The Struggle Is Real: When Financing Falls Apart

By Slonee Malhotra

Buying real estate can feel a bit like dating—full of excitement, big dreams, and the constant hope that everything works out. But just like in dating, sometimes someone (the buyer) gets cold feet and sometimes someone (the seller) gets hurt. In real estate, that “cold feet” moment usually looks like this: The buyer can’t secure financing.

Unfortunately, unlike dating, you can’t just ghost an Agreement of Purchase and Sale (APS). When a buyer fails to secure financing, they’re in breach of the APS, and that breach comes with real consequences.

Anticipatory Breach

If the buyer confesses early (before the closing date) that they won’t be able to close, then the seller can, legally speaking, go atomic. If the buyer confesses early (legally known as “Anticipatory Breach”), the seller can:

• Declare an anticipatory breach;
• Terminate the transaction (legally referred to as “repudiation”);
• Keep the deposit; and
• Pursue damages and carrying costs.

This is serious business.

The Calculation of Damages

It is very easy math to calculate the measure of damages.

Original purchase price – fair market value at the time of breach = Seller’s damages

The Treatment of Deposits

Real estate deals, like relationships, require commitment. And in the legal world, commitment is spelled D‑E‑P‑O‑S‑I‑T.

The deposit is automatically forfeited where the buyer breaches the contract.

The deposit stands as security for performance of the contract. If the buyer wants the deposit back, the buyer must make an application to the court for relief from forfeiture, which judges grant only in the rarest, most sympathy‑inducing circumstances.

A Review of Case Law

In the 2019 case of Azzarello v. Shawqi, the buyer couldn’t secure financing for a $1.55M home after negotiating multiple extensions with the seller. Ultimately, the seller had to declare the buyer in breach and resell the property for $1.28M—a painful, wallet‑thinning $275,000 loss. In addition, the seller incurred costs for staging the property, legal fees, carrying costs of the property and interest on a line of credit.

The APS included the standard preprinted form language providing that the deposit was “to be held in trust pending completion or other termination of this Agreement and to be credited towards the Purchase Price on completion.”

The Court agreed that damages were owed, but also made sure the seller didn’t double‑dip. The seller had already pocketed the $75,000 deposit, so that amount had to be credited against the loss. The goal: make the seller whole, not richer.

As for the buyer’s attempt to recover the deposit through relief from forfeiture? This was denied. Flat-out. The court found:

• The deposit was reasonable in relation to the purchase price,
• And nothing about the transaction smelled unfair or unconscionable.

The moral of the story is that courts won’t rescue a buyer from the consequences of a proportionate, standard deposit—especially when the seller has already taken a hit. The case below is a harsh reality check on this point.

In Redstone Enterprises Ltd. v. Simple Technology Inc, the buyer agreed to purchase a Brantford warehouse for over $10M and paid an initial deposit of $300,000. The buyer wasn’t able to close on the original closing date and negoitated with the seller to extend the closing date and pay an additional supplementary deposit of $450,000. That’s $750,000 in deposits. Then—stop me if you’ve heard this one before—the buyer failed to secure financing for the extended closing date.

Here’s the kicker: The seller resold the property and didn’t lose a dime. So… does the seller still get to keep the deposit? YES.

The Court of Appeal made the rule crystal clear: When a buyer backs out of an APS, the deposit is automatically forfeited, even if the seller suffers zero financial loss.

The only way out for the buyer is relief from forfeiture—and to get that, the buyer has to show the forfeiture would be unconscionable, a bar so high it may as well be guarded by a dragon.

Ultimately, the Court ruled that “this was a straightforward commercial real estate transaction undertaken in the expectation of profit by both sides. There was no inequality of bargaining power between them. There was no fiduciary relationship, and both parties were sophisticated. There was nothing to suggest that the applicant unconscionably abused its bargaining power in asking for an additional deposit of $450,000 to grant the requested extension.”

Let’s look at one final case.

In Gamoff v. Hu, things started going sideways right after the buyers failed to deliver a supplementary deposit installment. Shortly after that, they admitted they wouldn’t be able to close because financing fell through.

The sellers didn’t waste time. They accepted the anticipatory breach and ended the agreement well before closing. Then they relisted the property at the original price, hoping for a quick rebound.

But the market had other plans. The seller dropped the list price. Then dropped it again. And again. Eventually, months later, the seller resold at a $470,000 loss.

The court awarded the seller the full shortfall plus carrying costs, recognizing how the breach triggered months of financial strain.

Conclusion

When it comes to real estate, failing to secure financing doesn’t just break hearts—it breaks bank accounts.

The courts have a consistent message:

• Deposits matter. A lot.
• Buyers who can’t close are usually on the hook.
• Relief from forfeiture is rare and reserved for genuinely unfair situations.

So whether you’re buying, selling, or advising clients, remember: financing isn’t just a step in the process. Financing is the foundation and everything else is built on top of it.

Real estate deals, like relationships, only work when both sides show up ready to commit. And in the legal world, commitment is a deposit, backed by solid financing, and supported by the ability to actually close.