Introduction
A seller can indeed back off from a property deal under certain circumstances. For example, if the buyer fails to secure financing within the agreed-upon timeline or if significant issues are discovered during the inspection that the seller did not disclose, both parties should clearly outline these conditions in the purchase agreement to avoid any misunderstandings.
Table of Contents
- What If the Buyer Cancels the Contract?
- What is Token Money?
- Sale of Property: RERA Regulations on Refund of Money
Sale of Property: Sellers may also have the right to withdraw from a deal if there are legal or title issues with the property that prevent a smooth transfer of ownership. Buyers must thoroughly review all terms and conditions before signing any contracts to protect themselves in case the seller decides to back out. Here are some scenarios where a seller might choose to do so:
- Change of Heart: Sometimes, a seller may have second thoughts about selling their property. Personal reasons, emotional attachments, or external factors can lead to a change of heart.
- Legal Issues: If there are legal complications or disputes related to the property, the seller might reconsider the deal. For instance, if there’s a title dispute or pending litigation, the seller may back out.
- Financial Constraints: Unforeseen financial difficulties could prompt a seller to withdraw from the deal. Perhaps they need the property for their use or face unexpected financial burdens.
- Failed Inspections: If property inspections reveal significant issues (such as structural problems, safety hazards, or environmental concerns), the seller may choose not to proceed.
- Unmet Conditions: Property transactions often involve conditions (e.g., repairs, approvals, or financing). If these conditions are not met, the seller can back out.
- Buyer’s Default: If the buyer fails to fulfil their obligations (e.g., missed deadlines, non-payment of earnest money, or breach of contract), the seller has the right to terminate the deal.
What If the Buyer Cancels the Contract?
In case a buyer backs out of the deal, based on the agreement on the notarized document, the seller can keep a portion of the amount and return the rest. This clause protects the seller in case of a buyer’s change of heart. It is ensuring that they are compensated for any potential losses incurred. It also serves as a deterrent against frivolous or insincere offers. Maintaining the integrity of the transaction process.
Sometimes, the seller can keep the entire amount if the deal document clearly states that the token money will not be returned. If the contract is canceled at the last minute or if the deal is canceled. In this case, the buyer cannot claim this amount as a tax deduction as it is not an expense but a loss.
What is Token Money?
An advance amount is usually taken in sales. But it is also called token money. Token money (advance) is the amount paid by the buyer to the seller to show his interest in the property transaction. It is usually a 1-5% percentage of the total purchase price and is used to secure the property when the buyer arranges financing. This token money is generally not refundable if the buyer withdraws from the deal without a valid reason.
Sale of Property: RERA Regulations on Refund of Money
As per the current RERA (Real Estate Regulatory Authority) norms, the token money is limited to a limit. If the booking is canceled for any reason within 45 days from the date of receipt of the allotment letter. The builder is entitled to deduct only two percent of the total property amount.
That means the buyer has to pay the above percentage of the total price as a loss to the builder. Earlier, the case was different, where builders charged up to 10 percent of the total cost of the apartment as cancellation charges.
Conclusion
If the seller-buyer withdraws from the deal under the RERA rule for any reason. In that case based on the agreement on the notarized document, the seller may return the amount, or sometimes not. This decision is usually based on the terms outlined in the initial agreement and any additional agreements between the parties. It is important that both parties carefully review and understand these terms before entering into a transaction. For more information, visit openplot.
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