What You Lose When a Firm Deal Falls Apart (2026)
A firm deal is binding: if you can’t close, the seller keeps the deposit and can sue for the resale difference plus costs. What buyers lose.
A firm agreement of purchase and sale is a binding contract. If you cannot or do not close, the seller keeps the deposit and can sue for damages: the difference between your price and what they eventually resell for, plus carrying costs, legal fees, and sometimes the costs of the sale. Canadian courts have awarded six-figure judgments against buyers who walked away as prices fell. On an $800,000 firm deal with a $40,000 deposit, resold at $740,000 after four months, the buyer's exposure is roughly $60,000 in price difference plus $15,000 to $25,000 in costs, less the deposit already forfeited.
The CostToClose guided buying flow is built around the assumption that a buyer keeps conditions until the numbers are confirmed.
What "firm" means
An offer is firm when it has no conditions, or when every condition has been waived or fulfilled. From that moment the buyer's obligation to close is unconditional. A financing approval that later fails, an appraisal that comes in low, a job loss, a change of heart: none of these releases the buyer. The seller's remedies are the deposit plus damages.
What the seller can recover
| Head of damage | Typical |
|---|---|
| Deposit | Forfeited outright (courts rarely relieve against forfeiture of a reasonable deposit) |
| Difference in price on resale | Your price minus the resale price, if lower |
| Carrying costs until resale | Mortgage interest, property tax, utilities, insurance for the months the seller was stuck |
| Costs of the second sale | Additional commission, staging, legal fees |
| The seller's own consequential losses | Bridge financing, penalties on a purchase they could not complete, moving twice |
| Legal costs | A portion, often substantial |
Sources: Ontario and BC court decisions on failed real estate transactions since 2017; mitigation duty. The seller must mitigate, making reasonable efforts to resell, but need not accept a fire-sale price.
Worked example
$800,000 firm purchase, $40,000 deposit, buyer's financing fails, seller resells four months later at $740,000:
| Item | Amount |
|---|---|
| Deposit forfeited | $40,000 |
| Price difference | $60,000 |
| Seller's carrying costs (4 months) | ≈ $12,000 |
| Second sale costs (extra commission, legal) | ≈ $8,000 |
| Total claim | ≈ $80,000 |
| Less deposit already held | −$40,000 |
| Judgment exposure beyond the deposit | ≈ $40,000 plus legal costs |
Had the buyer kept a financing condition, the deal would have collapsed cleanly at the condition deadline with the deposit returned. Reproduce the purchase numbers.
The two conditions worth keeping
Financing
Five business days, "satisfactory to the buyer in the buyer's sole discretion." The lender's live-deal approval, including the appraisal, happens inside this window.
Inspection or status certificate
Same length. On a condo, the status certificate condition is the important one; on a house, the inspection.
Sellers in hot markets push for firm offers; some buyers respond by getting the lender to appraise and approve before offering, which converts most of the risk without dropping the condition. If you must go firm, do it with the lender's written approval of that property in hand and enough cash to cover an appraisal miss.
If it is already happening
- Tell your lawyer immediately. Delay makes it worse.
- Do not stop communicating with the seller's side; a negotiated release with an agreed payment is almost always cheaper than litigation.
- Explore an assignment of the agreement to another buyer, if the seller consents.
- Explore a private or alternative lender to close, then refinance: expensive, but often cheaper than the claim.
Frequently asked questions
What happens if I back out of a firm offer in Canada?
You forfeit the deposit and the seller can sue for damages: the resale shortfall, carrying costs, and costs of the second sale. Courts regularly enforce this.
Can the seller keep my deposit and also sue me?
Yes. The deposit is credited against the damages, but if the damages exceed it, the seller can pursue the balance.
Does a low appraisal let me out of a firm deal?
No. Appraisal risk sits with the buyer once the offer is firm.
What if the seller resells for more?
Then there is no price-difference damage. The deposit is still generally forfeited, and the seller may claim carrying and resale costs.
How long does the seller have to sue?
Two years from the breach in most provinces under limitation statutes; claims are usually filed within months.
Sources
- Ontario Court of Appeal and Superior Court decisions on buyer default (e.g. failed-closing damages cases, 2018–2025) — checked 14 Sept 2026
- BC Supreme Court and Court of Appeal, buyer default and deposit forfeiture — checked 14 Sept 2026
- Ontario Real Estate Association Form 100, conditions and waiver provisions — checked 14 Sept 2026
This is general information for Canadian home buyers and sellers, checked against the sources listed above on the date shown. It does not constitute legal, tax, or mortgage advice. Because rules and rates change, confirm current figures with your lawyer or notary, your lender, or the government office that administers the tax before you rely on them.