The most common causes
An appraisal below the agreed price, a change in the buyer's employment between offer and closing, undisclosed debt discovered at underwriting, a deposit that could not be sourced, or a title issue found by the lawyer. Almost all of these are visible in advance if the file is reviewed properly.
- Appraisal gap between contract price and value
- Job change, probation, or reduced hours before closing
- New credit taken on after approval, which is a frequent one
If you are the buyer
Do not take on new credit between approval and closing, not even a furniture financing plan. Keep employment stable. Provide documents the day they are requested. If a shortfall appears, secondary financing or a shortened closing extension can sometimes rescue the deal.
If you are the seller
A failed closing means going back to market with the disclosure obligations that follow. Reduce the risk upfront: ask for a strong deposit, request evidence of a real pre-approval rather than a broker letter with no file behind it, and be cautious with unusually long financing conditions.
Getting back on track
For buyers, a full re-approval with documents reviewed before the next offer removes the recurrence risk. For sellers, relaunching with fresh photos and a considered price strategy matters more than speed.
Frequently asked questions
- What happens to my deposit if I cannot close?
- It is generally at risk, and the seller may also pursue damages if the property resells for less. Legal advice is essential the moment a closing looks doubtful.
- How do I prevent a financing failure?
- A fully underwritten pre-approval, no new credit before closing, stable employment, and an early appraisal on properties where value is uncertain.
Talk to a Toronto private mortgage specialist
We arrange equity-based financing across Toronto and the GTA, whether you need a first position from a private lender or a second mortgage behind the bank you already have.