What if the buyer’s financing falls through?
Buyer’s financing collapses at closing — here’s exactly how to protect your sale and your money.
What happens when buyer financing falls through?
When a buyer’s mortgage dies before closing, the deal doesn’t have to die with it. The closing process includes financing contingencies and protections—but timing and response matter. If you’re selling, act fast. If you’re the listing agent, guide every decision. Slow moves cost time, money, and leverage.
Immediate steps to protect the sale
- Confirm the facts
- Get written notice from the buyer or their lender. Ask for lender denial documentation. Don’t rely on rumors.
- Check the contract
- Identify the financing contingency clause, mortgage-condition timelines, and deposit forfeit terms. These control your remedies.
- Talk to your lawyer or transaction coordinator
- Legal advice narrows your options and prevents wrong moves that cost damages or time.
Seller options — ranked by speed and certainty
- Grant a short, conditional extension
- Offer 3–7 days for the buyer to find alternate financing. Use a written amendment with firm deadlines and consequences.
- Accept a cure from the buyer
- Buyer brings new lender, private lender, or bridge financing. Require proof of funds and updated commitment.
- Enforce the deposit or terminate
- If the buyer breached the financing contingency and the deposit is non-refundable, you can keep it and re-list. This depends on contract terms and local law.
- Move to backup offers
- If you had backup buyers or a waiting list, activate them. A backup offer removes downtime and holds market momentum.
How a smart agent prevents financing failures
- Insist on verified pre-approval, not just “pre-qualification.”
- Verify lender reputation and underwriting timelines.
- Ask for a lender commitment letter or proof of funds when removing financing conditions.
- Keep inspection and financing windows aligned to avoid duplicated delays.
Re-list fast, sell smarter
If you must re-list:
- Price competitively but don’t panic-cut. Buyers can smell weakness.
- Market the quick closing window and flexible possession to attract cash or investment buyers.
- Push for offers with weaker financing contingencies or higher deposits.
Negotiation scripts that work
- “We can give 5 days to secure financing with proof of application and a new lender commitment by [date]. After that, the deposit is forfeited.”
- “We’re activating backup offers today. If you can produce a new commitment by noon [date], we’ll consider an amendment.”
Final word — control the process
Buyer financing falling through is a crisis with a plan. Confirm facts, use the contract, protect your deposit, and move quickly to backup buyers or re-list. A sharp agent turns a near-loss into leverage. For straight answers and fast action in the Toronto market, contact Tony Sousa — experienced negotiation, proven solutions.
Tony Sousa, Realtor
Email: tony@sousasells.ca
Phone: 416-477-2620
Website: https://www.sousasells.ca
(Consult a real estate lawyer for contract-specific legal advice.)
