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Summary: Most Ontario real estate deals close, but some collapse — usually because a condition is not met, financing falls apart, an appraisal comes in low, or a buyer walks away from a firm deal. Where the deal breaks decides who absorbs the loss and what happens to the deposit.
A deal falling apart is stressful and, depending on timing, expensive. The single most important factor is whether you are still inside your conditional period or the agreement has gone firm, because that line decides whether you walk away cleanly or lose your deposit.
What does it mean when a deal falls through?
A deal falls through when a signed agreement of purchase and sale does not make it to closing. That happens in two very different ways: a conditional deal is ended during the condition period because a condition is not satisfied, or a firm deal fails because one side cannot or will not close.
The distinction matters more than any other detail in this article. Ending a conditional deal is usually clean and your deposit comes back. Walking away from a firm deal, or being unable to close it, is where the money is lost.
What are the most common reasons deals collapse in Ontario?
Most fall-throughs trace back to a handful of predictable causes, and nearly all of them surface during the conditional period rather than on closing day.
Financing falls apart. The buyer cannot get a mortgage approved by the financing-condition deadline, or a pre-approval is withdrawn after a job or rate change.
Home inspection issues. An inspection turns up problems the buyer is unwilling to take on, and the parties cannot agree on a price adjustment.
Status certificate review (condos). The buyer's lawyer reviews the status certificate and finds a special assessment, litigation, or a shaky reserve fund, and the buyer terminates.
A low appraisal. The lender's appraisal comes in below the purchase price, leaving a gap the buyer has to cover in cash.
Sale-of-home condition. The buyer's own home does not sell in time, so a condition on that sale lets them exit.
Title or survey problems. A title search reveals an unresolved lien, encroachment, or work order that cannot be cleared before closing.
Cold feet or failure to close. A buyer or seller changes their mind, or simply cannot complete on the closing date.
Conditional vs firm: when can you actually walk away?
You can exit cleanly only while the deal is conditional. Once every condition is waived or fulfilled, the agreement is firm, the price is locked, and backing out puts your deposit and more at risk.
Conditional deal | Firm deal | |
Can you back out? | Yes, if a condition is not met by its deadline | No, not without the other side's agreement |
What happens to the deposit? | Returned to the buyer | At risk of forfeiture to the seller |
Further liability? | None if you follow the condition wording | Possible; the seller can claim losses on resale |
Best time to raise concerns | During the condition period | Before you waive conditions |
The takeaway for buyers: treat the conditional period as your window to investigate. Line up financing, book the inspection, and have your lawyer review the agreement of purchase and sale and any status certificate before you waive anything.
What happens to your deposit if a deal falls through?
The deposit — typically around 5% of the purchase price — sits in a trust account, not in the seller's hands. If a condition fails and you terminate properly, the deposit is returned. If you default on a firm deal, it is usually forfeited to the seller, and courts rarely grant relief against that forfeiture.
A lost deposit may not be the end of it. If the seller re-lists and sells for less, they can sue the defaulting buyer for the shortfall and related carrying costs. Deposit disputes and late deposits have their own rules, which we cover in late deposits in Ontario.
How can you keep a deal from falling through?
Most collapses are preventable with a little front-loading. The goal is to resolve every uncertainty before your conditions come off.
Get a real mortgage approval, not just a pre-qualification. Confirm the financing is solid before the financing condition expires.
Set realistic condition deadlines. Give yourself enough time to inspect, secure financing, and review a status certificate rather than agreeing to a rushed window.
Do the inspection and status certificate review early. Book them at the start of the conditional period so there is time to renegotiate or walk away if needed.
Engage your real estate lawyer early. A lawyer can review the agreement, flag risky clauses, and start the title search well before closing.
Do not waive conditions until everything checks out. Waiving is the point of no return; only do it once financing, the inspection, and any condo documents are confirmed.
Frequently asked questions
Can I get my deposit back if my financing falls through?
Yes, if your agreement had a financing condition and your lender declined within the deadline, you can terminate and recover the deposit. If the deal was already firm with no financing condition, the deposit is at risk even if the mortgage falls apart.
What happens if a buyer just changes their mind?
On a firm deal, a buyer who walks away usually forfeits the deposit and can be sued for the seller's losses, including any shortfall if the home is resold for less. During the conditional period, a properly exercised condition lets the buyer leave without penalty.
Can the seller back out of a firm deal?
Generally no. Once an agreement is firm, a seller who refuses to close can face a claim for damages or, in some cases, an order for specific performance requiring them to complete the sale.
Does a low appraisal automatically kill the deal?
No. A low appraisal creates a financing gap the buyer must cover in cash. If a financing condition is still in place, the buyer may be able to terminate; on a firm deal, the buyer is responsible for making up the difference.
Do most real estate deals fall through?
No. The large majority of Ontario deals close as planned. Fall-throughs are the exception and are concentrated in conditional deals, where a condition gives one side a clean way out.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus entirely on Ontario residential real estate law, helping buyers and sellers with purchase closings, sales, refinances, and status certificate reviews. Our licensed Ontario lawyers work alongside a digital platform that lets you track your file, sign documents remotely, and reach us by chat, email, or video call. You can start your closing online or get in touch with any questions.
Legal references: Condominium Act, 1998, S.O. 1998, c. 19 (status certificates); the common law of deposits and relief against forfeiture in Ontario real estate.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
