Can You Back Out of a Home Purchase Before Closing in Ontario?

Failing to close a real estate deal can have serious financial consequences for a buyer, and the main one is usually the deposit. If you repudiate the agreement and fail to close, the deposit is forfeited to the seller without proof of any damage.

The deposit is security for performance, not damages. Separately, the seller's damages are typically the difference between the agreed price and the property's value on the date set for closing, although the court may choose a later date, taking into account the seller's duty to take reasonable steps such as reselling. Losses that reasonable steps could have avoided cannot be recovered, but the buyer must prove both that the seller failed to mitigate and that mitigation was possible.

Section 98 of the Courts of Justice Act lets a court grant relief against forfeitures, and courts have asked whether the deposit is out of all proportion to the seller's damages and whether it would be unconscionable for the seller to keep it. If time is of the essence and neither side is ready to close, the agreement stays in effect. Outcomes depend on your contract and facts, so speak with a lawyer first.