When the Buyer Backs Out: Legal Remedies for Home Sellers in Ontario

You’ve accepted an offer, the paperwork is signed, and you’re counting down to closing. Then, out of nowhere, the buyer walks away. Whether it’s a last-minute change of heart, a financing issue, or a missed condition, a failed real estate deal leaves sellers in a stressful and often expensive situation. In Ontario, sellers have several legal remedies when a buyer backs out of a binding Agreement of Purchase and Sale (APS). Understanding these options early can help reduce losses—and avoid unnecessary delays.

Was the Buyer Legally Allowed to Walk Away?

Not every failed deal is a breach. The first question to ask is: Did the buyer have a valid reason to terminate? Many APS agreements include conditions such as:

• Financing approval
• Home inspection
• Lawyer review
• Sale of the buyer’s existing home

If the buyer backs out while conditions are still open, and no waiver has been signed, they may be within their rights. But if the conditions were waived or expired, and the buyer simply refuses to close, this is often considered a breach of contract.

What Are the Seller’s Remedies?

If the buyer breached the contract, the seller may be entitled to:

• 1. Keep the Deposit In many cases, the deposit (often 5–10%) is forfeited to the seller. However, this isn’t automatic. If the buyer refuses to sign a release, the deposit stays in trust until there is an agreement or a court order.
• 2. Sue for Damages If the property is later sold at a lower price, or the seller incurs extra costs (e.g., carrying costs, legal fees, staging), they may sue the original buyer to recover the difference and additional losses.
• 3. Seek Specific Performance In rare cases, sellers can ask the court to force the buyer to close the deal, especially if the property is unique. However, this remedy is more commonly used by buyers than sellers.

Mitigation Is Key

Sellers have a legal duty to mitigate losses. This means they must make a reasonable effort to re-list and resell the property. If they wait too long or hold out for a higher price, their ability to claim damages may be reduced.

Final Thought

When a buyer backs out, the seller isn’t left without options—but those options must be exercised strategically. The terms of the agreement, the reason for the breakdown, and the seller’s response all play a role in determining what can be recovered. Understanding your rights early is the best protection. Because once a deal collapses, every step afterward has legal consequences.