EXPLAINED: Can you back out of a property purchase in Norway?

Norway's property market has several aspects that can be pretty complex and confusing, whether dealing with the mortgage requirements or getting your head around the different ownership models such as housing associations. 

One of the more intimidating aspects is the bidding round. Firstly, there is the prospect of the house price being jacked up or your dream home being snatched away by a bidder with deeper pockets. 

Then there are the rules associated with the bidding, such as when the auction is held and needing to have your mortgage approval checked and vetted. 

The most important of all these rules is that property bids in Norway are legally binding, meaning that when you bid, you are legally obliged to purchase the property when the seller becomes aware of the offer. 

In the event that you put in a bid and have a change of heart, the rules are very clear; you will still be required to carry out the purchase. 

Bidding in Norway is bound to The Contracts Act, which is a particularly robust piece of legislation. You don't even need to sign the sales contract for the purchase to be binding, according to Jørn Ramberg in DNB Eiendom's specialist department. 

"Bids are binding for the home buyer once they have come to the seller's knowledge. When the seller has accepted the offer and the acceptance has returned to the buyer within the acceptance deadline, the buyer and seller have entered into a legally binding agreement," he said in a blog post on DNB Eindom's website. 

"In other words, according to Norwegian law, the parties are bound before a written purchase contract is signed. Therefore, refusing to sign the purchase contract does not change the fact that a binding agreement has been entered into between the parties," he added. 

Still, there are several ways to get out of a bid. However, it will probably end up costing you. First, contact the agent you are working with rather than trying to bury your head in the sand. 

Contacting the agent as soon as possible will give you the clearest overview of the options available to you. 

One of the main ways to get out of a purchase would be to buy the house and then sell it immediately. If you sell the home after owning for less than a year, any gains or losses on the property are considered taxable or tax deductible. 

This option takes time, and you will need to pay the costs of selling the house. Furthermore, you may get less for the home than you want, especially if you feel as if you are overpaying in the first place. 

While you are trying to sell the house, you will still be required to pay the mortgage and meet other financial obligations (such as shared debt costs if you are buying into a housing association). 

In Norway, you can talk to the seller, so you ask the realtor to put you in contact with them. The seller may hear your case and may be willing to agree to terminate the bid. But you may have to pay for their selling and viewing costs again. Having to go through the whole process again will be far from appealing for the seller.

Likely though, the seller will push through with the sale unless they feel they could get more money for the property by putting it back on the market.

If the next highest bidder is still interested in the home, you can offer to pay the difference between your bid and theirs and buy yourself out of the process that way. Although, like all the other options for getting out of the property purchase, this way is incredibly expensive. 

Furthermore, all these options neglect that the seller likely has their own plans, which hinge on the house sale going through. These types of arrangements are called cover sales or dekningssalg in Norwegian.

Should you disagree with the seller about pulling out of the sale, you can still choose to refrain from concluding the purchase. This comes with significant financial risks, however. 

Failure to fulfil your obligations regarding the purchase will result in you being taken to court by the property owner. 

There they can pursue a claim for financial cost, either for the associated costs of putting the home back on the market or for the financial loss of having to sell for a lower price. In almost all cases, courts will side with the seller as the law is on their side. 

One exception would be that the seller has hidden crucial details about the property. However, this would be in cases where important information has been excluded from the sales documents, which the buyer must have read thoroughly, and wasn't visible when viewing the house. 

The buyer will be required to prove that there are major faults and defects, which means the seller is not honouring the contract. In cases such as these, both parties are released from the agreement. The seller keeps the home, and the buyer keeps the money.