February 11, 2025
Should you make an unconditional offer to buy a house?
Ultimately, that decision is up to you, but you ought to know that if you do, you may not be able to get out of the deal without substantial cost.
We have written before about force majeure in the context of covid and the obligation to perform under a lease. In that article, we describe the concept of force majeure, which depends upon there being a suitable clause in the contract.
Where there is no force majeure clause, the common law doctrine of frustration may help the defaulting party escape liability. We have written about that in the context of a real estate deal that does not close. Because the doctrine of frustration has such a dramatic effect on the rights under the contract, the test to prove frustration is stringent.
The courts are still plagued with numerous lawsuits over real estate deals that fail to close. Among the reasons this happens is a failure to obtain financing.
Liddell v. Mousavi is a recent example which illustrates the difficulties of relying upon these doctrines to escape responsibility.
Where there is a seller’s market, and homes are in demand, it is common to feel pressure to make an unconditional offer to purchase to stand out from the crowd of offers and appeal to the seller.
The lesson to be learned in this case is that it is very risky to sign an unconditional offer to purchase property if you are not totally certain that funds will be available.
If you fail to close the deal, you cannot rely upon the concept of force majeure unless there is a specific clause to that effect in the agreement. Most realtors forms of agreement of purchase and sale do not routinely contain such a clause. Adding a clause as an additional provision waves a red flag and defeats the purpose of an unconditional offer by raising questions about your ability to close the deal.
Which leaves you trying to plead frustration, which seldom succeeds.
You are left exposed to damages if the seller must accept a lower offer, and for the carrying cost of the property, and legal fees. This may add up to hundreds of thousands of dollars, as in the Liddell case.
Cases like Liddell are unfortunately all too common.
Before you take the risk, understand the risk.
WHAT WEILERS LLP CAN DO TO HELP YOU
If you are uncertain about the terms of your agreement of purchase and sale, our real estate lawyers would be happy to explain them to you. All that we ask is that you hire us to close the deal on your behalf if you go ahead.
If you are in the unfortunate position of not being able to close, our real estate lawyers will do their best to extract you from the deal at the lowest possible cost.
If you are sued, our litigation lawyers are here to help.
If you have any questions about your real estate deal, give us a call. We might be the right lawyers for you.