By Mark Weisleder
Buyers who signed purchase agreements for new homes or condos over the past two to four years are now approaching occupancy—and for some, the path to closing isn’t as straightforward as expected. While many are moving forward without issue, others are finding that lower appraised values or tighter lending conditions are making financing a challenge, particularly where lenders don’t offer blanket mortgage approvals. It’s a good reminder: stay connected to your real estate professional and work with a trusted broker who has experience navigating this phase of the market
If you have found yourself in this situation, here are five key lessons to keep in mind.
1. Can you get out of the deal?
This is one of the most common questions we hear…and understandably so. It is not easy to exit an agreement. Perhaps, if the builder hasn’t met key deadlines outlined in the contract (like delivering the home on time), you may have grounds to terminate. Some builders may send a notice of “unavoidable delay” to extend those timelines. If that happens, don’t sign anything until you’ve spoken to a real estate lawyer. Every contract is different, and there may be options available depending on how your agreement was structured. Always get professional advice before making a move.
2. Can you just offer the builder the deposits and ask for a release?
In my experience this will also not work. Builders generally won’t accept a deposit as a settlement to walk away from the deal, especially if the market value has dropped. For example, if you bought at $900,000 and paid $100,000 in deposits, but the home is now worth $700,000, the builder may re-sell the property but could still come after you for the $200,000 difference. The deposit would be forfeited and you could still be on the hook for any shortfall.
3. Can you work with your builder for a solution?
In many cases, yes—and it’s often the best place to start. Some builders may be able to connect you with alternative lenders who are more flexible and willing to finance the deal. Others might allow you to assign your contract to a new buyer or even take the unit back into their inventory and attempt to resell it on your behalf. That said, the assignment market is currently quite soft, so while it’s an option worth exploring, it may take time and come with limitations. Your real estate professional can help guide these conversations and present your case in the best light.
4. What if I am a potential buyer for this assignment?
This could be a good opportunity for buyers looking to purchase a brand new condo, often at a discount compared to today’s preconstruction prices. You’ll get the benefit of seeing the finished product before committing, have clarity on final closing costs, and avoid the uncertainty of future delays. It’s a chance to step into a nearly completed home with full visibility and potentially strong value.
5. What if I am a resale buyer and I was pre-approved for a mortgage but now I cannot get the approval and I cannot close?
A pre-approval isn’t a guarantee. It’s an early green light but lenders still need to complete their due diligence, including a satisfactory appraisal of the property. If the appraised value comes in low, financing can fall through. That’s why it’s critical to include a financing condition in your offer, and avoid waiving it until your lender has completed the appraisal and confirmed full approval. A trusted real estate agent can help you navigate these steps and avoid surprises.
Final Thoughts
If you find yourself in this situation, there may be options to explore. Closings can sometimes be extended, units can be re-listed to help offset losses, and in certain cases, buyers may secure short-term financing while their situation stabilizes. In some instances, a mutual release may be possible. The key is to stay proactive, work closely with your real estate professional, and always seek legal advice before making any decisions. You’re not alone…experienced guidance can make all the difference.
Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP.
Contact him at [email protected] or toll free at 1-888-876-5529