The Real Estate Deal That Falls Apart Most Often
My client had been after this building for two years. When the seller finally accepted his offer, he called me from the parking lot, still grinning. He’d agreed to a 45-day closing. He had a bank lined up. He’d seen the property a dozen times. He felt good.
We were 12 days from closing when the lender came back with a new requirement.
That’s the story. Except it’s not just one story — it’s the same story I’ve watched play out more times than I can count, with different buyers, different buildings, and different lenders, but the same underlying pattern. A deal that felt finished wasn’t. And the reason almost always traces back to the same set of failure points, most of which were knowable before they became crises.
Why commercial deals fall apart
Most deals don’t fail because of bad faith. Sellers aren’t hiding things. Buyers aren’t being careless. Lenders aren’t inventing requirements. Deals fall apart because a commercial real estate transaction requires a dozen independent systems — legal, financial, environmental, physical, regulatory — to align on the same timeline, and those systems don’t communicate with each other in real time.
The buyer has a commitment letter. The commitment letter has conditions. Those conditions require a satisfactory appraisal, clean title, acceptable environmental, a property inspection that doesn’t surface material issues, and documentation the lender’s underwriter is satisfied with. Each of those is its own potential failure point. When one slips, it rarely slips quietly.
Financing contingencies: the most common trigger
Experienced buyers treat the lender commitment letter as a starting line, not a finish line. What the letter actually says is: we will lend you this money, subject to the following conditions. Those conditions are the deal. A buyer who reads the commitment letter carefully on day one — and maps out every condition against the closing timeline — is in a fundamentally different position than a buyer who files it away after the handshake.
One timing question I get regularly: when should I engage the lender? A lot of buyers prefer to get through diligence before formally engaging a lender — they want to know what they’re actually buying before they start the financing process. That’s a reasonable approach. But if that’s your plan, you need to build your closing timeline accordingly. The post-diligence period has to be long enough to accommodate loan processing, appraisal ordering and completion, underwriting review, and the inevitable back-and-forth on conditions. None of that moves quickly, and appraisers in particular run on their own schedule. I’ve seen appraisals take three weeks longer than expected simply because the appraiser’s queue was backed up. If your contract gives you 30 days post-diligence and the appraiser takes 45 days to deliver the report, you have a problem that has nothing to do with the merits of the deal. Build in the buffer before you sign the purchase agreement, not after.
The appraisal itself is the condition that creates the most drama. If the property doesn’t appraise at the purchase price, the lender’s loan amount adjusts down to match. The buyer either covers the gap in cash, renegotiates the price, or loses the deal. Order the appraisal as soon as you engage the lender. If there’s a gap, it’s better to know in week two of financing than in week six.
The second financing failure mode is the last-minute underwriter request. Underwriters review files they didn’t originate. They sometimes see things loan officers didn’t flag, and they ask for additional documentation — a lease amendment, an updated environmental clearance, a tenant estoppel that wasn’t in the file. These requests are usually resolvable. What they’re not is instant. When they arrive at day 35 of a 45-day closing, they become emergencies.
Title objections
The title commitment arrives early in diligence and gets treated as background noise. It shouldn’t. The exceptions section lists the conditions and encumbrances the title company won’t insure over — recorded easements, restrictions, covenants, and occasional gaps in the chain of title that require curative work.
Most exceptions are benign. A utility easement along the back of the property. A drainage agreement from 1987. Standard stuff. But occasionally there’s something that isn’t — an encroachment revealed by the survey, a recorded use restriction that conflicts with the buyer’s plans, an access easement that’s shared and contested. Title curative work takes time. Sometimes it requires a quiet title action. Sometimes the seller needs to obtain a release from a lienholder who is hard to locate. The earlier you identify these issues, the more runway you have to resolve them.
Send the title commitment to your attorney on the day it arrives. Not the day before closing.
Survey issues
A new survey ordered during diligence occasionally reveals something that wasn’t in the listing, wasn’t in the seller’s disclosure, and wasn’t visible during a walkthrough. An encroachment from a neighboring structure onto the subject property. A fence line that doesn’t match the legal description. A shared driveway that crosses the property line in a way nobody had formalized.
These issues are solvable, but not quickly. An encroachment agreement requires negotiation and drafting. A boundary issue may require a corrected legal description. Either can cause a title company to pause on its commitment until the issue is resolved. Order the survey on day one.
Seller disclosure problems
This is where buyers sometimes get a surprise they didn’t see coming — and it’s almost never the roof or the environmental. The issues that surface in seller disclosure disputes almost always involve the financial picture of the property: the rent roll, the profit and loss statement, the actual lease terms versus what was represented, or the occupancy numbers used to underwrite the deal.
A tenant shown as current who is actually in default. A lease renewal option that was exercised but not reflected in the documents provided. Vacancy that was papered over with a short-term occupancy agreement that expires shortly after closing. Expense figures that don’t reflect the property’s actual operating costs. These discrepancies don’t always represent intentional misrepresentation — sometimes sellers are working from stale information, or a broker assembled the package without full visibility into the current state of the leases. But they create real disputes when the buyer closes expecting one set of economics and inherits another.
The protection is in the diligence. Get current estoppels from every tenant. Reconcile the rent roll against actual lease documents. Ask for the trailing 12 months of actual operating statements, not just a pro forma. The seller’s representations give you a legal remedy if something turns out to be false. Your own diligence tells you whether the numbers add up before you close.
What experienced buyers do differently
They order the survey and the Phase I on day one. They send the title commitment to counsel immediately. They think through the financing timeline before signing the purchase agreement — whether they engage the lender during diligence or after, they make sure the post-diligence runway is realistic given appraisal timelines, underwriting review, and the conditions that will need to be satisfied. They reconcile the rent roll against the leases. They don’t assume the financing is done until the wire is confirmed.
And they use the back half of the diligence period for resolution and negotiation, not for starting the checklist. The contingency period isn’t a review window. It’s a resolution window.
Back to my client
He closed — three days late, with a short extension that cost him a negotiated fee. The lender’s last-minute requirement was resolvable. It just took eleven days of rapid document collection that nobody had planned for, two attorneys working over a weekend, and a seller who was gracious enough to grant the extension rather than declare a default.
He got his building. The deal worked.
But I’ve watched the same scenario end differently. The difference, almost always, is when the buyer started — and whether the people around the table had seen enough closings to know that a signed purchase agreement is the beginning of the hard part, not the end of it.
If you’re in diligence on a deal right now and want a transaction attorney reviewing the moving parts, the earlier in the process, the more options you have. Reach out.