A Buyer Wants to Walk Away After the OTP. What Should You Do?
- Stuart Chng
- Dec 17, 2025
- 5 min read
Although it does not happen often, there are occasions when a buyer or seller decides to back out after an Option to Purchase (OTP) has been issued. When this happens, it can be extremely frustrating for real estate agents—especially when a deal you thought was completed suddenly starts to unravel. Emotions can also run high if clients do not fully understand the consequences.
Here’s how to manage the situation calmly and professionally.
A Quick Refresher: What the OTP Means
The OTP effectively “locks in” the property for the buyer. To secure it, the buyer usually pays a non-refundable option fee of 1% of the agreed purchase price.
Once the OTP is granted, the seller is legally prevented from selling the property to anyone else during the option period, which is typically 14 days.
Within this timeframe, the buyer must exercise the OTP by signing the Sale and Purchase Agreement. If the buyer fails to do so, the option expires and the deposit is forfeited.
Because of these legal implications, it is crucial to explain the OTP clearly—in writing, not just verbally—before any option fee changes hands.
For sellers: backing out after granting an OTP can lead to legal consequences.
For buyers: failing to exercise the OTP usually means losing the deposit.
Nonetheless, if your client does decide to back out, here's what you should do:
Step 1: Clearly Explain the Consequences of Backing Out
If the buyer decides to withdraw after securing the OTP, they will almost certainly lose their deposit. While it is possible to request a refund, the seller is not obligated to return it. In many cases, sellers will say the money has already been committed toward their next purchase.
If the seller backs out, they must refund the buyer’s deposit within the timeframe stated in the OTP. Failure to do so exposes them to potential legal action. The buyer may seek a refund through the courts or even attempt to compel the seller to complete the sale.
Again, always ensure these explanations are properly documented!
Step 2: Understand Why the Client Wants to Back Out
If Your Client Is the Buyer
Not every situation is beyond repair. Sometimes, there are solutions if you act quickly.
Common scenarios include:
Loan rejection:If the buyer cannot secure financing after obtaining the OTP, consider referring them to mortgage brokers. In some cases, non-bank financial institutions or last-minute solutions such as bridging loans may be available.
Chain transactions falling through:If the buyer is relying on the sale of their existing property and that deal collapses, you may explore requesting an OTP extension from the seller. Some sellers may agree, often in exchange for compensation. Always consult the conveyancing lawyer before proceeding.
Unavoidable life events:Situations such as sudden medical issues or loss of income may leave no viable alternative but to forfeit the deposit.
There are also rare cases where walking away is actually the lesser evil—for example, if the property turns out to have serious issues that were previously unknown (eg. resale flat targeted by loan sharks). This is why thorough due diligence is essential before committing.
Pro tip: Encourage buyers to obtain an Approval In Principle (AIP) before securing an OTP. Some agents refuse to proceed without it to avoid unnecessary fallout later.
If Your Client Is the Seller
Some sellers attempt to back out simply because they have found another buyer willing to pay more. In such cases, remind them that the original buyer has legal rights under the OTP and can enforce the sale.
It is also important to highlight that this cannot be done discreetly. A buyer’s lawyer can lodge a caveat with the Registry of Titles or Deeds, alerting all parties to the buyer’s interest. Any attempt to sell to a third party will be flagged.
Legal disputes can quickly become costly and time-consuming, far exceeding the amount of the original deposit. Most sellers reconsider once they understand the true risks.
In non-financial situations—such as family disagreements or emotional attachment—you may have limited influence. However, showing empathy and attempting to mediate between both parties can go a long way, even if it simply results in the buyer recovering their deposit without further action.
Step 3: Document Everything
Create a clear timeline of events and retain all supporting documents. This protects you from accusations such as failing to inform your client of deadlines or consequences.
Good documentation also serves as vital evidence should any complaints be raised with your agency or regulatory bodies.
Step 4: Prevent a Repeat Scenario
If the issue stemmed from financing, ensure all loan matters are resolved before your client commits to another property. Reassess affordability where necessary.
For hesitant sellers, it may be wiser to step back and give them time. Working with clients who are unsure can lead to unnecessary stress and repeated breakdowns in negotiations.
Final Thoughts
Handling OTP disputes is part of a real estate agent’s role. It requires patience, empathy, and clear communication—especially during emotionally charged situations.
While not every case can be salvaged, your professionalism in guiding clients through these moments will strengthen trust and protect your reputation in the long run.
Need advice for your upcoming property investment plans? Or help getting your property sold or rented?
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Stuart Chng, Executive Group District Director at Huttons, is a renowned leader and personality in the real estate industry.
He adores music and can play a few instruments decently without upsetting his neighbours. When not doing so, he enjoys pillow fighting with his son and coming up with silly puns which barely amuses his wife.
Professionally, he is a licensed real estate agent, an avid stocks, options and real estate investor, business owner, team leader, speaker and columnist for several property newsletters and blogs and is often quoted in media interviews on 938FM, Channel 8, PropertyReport, PropertyGuru and other publications.
Throughout his career, he has helped many clients grow their wealth through selecting great property investments and managing their portfolios actively. Read his clients' reviews here.
Stuart has also coached many top million dollar producing agents from different real estate agencies in Singapore. Read his agents' reviews here.
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