What are the penalties for a walk-away buyer?

As you hopefully know the bid on a property is binding in Norway.  There are no regrets. But what will happen if you walk away after giving a bid?

I got this question from a reader of my blog:

Thank you for your cool articles on boligdama.no
I keep hearing about the biding process being binding. Where can I read about the penalties for a walk-away buyer? If you could point me towards a website or Norwegian legislation(even if not in english), that would be great!

Thank you and keep up the great work!

Best, Jon

 

It is a very good question, and I am glad that Jon asked.  Because it is quite common knowledge in Norway how this work, I didn’t think about explaining this to my English speaking readers.

It is a violation of the law to walk away from the purchase deal

Because the bid is binding it is a violation of the law for the buyer to walk away from the deal or purchase.

This is according to the Norwegian “Avhendingsloven” or the Disposal /Alienation Act)

Which sanctions or demands will the seller have if the buyer breaks or walk away from the purchase or fails to fulfil the agreement that is done by the bid: 

1. Demand that the buyer fulfils the agreement
2. Cancel the purchase
3. Claim compensation for failure to fulfill the agreement
4. Held back the take over of the property to the buyer
5. Demand payment of default interest (when paying the purchase to late)

This is a private law matter.  But this law, “Avtaleloven” has a very strong position in the Norwegian legal system. The government will not come after you if you break a deal like this.  But the other part in the agreement, the seller, can take you to court if you don’t fulfil your obligations made through your bid.

The outcome of these regret/walk away cases will vary.

If it is just a matter of pure regret, the seller will, with assistance from the real estate agent, insist on the fulfilment of the purchase.   And maybe go to court.  Where you probably will lose and have to pay the legal costs for both parts.

If the seller agrees to sell it again through his real estate agent, he will most likely claim compensation for extra cost.  Or maybe he has to sell to a lower price.  Then you will be responsible for the gap between your bid and the new sales price.

In some cases the buyer might have trouble to fully finance the purchase.  This should not really happen, because the realtor are obliged to check this before he approves the bid on behalf of the seller. In these cases the seller often approves the buyer to walk away.  But he will make reservations that he will claim compensation if he has to sell it again to a lower price. And for additional costs for the resale.

And then the “party” maybe continues:
The seller claims the realtor for not doing his job when checking the finances…….

Most Norwegians are aware that the seller has a very good case if the buyer walk away from the sales agreement (after the binding bid). Despite of this we have some cases of regret and attempt to try to withdraw from the purchase.

So, please be aware!

Don’t give a bid if you are not certain that you really want the home:

You will either be forced to go through with the purchase, and maybe sell the home yourself, or pay compensation for any loss that may arise for the seller.