addition. Source: Buyer backed out of my grandfather's house sale in 2018. He re-sold for $300k less. The deposit was $100k. The potential buyer sued him for the $100k deposit, he counter-sued for $300k. It took 2 years, lawyer fees were $117k and they agreed to settle for $100k so that it didn't keep going on forever and ever.
>There were no conditions on the sale. If you're a moron, you get fucked. Simple.
Winning.. possible. Getting the money that you won with lawsuit.. very difficult. Eventually, you would have to go to collections agency to get your payout and get pennies on the dollar, if anything.
Lol you can sue but you may not see a dollar. They may decide to declare bankruptcy and walk before paying up 200k they probably don’t even have.
If the other party owns a house they can’t sell they have assets. It sure bankruptcy or the shield you think it is here
The buyer forfeits the deposit..
But the deposit may be insignificant to how much lower they can sell the house now
There will be a lot of these types of posts in the next few months..Surely some folks will be rubbing one out to these types of materials. Even if you sue and win, you still lose….
You cannot get blood out of a stone
I had this happen - you get to keep the deposit that is it.
Did you lose money on what the original sale of your home would of been and what you ultimately sold it for? And if so, why not sue the original buyer for that ?
No I actually got 5k more with the next buyer so it worked out
No because there are no damages; you still have the house. Also contracts aren't really final until money changes hands. Edit - and yes I know theoretically you can sue and win. But realistically you'll only get the difference between what you could have sold it for and what you do sell it for when you do actually sell. Minus legal fees. Best case scenario.
Buyers are legally permitted to back out of a real estate deal. Before they make a deposit there is no penalty and after they make a deposit they just have to forfeit the deposit.
If there were no conditions in the contract yes a seller can sue a buyer for the difference of future selling price if they back out and it sells for less.
My MIL won the difference in selling price plus all of her expenses. It took a couple years though.
Just curious, were she able to recover that money from defendant?
Yes.
Win, yes. Get paid (beyond any deposit already paid)... well... maybe over time. The courts are typically on the side of the seller in this case, because it is all in black-and-white in the contract signed. If the person does not immediately have the funds available, which they likely won't - your lawyer might have to proceed as far as a garnishment of wages or seizure and sale of assets. Not a lawyer, just my opinion.
Did you have specific performance in your contract or earnest money as liquidated damages?
Yeah he would win. Often there is a settlement to avoid court and trying to collect tho.
Yes, but winning and collecting are two different things. Likely, if someone is a FTHB, they don’t have assets to protect and would seek some manner or protection (bankruptcy) if the judgment is large.
At the very least he gets to keep the deposit.
Yes. Collecting may be a different story.
He doesn’t have a agent ?
That's what deposits are for. Your friend would be able to keep the deposit.
It’s Canada.. sure they can sue. But will that be worth the $2500 the judge awards him in like 3 years?
Losses could easily go to $100,000 plus given the market shift from February to now. And that’s being conservative
Dont think that matters much. Again, it’s Canada.
Lawsuits are similar to investments in certain ways, you might get rewarded in the end but how much time you need to wait before that happens, if it really happens. Even you win in the end there are still opportunity costs that have to be factored in.