Real Estate

When a Home Buyer Backs Out: Deposits and Damages

A buyer walking away from a firm deal can be very costly for them. Here is what happens to the deposit, and the seller's further claim.

Black framed eyeglasses on white book page

Once an agreement of purchase and sale is firm (any conditions have been met or waived), a buyer who fails to close is in breach of contract.

The short answer

The seller can usually keep the deposit and sue the buyer for further losses, such as a lower resale price and extra carrying costs. Sellers must try to resell at a reasonable price to keep their losses down.

The deposit

  • The deposit is held in trust, often by the seller's brokerage.
  • After a failed closing, the seller usually claims it. The brokerage may need both sides' written direction, or a court order, to release it.

Further damages

Hands holding a pen and signing a formal document on a dark surface

If the seller resells for less, they can claim the difference, plus reasonable costs such as:

  • extra mortgage interest, taxes and utilities while unsold;
  • added real estate commission and legal fees.

The deposit is credited against those damages.

The duty to mitigate

The seller must make reasonable efforts to resell, for example by relisting promptly at a market price.

Buyers: avoid it

  • Make your offer conditional on financing and inspection.
  • Get mortgage approval before you firm up.
  • Talk to a lawyer before missing a closing date.

Buyers who are owed money

If a seller fails to close, the buyer can also sue, and sometimes ask the court to order the sale (specific performance).

Talk to NEO

Buying, selling and title matters need a real estate lawyer. NEO can help with related money disputes in Small Claims Court and refer you for the rest. Call 647-200-3526 or toll-free 888-519-2435, email info@neolegalservices.com, or book a free consultation.

Sources

Read next: Joint Tenancy or Tenancy in Common? How You Own Property Together

General Ontario legal information, not legal advice for your matter, and reading it does not create a retainer. Sources checked 16 October 2026: check the current law, forms and dates before you act.

Photos from Unsplash: black framed eyeglasses on white book page · Hands holding a pen and signing a formal document on a dark surface.

This article is general information for people in Ontario, not legal advice. Rules, forms and deadlines change, and every situation is different. Check the current rule or speak to a licensed legal professional before you act.

Not sure where you stand? A licensed paralegal can look at your documents and tell you your options.

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Law Society of Ontario — Barreau de l'Ontario
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