Ottawa Real Estate Lawyer Brian Wilson Explains the Legal & Financial Consequences
In today’s real estate market, one of the biggest fears for buyers and sellers alike is a failed closing.
A buyer loses financing.
A job loss happens unexpectedly.
An appraisal comes in low.
Interest rates change.
Or life simply takes an unexpected turn.
And suddenly, a real estate transaction that seemed secure starts falling apart.
In Episode 3 of the How’s It Going Ottawa Podcast , Real Estate Law Series, Ottawa real estate lawyer Brian Wilson joined us to break down one of the most important questions in real estate right now:
What happens if a buyer can’t close on time?
The answer is more serious than many people realize.
Failed Closings Are Becoming More Common in 2025
Over the past two years, Canadian real estate markets have experienced increased uncertainty due to higher borrowing costs, affordability pressures, and financing challenges.
According to the Canadian Real Estate Association (CREA), national home sales declined significantly throughout 2025 as buyers became more cautious and mortgage qualification became more difficult.
At the same time:
Mortgage delinquency rates have been rising in Ontario
Buyers are facing tighter lending requirements
Appraisal gaps are becoming more common
Financing approvals are taking longer
Some transactions are collapsing before closing
This has created a growing number of situations where buyers simply cannot complete the purchase of a property.
Unfortunately, many people still believe:
“Worst case, I just lose my deposit.”
That is NOT always true.
Why Buyers Fail to Close
According to Brian Wilson, the vast majority of failed closings happen because financing falls through.
In many cases, buyers:
Lose financing approval late in the process
Experience employment changes
Take on additional debt before closing
Face unexpected appraisal issues
Cannot provide the required down payment
Run out of financing options
Brian explained that there are usually two possible scenarios:
1. The Buyer Needs More Time
This is the “best-case scenario.”
Sometimes financing is delayed but still possible. In these situations, the buyer may request an extension to close the transaction.
If both parties agree, the transaction can still proceed successfully.
However, extensions are never guaranteed.
The seller has the right to decide whether they are willing to wait.
2. The Buyer Cannot Close at All
This is where things become much more serious.
If the buyer cannot complete the transaction by the agreed closing date, they are considered to be in default of the Agreement of Purchase and Sale.
At that point:
The seller may terminate the contract
The property may go back on the market
The seller may pursue damages against the buyer
And those damages can become substantial.
Can Buyers Lose More Than Their Deposit?
Yes.
This is one of the biggest misconceptions in real estate.
Many buyers believe the deposit acts like a cancellation fee , that if they walk away, they simply lose the deposit and move on.
But legally, the seller may have the right to pursue additional financial damages.
According to Brian Wilson, sellers may potentially claim:
The difference in resale price if the home sells for less
Additional mortgage carrying costs
Property taxes
Insurance expenses
Utility costs
Legal fees
Other related financial losses
For example:
Imagine a buyer agrees to purchase a home for $850,000 but fails to close.
If the seller later resells the property for $800,000, the seller may attempt to recover the $50,000 loss, in addition to other expenses.
This is why failed closings can quickly become financially devastating.
What Happens to the Deposit?
Another important point Brian discussed is that deposits are not automatically released to the seller.
Typically, the deposit is held in trust by the real estate brokerage.
That means the funds are essentially frozen until:
Both parties reach an agreement
Or a court orders the release of funds
This is extremely important because many sellers assume they immediately receive the deposit after a failed closing.
That is not always the case.
Should Sellers Accept the Deposit and Move On?
Not necessarily.
This depends heavily on:
Market conditions
The size of the deposit
The seller’s financial losses
The likelihood of recovering additional damages
Brian explained that in some situations, sellers may negotiate with the buyer quickly in order to move on and relist the property.
However, he also warned sellers to be cautious about settling too early.
Why?
Because sellers often do not yet know the true extent of their damages until:
The property is relisted
A new buyer is found
The final resale price is determined
If a seller settles too quickly, they may unintentionally give up the right to recover larger losses later.
What Buyers Should Do Before Closing
If you are buying a home in Ottawa or anywhere in Ontario, this episode highlights why preparation is critical.
Buyers should:
Avoid major purchases before closing
Avoid changing jobs during the transaction
Keep debt levels stable
Maintain strong communication with lenders
Have financing fully confirmed
Work with experienced professionals
Most importantly:
Never assume financing is guaranteed until everything is fully approved and funded.
What Sellers Should Know
For sellers, failed closings can create major financial and emotional stress.
If a buyer defaults:
Speak with your lawyer immediately
Carefully document all losses
Do not rush into settlement agreements
Understand your legal options before signing anything
Every situation is different, and the right strategy depends on the specific circumstances.
Final Thoughts
A failed real estate closing is one of the most stressful situations buyers and sellers can face.
And in today’s uncertain market, understanding your legal and financial risks is more important than ever.
That’s why conversations like this matter.
A huge thank you to Ottawa real estate lawyer Brian Wilson for sharing his expertise and helping educate buyers and sellers across our community.
If you are buying or selling a home this year, make sure you work with professionals who can guide you properly through every stage of the transaction.
Watch Episode 3 of the How’s It Going Ottawa Podcast – Real Estate Law Series
Featuring Ottawa Real Estate Lawyer Brian Wilson
Topics Covered:
Buyer defaults
Failed closings
Deposits
Financing issues
Seller damages
Legal risks in real estate
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