Sweden's home buyers: backing out can cost 10% of the price or more

Back out of a home purchase in Sweden after signing, and the seller can often keep the deposit ("handpenning"), usually 10% of the price. On a SEK 3,500,000 house that is SEK 350,000.

The signed purchase contract is binding, with no cooling-off period. If you back out anyway, the seller can cancel the sale and claim damages.

When does the purchase become binding?

A bid binds no one. The Swedish Consumer Agency ("Konsumentverket") says the purchase becomes binding only when both buyer and seller have signed the contract. Until then, either side can change their mind without the other making any claim. After signing, it is too late.

Houses fall under the Land Code ("jordabalken"). Co-op flats fall under the Co-operative Housing Act and the Sale of Goods Act. In both cases the contract decides much of what happens if one side does not do what it promised.

What the seller can do

If you do not pay, the seller can cancel the purchase. For a house, the right to cancel must be written into the contract. Under the Land Code, the buyer must then compensate the seller's loss.

The contract may have a clause about the deposit. In a case the Supreme Court decided, NJA 1982 p. 613, it read like this: if the buyer does not do what they promised, the seller may cancel and keep the deposit as damages. If the loss is larger than the deposit, the buyer must pay the difference.

The seller's loss can be larger than you think

The loss is what the seller loses because the sale did not go through. Examples from the court cases are:

• A lower price when the house is sold again.
• A new commission to the estate agent.
• Other costs the seller has because of the cancelled sale.

Take the SEK 3,500,000 house. The seller sells again for SEK 3,300,000 and pays the agent SEK 50,000 a second time. The loss is SEK 250,000.

With a clause like the one in the court case, the seller can still keep the whole SEK 350,000 deposit as damages. Had the house only sold for SEK 3,000,000, the loss would have been SEK 550,000. You would then have had to pay SEK 200,000 on top of the deposit.

Can the amount be reduced?

Yes, sometimes. In the same case, the Supreme Court said a clause letting the seller keep the deposit is not unfair in itself. But special circumstances can lead to an adjustment.

In that case the buyer had signed before her loan was confirmed, because the seller was in a hurry. The loan fell through. The court cut the amount from SEK 37,500 to SEK 12,000. Do not count on the same result. The court looks at the facts of each case.

If you want to back out

Talk to the seller and the agent as soon as you can. The sooner the seller knows, the sooner the house can go back on the market. That can reduce the loss. Some things to keep in mind:

• Read what your contract says about cancellation and the deposit.
• Try to agree an amount with the seller. A settlement can cost less than a dispute.
• If the contract has a loan condition ("låneförbehåll") or an inspection clause, check whether you can still use it. If so, act before the deadline.
• Get a lawyer if the seller demands more than the deposit.

How to avoid it

You can lower the risk of ending up here:

1. Have a pre-approval that covers the whole loan before you bid.
2. Inspect before signing, or add an inspection clause.
3. Add a loan condition if the bank has not approved this particular home.
4. Do not sign until you know you want to and can complete the purchase.

The contract chapter of our real estate crash course explains what to check before you sign.

Sources

• Bidding when buying a home, Swedish Consumer Agency (in Swedish)
• Land Code (1970:994), Riksdag (in Swedish)
• Land Code with commentary, lagen.nu (in Swedish)
• NJA 1982 p. 613, lagen.nu (in Swedish)
• NJA 1986 p. 146, lagen.nu (in Swedish)
• Signing the contract, Nordea (in Swedish)

---

This content is general information, not financial or legal advice. Bolån Radar collects data from banks and authorities and cannot guarantee that it is complete or free of errors. Talk to your bank or an adviser before you decide.