Question:
There is a firm accepted Agreement of Purchase and Sale, and it’s discovered two weeks from closing that the Seller owes more than the offered amount to purchase.
Buyer is ready to close.
Buyer has incurred costs – home inspection, appraisal, and lost the opportunities to acquire other properties.
No Mutual Release or Termination arrangements has been sent from the Listing Brokerage, just simply the information that it can’t close.
Answer:
Buyer can pay the extra amount, close the deal and sue the Seller for the additional payment, assuming that they really want the property. Provided that they have been suitably advised this is likely anticipatory breach. So, they have remedies now. If it’s not, then they better get ready to tender in two weeks.
The Buyer can carry the shortfall forward and sue for the deficiency. Provided that the Seller does not declare bankruptcy, the Buyer will be able to collect.
The Buyer will have to initiate the lawsuit within two years. Once the have a Judgment that can be renewed in perpetuity until it is collected in full. The risk is bankruptcy, but it is very unlikely that the Seller would go bankrupt for less than $50,000.00.
It’s surprising that the Seller’s financial situation may change considerably over the next decade or two.
Brian Madigan LL.B., Broker