What if the buyer’s financing falls through?
“What if the buyer’s financing falls through?” — The brutal question every Georgetown seller must plan for.
What this post delivers
You’ll get a clear, tactical plan that stops panic and turns a broken buyer financing into control. This is direct, actionable advice for home sellers in Georgetown, Ontario and Halton Hills. No fluff. No legal guessing. Real steps you can use right now.
The reality: financing fails more often than you think
Buyers in Georgetown put offers on houses every week. Many come with a financing condition. Most will get funding. Some won’t. When financing collapses near closing, sellers lose time, money, and momentum. But you do not have to be helpless.
Understanding the Agreement of Purchase and Sale (APS)
- The financing condition (also called a “subject to financing” clause) gives the buyer a deadline to secure a mortgage commitment.
- If the buyer does not remove the condition by the deadline, they can lawfully terminate and get their deposit back. The sale falls apart and the seller must relist.
- If the buyer waived the financing condition and financing later fails, the buyer may be in breach. That shifts the situation — but it’s not automatic money in your pocket.
First actions the moment you learn financing failed
- Stay calm and gather facts fast
- Ask the buyer’s agent to provide written confirmation: did the buyer fail to obtain a mortgage commitment or did they simply miss a deadline? Was the financing condition waived?
- Get dates: when was the condition due? When did the buyer notify you? What evidence did the lender give?
- Check the Agreement of Purchase and Sale
- Confirm whether the buyer waived or satisfied the financing condition. If the condition was not waived and the deadline expired, the buyer can terminate and recover the deposit.
- If the buyer waived the condition and financing failed, you may have rights for breach. Contact your lawyer immediately.
- Contact your real estate lawyer
- Conveyancing and deposit rules in Ontario can be technical. Your lawyer will explain whether you can keep the deposit or pursue damages.
- Decide quickly: relist, negotiate, or enforce
- Relist quickly if the contract is terminated. Speed wins; relisting within days retains buyer interest and avoids a stale listing.
- Negotiate an extension if the buyer’s financing is salvageable. Ask for proof of a new mortgage broker review and a bigger deposit or compensation for the delay.
- Enforce the contract if the buyer waived conditions and cannot close. Your lawyer will advise whether pursuing the deposit or specific performance makes sense economically.
Practical seller strategies to reduce risk before offers come in
- Require a mortgage pre-approval or a commitment letter
- Make this a listing expectation: ask buyers to attach a lender pre-approval or mortgage commitment. Not all buyers will have it, but serious buyers usually do.
- Shorten financing condition deadlines
- Instead of 10 days, use 3–5 days for financing conditions. Short deadlines force buyers and lenders to act quickly.
- Ask for a higher deposit
- In Ontario, deposits are typically 5% for resale homes; for higher risk deals consider requesting a larger deposit. It signals seriousness and provides better protection if the buyer defaults.
- Use backup offers
- Keep showings open until the deal is firm and the financing condition is removed. A backup offer protects you from downtime and gives negotiating power.
- Verify buyer’s mortgage broker and lender
- Ask the buyer’s agent for the contact details of the mortgage broker or lending officer. A quick call can confirm whether the buyer is pre-approved and what stage the lender is at.
How to negotiate when financing stalls
- Offer a short extension (3–7 days) for the buyer to secure financing. Ask for compensation: an extension fee or a firm increase in deposit.
- Condition the extension on proof: a written interim approval or a signed commitment from a lender.
- If the buyer is borderline, insist on a stronger deposit and a clear timeline. Don’t accept vague promises.
When to relist your Georgetown home
Relist immediately if:
- The buyer properly terminates under an unsatisfied financing condition.
- The buyer misses a revised deadline and cannot show proof of imminent financing.
Relist quickly and be transparent: advertise that the property is back on the market due to financing fallout. Georgetown buyers respect honesty and speed. The sooner you relist, the lower the chance of losing momentum.
Damages and holding the deposit — what you must know
- If the buyer legitimately terminated under an active financing condition, the deposit is returned to the buyer. You cannot claim it.
- If the buyer waived the financing condition and the lender fails, you may have the right to retain the deposit or claim damages, but you must be prepared to litigate or negotiate.
- Consult your lawyer before making any claim. Pursuing legal action for a deposit or damages must make financial sense — small-dollar lawsuits can cost more than the recovery.
How a Georgetown-focused agent protects sellers
A top local agent should:
- Vet buyer financing before accepting an offer.
- Require proof of pre-approval / mortgage commitment when needed.
- Keep lines open with local mortgage brokers in Halton Hills and Georgetown.
- Keep showings open for backup offers until the buyer is unconditional.
- Advise on realistic deposit strategies and conditional deadlines tailored to local market dynamics.
Tony Sousa’s market edge in Georgetown, Ontario
Tony Sousa knows Halton Hills and the Georgetown market. He works with local mortgage brokers and real estate lawyers who move quickly when financing issues show up. Tony will:
- Verify lender commitment early.
- Push for reasonable deposits and short financing conditions.
- Activate backup offers within 24–48 hours if a deal heads south.
Contact Tony for a free strategy call: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
Checklist: immediate seller playbook when financing collapses
- Get written confirmation from buyer’s agent.
- Review the APS: did the buyer waive or satisfy their financing condition?
- Call your lawyer — fast.
- Decide: relist, extend, or enforce.
- If extending, get proof and an immediate deposit top-up or compensation.
- If relisting, do it fast and start a backup offer campaign.
- If enforcing, evaluate legal costs vs likely recovery.
Local lender and lawyer resources (Georgetown / Halton Hills)
- Ask for pre-approval letters from major lenders serving Georgetown: TD, RBC, BMO, CIBC, Scotiabank — local branches and mortgage brokers have fast turnaround.
- Use local conveyancing lawyers experienced in Halton Region closings. They’ll speed up deposit handling and closing date adjustments.
Final direct advice: protect time and momentum
Time is your asset as a seller. A sale that stalls becomes a stale listing and sells for less. Prioritize speed: vet financing early, demand proof, keep your home exposed to the market until financing is unconditional, and turn a failed buyer into a relisted property in 48–72 hours.
FAQ — Selling in Georgetown and buyer financing issues
Q: If a buyer’s financing fails during the conditional period, can I keep the deposit?
A: No. If the buyer had an active financing condition and they properly terminate before conditions are waived, the deposit is returned to the buyer. You cannot keep it. If the buyer waived the financing condition and later can’t close, you may have legal options; speak to your lawyer.
Q: How long can a financing condition be in Georgetown offers?
A: Financing condition timelines are negotiable. Common practice is 7–10 days, but sellers often shorten this to 3–5 days in a hot market. Shorter timelines reduce risk.
Q: Should I accept an offer from a buyer who’s only pre-approved?
A: Pre-approval is good, but a lender commitment is stronger. You can accept a pre-approved buyer but protect yourself: shorten the financing timeline, ask for proof of strong income verification, a mortgage broker contact, and a higher deposit.
Q: What’s a backup offer and should I use it?
A: A backup offer is an offer that becomes active if the current deal collapses. Yes — keep showings open and accept backup offers until the deal is unconditional. Backup offers are emergency insurance in Georgetown’s market.
Q: Can I relist immediately if financing falls through?
A: Yes, if the buyer properly terminates under a financing condition, you can relist immediately. Act fast to preserve market interest.
Q: What compensation can I demand for a financing delay?
A: Sellers can negotiate an extension fee, an additional interim deposit, or a revised higher deposit. Everything is negotiable while both parties agree. Get this in writing.
Q: How can I reduce risk before accepting an offer in Georgetown?
A: Require pre-approval or a commitment letter, shorten financing deadlines, request a higher deposit, verify the buyer’s mortgage broker, and keep the house available for backup offers until conditions are waived.
Q: Who pays legal fees if the deal falls apart?
A: Each party typically pays their own legal fees. If you pursue damages you may recover costs if a court awards them, but suing is unpredictable and expensive. Talk to your lawyer first.
Q: How can a local agent help when financing fails?
A: A local agent will vet buyers, contact mortgage brokers, negotiate extensions or deposit changes, and relist quickly. They will also advise whether to pursue legal remedies or to relist for speed.
If you’re selling a home in Georgetown, don’t leave financing to chance. Get clear pre-approvals, demand short timelines, and keep your sale active until the buyer is unconditional. If you want a direct, no-nonsense plan for your property, contact Tony Sousa at tony@sousasells.ca or 416-477-2620. He will walk you through the closing process and protect your sale in Georgetown, ON.
