Why So Many Real Estate Deals Are Struggling With Financing Right Now

Selling a home in today's market is already difficult enough.Properties are taking longer to sell. Price reductions have become common. Buyers are negotiating aggressively, and sellers often have to wait weeks before receiving an offer they're willing to accept.But recently, I've noticed another frustrating trend.Buyers are getting accepted offers and then reaching the end of their subject period without their financing in place.This isn't something I've seen once or twice. We've now experienced it on roughly six of our recent accepted offers on listings.The buyer negotiates the deal, gets five, six or seven business days to satisfy their conditions, and then on the final day their agent comes back asking:Can we have an extension?The reason?Financing isn't finished.

Getting an Accepted Offer Is Already Taking Longer

In a strong seller's market, getting an offer might be the easy part.That's certainly not the market we're experiencing today.A seller may spend 30, 45 or even 60 days on the market before finding the right buyer.Often, there has already been a price reduction along the way.Then an offer finally arrives, and it's usually below the asking price.That starts another negotiation.The buyer comes up. The seller comes down. Maybe they go back and forth for a couple of days before finally reaching an agreement.After all of that, the seller finally thinks their home is sold.Except it isn't.In most cases, the buyer still has conditions to satisfy before the transaction becomes firm.And one of the most important is financing.

Five to Seven Business Days Should Usually Be Enough

A typical offer may give the buyer approximately five to seven business days to complete their financing, inspection and other due diligence.That should provide a properly prepared buyer with a reasonable amount of time.The mortgage professionals I regularly work with can often get financing organized much faster when they've already been working with the client and have the necessary documentation.But increasingly, we're reaching the final day of the subject period only to discover that the financing still isn't complete.At that point, the buyer asks the seller for another two, three or four days.For the seller, that's a difficult decision.Do you grant the extension and hope the buyer can eventually complete the financing?Or do you refuse and potentially put the property back on the market after already waiting weeks to get an accepted offer?Neither option is particularly attractive.

The Problem Isn't Always the Bank

One explanation we're hearing regularly is that lenders are taking longer to process mortgages.That can certainly happen. Every financing situation is different, and some applications are much more complicated than others.But based on what I'm seeing, the lender isn't always the problem.Sometimes the buyer simply wasn't as prepared as everyone assumed.When a financing extension is requested, I want to understand why.With the buyer's permission, there may be an opportunity for the listing side to obtain more information about the financing situation so the seller can make an informed decision about granting an extension.And sometimes we discover that the mortgage broker has been asking the buyer for documentation for days—or even months.The buyer simply didn't provide everything until the last minute.That's very different from a lender taking too long to approve an otherwise complete mortgage application.

A Mortgage Pre-Approval Doesn't Guarantee Financing

This is where buyers and sellers need to understand the limitations of a mortgage pre-approval.Being "pre-approved" can mean different things depending on how much work has actually been completed.A preliminary conversation with a lender or mortgage broker isn't the same thing as having your income, employment, credit, down payment and other financial information fully documented and reviewed.Even a strong pre-approval doesn't guarantee financing on a specific property.The lender may still need to review the purchase contract, property, appraisal, strata documents and other information before providing final approval.That's why I don't think buyers should wait until after they've negotiated an accepted offer to start gathering basic financial documents.That work should begin long before you write the offer.

This Is Particularly Frustrating for Sellers

Put yourself in the seller's position.You've been on the market for 45 days.You've reduced your price.You've kept the home clean for showings.You've negotiated with a buyer and eventually agreed to sell for less than you originally hoped.Then you've waited another week while the buyer completes their conditions.On the final day, you're told:"We need more time."That's frustrating.More importantly, it creates uncertainty.While your property has been under an accepted offer, other potential buyers may have moved on and purchased something else.If the deal collapses, you're back on the market.And in a declining market, even a couple of additional weeks can matter.

Why Does This Happen More Often in a Slow Market?

I've seen versions of this throughout my career.When the real estate market becomes slower, buyers who previously felt shut out of the market begin looking again.That's generally a good thing.Prices are lower. There is more inventory. Buyers have more negotiating power, and they have time to include reasonable conditions in their offers.But it can also attract buyers who are curious about purchasing without having completed all of the necessary financial preparation.In a hot market, those buyers often don't get very far because they're competing against multiple prepared purchasers.In a slow market, sellers are much more willing to negotiate.That means an unprepared buyer has a much better chance of getting an offer accepted.The problem only becomes obvious afterward when it's time to actually obtain the financing.

Buyer Preparation Matters More Than Ever

If you're buying a home right now, there is an enormous opportunity to negotiate.But that opportunity shouldn't be confused with being ready to buy.Before writing offers, buyers should have meaningful conversations with their mortgage professional and provide the documentation they've been asked for.That could include income verification, employment information, tax documents, confirmation of down payment and other financial information depending on the buyer's situation.Don't wait until your offer is accepted to discover what the lender needs.Your subject period should be used to obtain approval for the actual property you're purchasing—not to begin figuring out whether you can afford to purchase a home at all.

Sellers Need to Evaluate More Than the Price

This is also an important lesson for sellers.The highest offer isn't necessarily the best offer.Price obviously matters, but so do the buyer's conditions, deposit, subject-removal date and overall preparedness.If two buyers offer similar prices but one has clearly done substantially more financial preparation, that can be important information when deciding which offer provides greater certainty.A buyer offering slightly more money isn't particularly valuable if they can't complete the transaction.In today's market, the strength of the buyer matters.

What Happens When a Buyer Asks for an Extension?

A seller doesn't automatically have to grant a financing extension.It's a negotiation.Before agreeing, I want to understand what's causing the delay and whether there is a realistic path to completing the financing.Did the lender simply need another day for an appraisal?Is the file essentially approved and waiting for one final document?Or did the buyer only submit their financial information yesterday?Those are very different situations.The seller needs enough information to decide whether giving the buyer additional time makes sense.Sometimes granting the extension is absolutely the right decision.Other times, continuing with an unprepared buyer may simply waste more time.

A Slow Market Doesn't Mean Every Buyer Is Ready

Today's real estate market gives buyers advantages we haven't seen for years.There is more selection, more time to make decisions and considerably more negotiating power.But an accepted offer still needs to become a completed transaction.For sellers, that means evaluating more than just the number written at the top of the contract.And for buyers, it means doing the financial work before you fall in love with a property.If you're planning to purchase, speak with your lender or mortgage broker early. Provide the documentation they request. Understand your budget. Know what your monthly payment looks like. And make sure you're actually in a position to proceed before asking a seller to take their home off the market for you.Because in this market, getting an offer accepted might be easier than it was a few years ago.Getting that offer across the finish line is another story.

Written by:
Steve Karrasch PREC
Karrasch Real Properties Team
Macdonald Realty