I recently watched a podcast by mortgage expert Ron Butler discussing a troubling trend in Ontario’s real estate market: home purchase failures have increased by 500% compared to pre-COVID levels.

That number should make all of us pause.

What Is a “Purchase Failure”?

A purchase failure happens when a buyer signs a contract to buy a home — new construction or resale — but cannot close the deal on the agreed closing date.

In simple terms:
The buyer doesn’t have the money or cannot secure the mortgage needed to complete the purchase.

Before COVID, less than 1% of purchases failed. Today, that number is reportedly around 5% — and in new construction, some estimate it could be much higher.

Why Are Deals Falling Apart?

There are several major reasons:

1. Appraisal Problems (Especially New Construction)

Many buyers purchased pre-construction homes or condos in 2021–2022 at peak prices. Now that projects are completing:

• Market values have dropped.
• Appraisals are coming in far below the original purchase price.
• Buyers must cover the difference in cash.

If you bought at $1.95M and the appraisal comes in at $1.525M, that’s a $400,000 gap you must cover. Many simply can’t.

2. Condo Market Reality

Some buyers purchased condos years ago at inflated prices, expecting appreciation or easy rental income. Today:

• Comparable units are selling for less.
• Higher interest rates mean negative monthly cash flow.
• Rental income often doesn’t cover mortgage payments.

Some buyers are choosing to walk away from large deposits rather than close on a losing investment.

3. Mortgage Qualification Issues

In resale markets, failures are happening because:

• Buyers couldn’t sell their existing home for the expected price.
• Income was overstated or improperly assessed.
• Job losses occurred before closing.
• Buyers assumed pre-approvals guaranteed final approval (they don’t).

As Ron Butler bluntly stated: “The buyer doesn’t have the money.”

Why This Matters to Our Community

This is not about panic. It’s about awareness.

When purchase failures rise:

• Sellers face uncertainty.
• Builders face stress.
• Buyers risk losing deposits.
• Legal disputes increase.
• Financing becomes stricter.

We are entering a market where leverage cuts both ways.

For years, rising prices hid risk. Today, falling values expose it.

If You’re Buying or Investing, Be Careful

Before signing anything:

• Get a fully verified mortgage approval (not just a quick pre-qual).
• Be conservative with projected sale prices.
• Stress-test your finances at higher interest rates.
• Understand appraisal risk.
• Have liquidity reserves.
• Read pre-construction contracts very carefully.

Speculation worked in a rising market. It is dangerous in a correcting one.

Final Thought

Real estate is not guaranteed to go up. It never was.

The goal is not to scare anyone — but to make sure our community members are informed. The people who survive market corrections are not the boldest. They are the most disciplined.

If you’re planning to buy, sell, or close on a property soon, now is the time to review your numbers carefully.

Awareness today can prevent disaster tomorrow.