You may have seen the phrase "this offer shall be irrevocable by" on your Agreement of Purchase and Sale during a real estate transaction in Ontario. This phrase usually contains a specific date and time and states "after which time, if not accepted, this offer shall be null and void and the deposit returned to the buyer without interest."
This phrase is often standard on Ontario Real Estate Association (OREA) forms, it can play an important role in the finalization of any real estate deal and it directly impacts the ability of the offeror to cancel the offer.
The irrevocable clause
In order for any real estate contract to be binding, it must have both an offer and an acceptance. Without an irrevocable clause, offers can remain open and valid indefinitely. This means that once the offer is made, the purchaser can sit on it for an undefined period of time.
To ensure that the transaction has time limits and to protect against undue delay, irrevocable clauses are often specified on real estate forms during offers of purchase and sale. After the date and time specified in the irrevocable clause, the offer becomes null and it cannot be accepted. The seller is then free to make a new offer, offer to other parties, or not offer at all.
Before the specified date and time, the offeror cannot take the offer back or cancel it. The other party is free to sign an acceptance of the offer at any time until the irrevocable date and time specified.
Backing out of an offer to sell your home
One way to back out of an offer to sell your home is simply to wait for the irrevocable date and time to pass without the offer being accepted by the other party. In this scenario, the offeror can simply walk away and does not have to make another offer, or they can modify their offer or make an offer to another party.
Another way to back out of an offer to sell your home is if the purchaser submits a counter-offer. Once a counter-offer is received, there will usually be another irrevocable date by which the other party must abide, or the original irrevocable date will remain if it has not yet passed. In this scenario, the offeror can simply let the irrevocable date arrive and pass without signing anything and the offer will then expire.
Sellers and their agents have to be careful about irrevocable dates when multiple offers are received. If a seller accepts an offer to an initial purchaser with an irrevocable date, they cannot accept another offer from another purchaser prior to that irrevocable time period expiring. This would create a scenario where 2 different offers have been made and accepted. In this scenario, the seller of the home has now sold the home to 2 different parties. The threat of legal action now exists.
Keep in mind that you cannot simply call another real estate agent and inform them, prior to the irrevocable period expiring, that your seller wishes to back out of the deal. It is not possible to unilaterally cancel an offer once it is made and prior to the irrevocable time period expiring.
Backing out of a condominium purchase in Ontario
For backing out of condominium purchases, there are a different set of rules in Ontario. Section 73 of the Ontario Condominium Act allows for a 10-day period where a buyer can rescind a signed agreement to purchase. This only applies to condo units that were purchased from a builder. It does not apply to re-sale condo units. If the buyer walks away from the deal during the 10-day period, the condo builder must refund any deposits that were made.