Why So Many Real Estate Deals Are Falling Apart (And What You Can Do About It)

Realtor groups and forums are buzzing with the words “mutual release”.  One agent lost 3 deals in one week.  The comments echoed that others are experiencing a surge in deals that are falling apart.  

You stage the home, negotiate a strong offer, and get the paperwork signed, only to see it all unravel days later. Sound familiar?

Across Canada, more real estate deals are falling apart than ever. Buyers are walking. Sellers are pulling listings. And “mutual release” forms are showing up in inboxes like never before.

This isn’t a blip. It’s an alarming trend.

Greg Campbell, a seasoned Ottawa realtor, recently said on his podcast, “I’ve never seen this many deals fall apart.” He’s not exaggerating. A mix of market uncertainty, tighter lending conditions, and emotional decision-making is breaking deals at an alarming rate.

Here’s what’s really happening—and what you can do to keep your deals from ending with a mutual release in 2025.

1. Financing is falling through at the last minute

Buyers think they're covered with a pre-approval, but that’s no guarantee. When rates shift or lender policies change mid-transaction, financing falls apart. A rate increase of even 0.25% can push a buyer’s debt service ratio too high, instantly disqualifying them.

One recent buyer secured a pre-approval at 4.7%, only to learn days later that their lender had adjusted it to 5.4%. That change pushed her over the limit. Her deal collapsed just before conditions were due, and both parties ended up signing a mutual release.

Agents need to stay close to the lender. Encourage clients to get a full underwrite—not just a basic pre-approval, and check again if rates move. Don’t assume the financing is solid until the condition is fully waived.

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2. Appraisals are coming in short

In markets where prices are cooling or holding flat, appraisers are cautious. Homes that sold for $900,000 last quarter are now appraising at $875,000. When that happens, banks lend on the lower number, and the buyer is stuck covering the difference in cash.

If they can’t, or won’t, the deal dies.

This is especially painful in transactions where the buyer has limited savings. It’s also becoming more common in suburban markets where prices ran hot in early 2022 and have since adjusted.

Agents should prepare buyers for this possibility. Share comparable sales data with the appraiser. If you sense the price might be aggressive, talk through how to handle a shortfall before it becomes a deal breaker.

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3. Inspection reports are scaring buyers away

Inspections used to be routine. Now they’re a reason to walk.

Even minor issues, like a 15-year-old roof, aging HVAC systems, or signs of moisture, are causing buyers to panic. In a softer market, they don’t feel the pressure to compromise. If one property raises doubts, they simply move on to the next.

This isn’t just about the home’s condition. It’s about buyer psychology. Today’s buyers are more cautious, more financially stretched, and less willing to take risks.

A pre-listing inspection can help. Sellers should consider investing in one, then addressing major issues upfront or pricing accordingly. It gives buyers confidence and reduces renegotiation after the offer is accepted.

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4. Status certificates and surprise assessments are turning off condo buyers

Condo deals are failing, often due to documents that arrive too late. The status certificate reveals an upcoming $40,000 elevator assessment. Or a reserve fund that’s underfunded. Or litigation the seller didn’t disclose.

When this happens after the offer is accepted, buyers feel blindsided. Their lender might refuse to fund. Or they simply lose trust and request a mutual release.

This is avoidable. Status certificates should be ordered before the listing goes live. Agents should read them carefully, flag risks, and prepare the buyer for what’s inside. Transparency goes a long way toward protecting the deal.

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5. Job losses are killing mortgage approvals

It’s happening more than people realize. A buyer loses their job after the offer is accepted. Or they accept a new job with a probationary period and their lender pulls funding.

This is especially common in tech and construction sectors, where layoffs are happening quietly but frequently. Some buyers don’t think to mention it until it’s too late. Sellers may also hide employment changes that affect their own ability to carry two homes.

Agents need to double-check employment stability before waiving financing. If there’s risk, bring in a mortgage broker early to explore options like co-signers, alternative lenders, or flexible conditions.

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6. Sellers are clinging to unrealistic prices

Some sellers still believe their home is worth what it was in early 2022. They refuse to adjust, even after multiple showings with no offers. Others accept an offer, then get cold feet when they realize they “could’ve gotten more.”

In Ottawa and similar markets, terminated listings are on the rise. These aren’t expired listings—they’re sellers backing out or refusing to negotiate once the reality of market value sets in.

This is a trust killer. Buyers feel jerked around, and many agents are left cleaning up the mess with a mutual release.

Agents must set expectations from day one. Show recent sold prices, not just listings. Role-play pricing discussions before the offer comes in. Help sellers understand that if they don’t move, the market will move without them.

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7. Investor math no longer makes sense

For many investors, the numbers just don’t work anymore. Rents have flattened or declined in some areas, while carrying costs have surged due to rising interest rates.

What looked like a cash-flow-positive property in January is now break-even—or worse.

Some buyers are pulling out during conditional periods. Others walk away from firm deals and forfeit deposits. The risk isn’t just financial. It’s emotional. Many are scared of negative cash flow in a slowing rental market.

Agents working with investors need to run stress tests upfront. What happens if the rate jumps? What if rent drops $200? If the deal only works in perfect conditions, it might not be the right investment.

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What You Can Do to Keep Your Deals Alive

Stay ahead of the problems. Don’t wait for conditions to fail.  Anticipate what might go wrong and have a plan to address it. Communicate constantly during conditional periods. Get financing updates, legal feedback, inspection timelines, and appraisal results moving quickly.

Be the calm in the chaos. Clients need more than a great negotiator, they need a guide.

Build a network that includes mortgage brokers, inspectors, lawyers, and appraisers who move fast. When a problem shows up, your ability to respond in hours, not days, can save the deal.

And finally, don’t underestimate the power of transparency. Educate your clients. Prepare them for the market we’re in, not the one they hoped for. If they understand the risks, they’ll be more likely to stay committed—even when things get complicated.

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FAQ: Common Questions About Collapsing Deals

What is a mutual release, and when is it used?
A mutual release is a legal document both buyer and seller sign to cancel a deal and release each other from obligations. It’s typically used when a deal falls apart during the conditional period or when both sides agree not to proceed.

Can a buyer get their deposit back after a mutual release?
If the deal was still conditional and the buyer acted in good faith, they’re usually entitled to a refund. But if the deal was firm, the deposit may be forfeited. Always consult the specific terms of the agreement.

Why are appraisals coming in low lately?
Appraisers are being conservative due to shifting market conditions. They’re prioritizing recent sold data, not asking prices. As prices flatten or decline, the gap between agreed purchase price and appraised value grows.

What’s the best way to avoid surprises in a condo deal?
Get the status certificate before listing or offering. Read it thoroughly. Highlight upcoming assessments, reserve fund balances, and any red flags that could worry a buyer or lender.

How do I talk a seller down from an unrealistic price?
Use sold comparables from the last 30 days, not older data. Ask them what they’ll do if no offers come in. Help them see the long-term cost of sitting stale on the market.

What should I do if my client loses their job mid-transaction?
Notify the lender immediately. They may be able to restructure the deal. In some cases, switching to an alternate lender, adding a co-signer, or renegotiating the terms can save the deal.

Is it worth doing a pre-listing inspection?
Yes. It builds trust with buyers, reduces renegotiation, and shortens the conditional period. It also gives you control over how the home’s issues are presented.

Deals aren’t just falling apart on their own. They’re collapsing because no one’s stepping in early enough to hold them together.

Be that person. Be the difference between a signed agreement—and a mutual release.

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