Worry, buyer’s remorse high as real estate market slowdown materializes

TORONTO — A wave of buyer regret is taking shape in several heated real estate markets after home prices began to fall and sales slowed over the past two months.

TORONTO — A wave of buyer regret is taking shape in several heated real estate markets after home prices began to fall and sales slowed over the past two months.

Real estate agents and attorneys in Toronto and Vancouver say they’ve noticed buyers are evaluating their options for exiting a purchase, and sellers are hoping to make sure one pulls through as conditions ease from previous highs and the blistering pace have changed dramatically.

The country saw a 25.7 percent drop in the number of homes sold last year and a 3.8 percent drop in home prices between March and April, the Canadian Real Estate Association said on Monday. The median home price last month was $741,517.

Figures like this have prompted some sellers to look into lawsuits to ensure transactions progress and other buyers to worry about the value of pre-sale properties they bought years ago but have yet to take possession of.

“With real estate prices today there really is no choice but to go all in and when you go all in you suddenly realize that maybe you made a bad bet and there is a way out of that bet. We’re going to do whatever it takes to get out,” said Mark Morris, a Toronto real estate attorney.

In recent weeks he has seen nine instances of buyers wanting to back out of stores, but on Monday alone he was approached by three sellers keen to use legal channels to discourage buyers from walking away.

Morris doesn’t call the encounters a trend because it’s unclear how many other attorneys are seeing the same surge, but three queries in one day is his new record. He used to see a case like this every few months.

“Buyers look at the crisis in place and at the best of times feel like they paid too much, but now they have objective evidence that the markets have started to bounce and fall and are really showing no signs of slowing down. ‘ Morris said.

“Many of these buyers are faced with a choice of going forward or stepping up and going.”

People get “terrified” every time the market turns and explore what they can do about deals they sign, but few end up walking away because it’s difficult to get out of deals like this, said Phil Sopher, CEO by Royal LePage.

He believes the exception to this pattern came in 2020, when the COVID-19 pandemic hit and people looking to exit transactions had so many unknowns on their side.

Most buyers trying to close a deal this year won’t be successful because there’s no legal way out, but such cases are impractical for sellers, too, Morris said.

“Is a seller really willing to pursue a buyer who has no assets? Will the seller really have to go to court for three years only to find that he has made a judgment that cannot be followed up?” he mused. “Are they really willing to put up the amount of money it takes to follow this to the ends of the earth if they’re able to resell it? Maybe not.”

In cases where the buyer has deposited money into a seller’s escrow account, that money can only be released through a court action, the closing of the deal, or a mutual agreement not to proceed with the sale, Morris said. He has seen buyers agree to give the seller the money if the seller mutually agrees to go out of business.

When a deal ends, brokers can sue for their lost commission, but not many go down that route because it “doesn’t look good” to take legal action against a client who may still turn to you when they’re trying to sell the house the failure to re-sell transaction, Morris said.

While Tirajeh Mazaheri has not taken legal action in Vancouver, real estate agent Coldwell Banker Prestige Realty has seen buyers’ remorse and concerns rising among investors who bought pre-construction homes a few years ago but have not yet taken possession of them.

“A lot of these people think, ‘Will the market justify that price or match the price I paid, and if I want to sell in a year, can I get that money back?’ She said.

People who bought in early rounds of sales before construction for a building are already ahead of the curve, but those who bought later will have to wait longer to breakeven or turn a profit, she said.

Though concerns run high, Mazaheri and Soper agree that markets are recovering and homes are still a valuable investment.

“Anyone who bought a home in this country in 2021 will have their home worth more in 2021 if they bought anywhere near the market price,” Soper said.

“Will it be worth more in a year? It’s harder to predict… but even a year from now, there’s less chance that house will be worth less than it is today.”

This report from The Canadian Press was first published on May 18, 2022.

Tara Deschamps, The Canadian Press

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