Delays in Closing (Real Estate): What Buyers and Sellers Risk, and Who Pays?

Key Takeaways

• Closing delays in real estate are common: Paperwork issues, financing snags, and property problems can all push back your closing date.
• Both buyers and sellers have risks: Buyers face extra costs and the risk of losing their rate lock, while sellers have ongoing carrying costs and the potential for the deal to fall through.
• Your contract is your guide: The Agreement of Purchase and Sale outlines who is responsible for what when a delay occurs.
• Communication is key: Working closely with your real estate agent, real estate lawyer, and lender can help you navigate delays and find solutions.

Closing day is supposed to feel like a finish line. Instead, the closing date can feel like a moving target.

Buyers may have movers booked, a lease ending, kids starting school, or a rate lock that expires in days. Sellers may already be packed, counting on equity for their next purchase, or trying to time a job move. When the date shifts, the pressure builds quickly.

In plain terms, a closing delay in a real estate transaction means the closing date moves back because paperwork drags, conditions are not met, or loan funding stalls. Whether you are buying in Toronto, Vancouver, or a smaller market, the mechanics are similar but the legal framework is distinctly Canadian. This guide walks through the common causes of delays, the real costs and risks for buyers and sellers, how contracts typically assign who pays, and how to protect yourself under Canadian real estate law.

What causes closing delays real estate, and what it means for your timeline

Most closing delays are not mysterious. They come from a handful of repeat problems, and one delay often triggers another. A late appraisal can slow the lender, which pushes back signing, which forces movers to reschedule.

The key is to treat the closing process like a chain. If one link breaks, the whole thing shifts.

Red flags that often predict a delay

• The buyer has not provided documents quickly (pay stubs, bank statements, ID).
• Bank appraisals have not been ordered within the first week.
• The title search finds an old lien or ownership question.
• Repairs are vague, with no firm deadlines or receipts.
• The lender will not confirm "clear to close" in writing.
• The closing date is aggressive for the loan type and local pace.
• The lawyer has not received the Status Certificate (for condos) or is not flagged for title search yet.

Financing delays and mortgage lender issues that push back the closing date

Financing delays are the biggest driver of late closings. Even strong buyers can hit a snag late in the process.

Common mortgage lender-related causes include:

• Underwriting process backlogs: Underwriters get slammed during busy seasons. A file can sit in a queue for days, then come back with requests that restart the clock and delay mortgage approval.
• Missing documents: One unsigned page, a large bank deposit that needs sourcing, or an outdated pay stub can pause approval. Buyers often think they already sent everything, then the lender asks again.
• Last-minute job or credit changes: A new car loan, a new credit card, switching jobs, or even a drop in hours can force the lender to re-check risk. That can lead to new conditions, or worse, a denial.
• Mortgage stress testing complications: In Canada, buyers must qualify at a rate that's 2% higher than their actual mortgage rate (or the Bank of Canada's benchmark rate, whichever is higher). This is known as the mortgage stress test. If a buyer's income drops or their debts increase, they could fail the stress test at the last minute, even if they were pre-approved.
• High-ratio mortgage insurance delays: If a buyer is putting down less than 20% of the purchase price, they need mortgage insurance. This is often called high-ratio mortgage insurance. Any last-minute documentation issues or property concerns flagged by the insurer (like CMHC or Sagen) can delay approval by several days.
• Appraisal conditions: Even when the value is fine, bank appraisals may require repairs (peeling paint, missing handrails, roof concerns) for certain loan types. Those conditions can delay the file while repairs are completed and re-inspected.
• Rate-hold timing: In Canada, rate holds are typically 90 to 120 days. If the closing date pushes beyond the hold period, extending it costs money, and the buyer usually pays. If the hold expires and rates rise, the buyer's monthly payment can jump enough to break approval.

Also, remember there are two major milestones that people blur together:

• Final mortgage approval (clear to close): The lender says the loan is approved and closing can be scheduled.
• Funding: The lender sends the wire. Funding can lag due to bank cut-off times, fraud checks, or a missing final condition.

A buyer can be "clear to close" and still face a funding delay that pushes the closing date by one or two business days.

Title, appraisal, inspection, and repair issues that stall closing

Even a cash buyer can be delayed if the property side is not clean.

• Title issues: Old judgments, unpaid property taxes, contractor liens on title, municipal tax arrears under the Property Tax Act, financial encumbrances, zoning requirements, or restrictive covenants can block transfer. A search for official debt orders (Writs of Execution) may show that the seller has outstanding debts that need to be settled. Something as small as an unpaid utility liens on title can stop a closing until it is paid and released. These issues often push back the closing date significantly.
  
  • Example: a seller thinks a $240 water bill was paid years ago. The title search finds a liens on title tied to that bill. Closing cannot happen until the lien is cleared and recorded, which may take several days and delay the closing date.
• Probate and ownership questions: If a prior owner died, or the deed was not recorded correctly, the title insurer may require court documents or corrective deeds.
• New construction and Tarion issues: In Ontario, pre-construction homes come with Tarion warranty coverage. If there are outstanding deficiencies or incomplete Tarion registration, this can delay occupancy and final closing for pre-construction homes. Pre-delivery inspections that reveal unfinished work can push dates significantly.
• Survey and boundary problems: A real property report may show a fence over a line, an encroachment, or an unrecorded easement. That can lead to negotiation, legal review, or added lender requirements.
• Appraisal issues: If the appraisal comes in below the contract price, the buyer and seller have to adjust. That can mean a price cut, a bigger down payment, or a dispute that eats up days and sometimes ends the deal.
• Repairs and permits: Home inspection items can be simple, until they are not. Contractors get booked out, parts take time, permits can be missing, and repair negotiations drag on. If the buyer's loan requires proof of repair completion, the timeline depends on how fast work can be done and verified. Financing, appraisal, and home inspection contingencies usually have dates.

What buyers and sellers risk when closing is delayed

A closing delay is not just inconvenient for the buyer and seller. It can create new costs, push someone into default, or give the other party a reason to cancel. The risk grows with every day of uncertainty, especially when the closing date in the contract passes.

Buyer risks: extra costs, losing the home, and legal exposure

When the closing date moves, buyers often pay for the calendar twice.

• Rate hold extension fees: If the rate hold expires, the lender may charge a daily or flat extension fee. If rates rise, the buyer might also face a higher rate after the hold ends.
• Higher monthly payment: Even a small rate bump can change debt-to-income ratios and stress test qualification. A buyer who qualified at one rate might not qualify at another.
• Extra housing costs: Buyers may need extra rent, a hotel stay, storage, or a short-term rental. If the buyer already gave notice, they can get squeezed into expensive options.
• Moving and life disruption: Rescheduling movers costs money, and missing work costs time. Childcare can get complicated, and school timing can turn into a real problem for families.
• Deposit risk: The earnest money is not "lost automatically," but it can be at risk of deposit forfeiture if the buyer misses key dates or cannot close without a valid contract reason.
• Contingency deadlines matter: Financing, appraisal, and inspection contingencies usually have dates. If a buyer misses a deadline without an extension, they may lose the right to cancel and still get their deposit back. That is one of the quiet ways closing delays turn into a fight.

Seller risks: carrying costs, chain reactions, and the chance the buyer walks

Sellers often feel like they are carrying the burden during a delay. Many of the costs keep running whether the buyer closes or not.

• Carrying costs add up: Mortgage interest, property taxes, insurance, utilities, HOA or condo fees, lawn care, snow removal, and basic upkeep do not pause. Depending on your province, you may also continue accruing GST/HST liability on these expenses. If the home is vacant, vacancy risks rise too (storm damage, break-ins, or a small leak that becomes a big one).
• Domino effects on the seller's next move: If the seller is buying another home, a delay can cause them to miss their own closing date. They might need bridge financing (common in hot markets when closings do not align), temporary housing, or they could lose the next home entirely.
• Work and family plans disrupted: Time off work, travel plans, and caregiving schedules can fall apart when the closing date will not hold.
• Risk of losing the sale entirely: If the deal falls through after a delay, sellers do not just lose time, they lose the sale, face carrying costs that continue to pile up, and must start the selling process over. SecureMyOffer provides financial protection for sellers. If a buyer is unable to close after repeated delays, you are compensated, even if the sale fails. This means your agent still gets paid, you recover some of the opportunity cost, and you are not left holding all the risk when a buyer walks. Learn more at www.securemyoffer.com. The Agreement of Purchase and Sale sets key terms here.
• Re-listing pressure and pricing concerns: If the deal fails, the seller faces showings again, staging again, and buyer questions about "what went wrong." Sometimes the market reads a fallen deal as a warning sign. That can lead to price cuts and a longer time on market. For sellers staring at that possibility, this guide on Steps for relisting a property after a failed closing helps clarify what happens next in the real estate transaction flow.

Who pays for a delayed closing, what contracts usually say, and how to avoid fights

A delay and a failure to close are not the same thing. Many contracts allow extensions by agreement, and many delays get solved with a simple addendum. The trouble starts when one side thinks the other "caused" the delay, and the contract has hard deadlines.

Provincial differences matter. In Ontario, real estate lawyers typically handle closings and hold documents in trust. In BC and Alberta, notaries often manage the process. Deposit structure also varies; in Ontario, deposits are commonly held in trust with the brokerage, while in BC they are typically held with the seller's lawyer. Some provinces have mandatory lawyer review periods that can affect timelines.

Most Agreements of Purchase and Sale address:

• Closing date: The target date for signing and transfer.
• Time is of the essence: A clause that makes dates strict. Missing them can be a breach of contract.
• Notice to perform and cure periods: A formal notice that gives the other side a window to fix the issue.
• Extensions and amendments: Written changes to dates and terms, signed by the buyer and seller.
• Per diem penalty: A daily charge paid to the other party when a delay is someone's fault (only if negotiated or stated).
• Holdbacks in trust: Money held back at closing by the lawyer to cover unresolved items, if allowed and approved.
• Occupancy agreements: The buyer or seller stays in the home after closing (or before, in rare cases), with rent and rules.

Your contract controls. If you are unsure, ask your agent or real estate lawyer before you assume who owes what.

Common ways costs get assigned: per-diem charges, extensions, and credits at closing

When a closing moves, money can move too. Here is how it often plays out in practice, though local norms differ and everything depends on the signed agreement.

Cost from a delayed closing Who often pays How it is handled Rate hold extension fee Buyer Paid to lender, sometimes shown as buyer costs Buyer's hotel, storage, mover change fees Buyer Usually out of pocket unless seller agrees to credit Seller's extra mortgage interest, taxes, utilities Seller at first Sometimes offset by a credit if buyer caused delay Per diem penalty (daily delay charge) Party causing delay (if agreed) Negotiated in an extension addendum or contract clause Re-inspection fee for repairs Depends on cause Buyer pays often, seller may pay if repairs were promised late

Per diem penalties are one of the cleanest ways to reduce arguments, but they have to be agreed to. Example: $150 per day paid by the party who is not ready to close, credited to the other side on the closing disclosure.

Credits at closing are also common. Instead of writing a check today, the party at fault agrees to a seller credit or buyer credit that appears on the settlement statement.

Real-life scenario: buyer's lender is not ready, seller's movers are booked

The closing date is set for Friday. On Thursday afternoon, the lender requests one more document, a verification call cannot be completed until Monday, and funding slips to Tuesday.

The costs show up fast:

• The buyer pays a short rate hold extension fee.
• The seller pays to re-book movers and may lose a deposit.
• The seller carries three more days of mortgage interest, utilities, and insurance.

A practical fix is an extension agreement that moves the closing date to Tuesday and sets a small per-diem amount or a one-time credit to the seller to cover carrying costs. Everyone signs it, everyone has a clear new date, and the deal stays intact.

Real-life scenario: seller cannot clear a title issue in time, buyer's lease ends

A title search finds an old lien or issues flagged in the survey that must be released to deliver clear title. The seller thought it was resolved, but the release was never recorded. The lawyer says it may take 10 days to clear.

The buyer's lease ends in a week. Now the buyer is facing:

• hotel or short-term rental costs
• storage costs
• mover rescheduling fees
• missed work time

Possible solutions depend on what the lender and contract allow:

• Extension agreement: The simplest option, if the buyer can handle the extra housing cost.
• Holdback in trust (if permitted): Some transactions allow holding funds in trust with the lawyer so closing can happen while paperwork finishes. Many lenders will not allow this for title issues, so it is not always available.
• Temporary occupancy agreement: If everyone agrees, the seller may let the buyer occupy after closing, or sometimes allow early occupancy before closing (higher risk). Clear rules, insurance, and deposits are non-negotiable.
• Termination (if deadlines pass): If contract deadlines expire and the issue cannot be cured in time, the buyer may have a right to walk.

In these moments, the lawyer can speed things up by pushing for payoffs, releases, and recorded documents. Quick, organized paperwork makes a real difference.

How to prevent closing delays, reduce damage, and protect the sale price

You cannot control every surprise, but you can shrink the odds of a messy delay and mitigate losses. The goal is simple: remove avoidable friction early, and put guardrails in writing.

Buyer checklist: avoid last-minute surprises

• Get a fully underwritten pre-approval when possible, not just a quick pre-qualification.
• Share income details early (bonuses, commission, self-employment, overtime).
• Do not open new credit or finance a car before closing; this can break your stress test approval.
• Order the appraisal fast, and confirm the scheduled date.
• Answer lender document requests within 24 hours.
• Keep cash-to-close funds in place, avoid unexplained transfers.
• If buying a condo, ensure the Status Certificate is ordered immediately.
• Confirm homeowners insurance and title insurance early, including any special coverage.
• Verify wire instructions using a known phone number; fraud is real.
• Schedule the final walk-through with enough time to fix issues.
• Choose a firm closing date based on your lender's current workload and typical processing times in your province.

Seller checklist: reduce delays from your side and keep leverage

• Run a pre-list title check when possible, or at least review past payoffs and confirm no outstanding Writs of Execution.
• Gather mortgage payoff details and any second lien info early.
• Order HOA or condo documents quickly if your area requires them.
• Keep permit receipts, repair invoices, and warranty paperwork handy (including Tarion documents for new builds in Ontario).
• Make sure utility bills and property taxes are current to avoid surprise liens.
• Provide clean access for inspections and appraisal (attic, crawl space, panels).
• Write repair terms clearly, with firm dates and who chooses the contractor.
• Ask for regular loan status updates, including appraisal order and underwriting stage.
• Consider protection against buyer default, especially important during extended delay periods when the risk of deal failure increases.

These checklists for buyers and sellers streamline the real estate transaction.

Sellers who want less exposure to a failed closing can also talk with their listing agent and lawyer early about protections like stronger Agreement of Purchase and Sale terms, proof of buyer progress, and clear remedies if the buyer cannot close. The earlier those terms are discussed, the calmer the back half of the deal tends to be.

Conclusion

Closing delays are a common hurdle in Canadian real estate, but they do not have to be a deal-breaker. By understanding the risks, preparing in advance, and communicating clearly, both buyers and sellers can navigate these challenges in the real estate transaction. Protect yourself with clear deadlines, respond quickly to requests, and always get any changes in writing.

For sellers, the biggest risk is not just a delay, but a deal that falls apart completely. If you are concerned about a buyer's ability to close, SecureMyOffer provides a safety net. It ensures you are covered financially even if the transaction fails, so you are not left with all the risk. Learn more at www.securemyoffer.com.

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