When a Buyer's Default Nearly Broke a Downsizing Sale

The situation

Feng had spent three decades building a small construction company from the ground up before handing day-to-day operations to a younger partner. Xia had worked as an investment advisor through the same stretch. With their children grown and the house too large for two people, they decided it was time to downsize: sell the family home in Ottawa and move into a smaller bungalow across the city.

They did it in the usual order, the order most real estate lawyers recommend. They found a bungalow they liked, priced at roughly $1,350,000, and made an offer conditional on selling their own home first, so they would never be on the hook for two mortgages at once. Once that condition was satisfied, they listed their existing property and accepted an offer of roughly $2,300,000 from a buyer named Hanna, closing on a date about eight weeks out. With both agreements firm, Feng and Xia's own purchase of the bungalow was no longer conditional — it was going to close on a fixed date whether or not their sale did.

That is the structural risk built into any linked transaction: a sale and a purchase moving in sequence, with the proceeds of the first expected to fund the second. The condition protects the buyer of the bungalow-to-be while it is still open, but once it is satisfied and waived, the two deals become independent obligations that happen to share a calendar. Most of the time that works without drama, because most buyers close on the date they agreed to. This time one did not.

The problem

Roughly a week before closing, Hanna's lawyer advised that her financing had fallen apart and she would not be able to close on the agreed date. No new date was offered. Under the agreement of purchase and sale, Hanna was in default, but a default on paper does not put money in a seller's bank account. Feng and Xia were left holding a house they had contracted to sell, with a firm and unconditional closing on their own bungalow purchase still ten days away.

The couple had never intended to carry two properties, let alone close on one without the proceeds from the other. Ottawa real estate lawyers see this scenario more often than the public would expect: it is rarely the seller's own conduct that causes it, but a buyer's collapsed financing — a lender pulling an approval late, an appraisal coming in short, a job loss — can turn a well-planned move into a short, high-stakes scramble for the seller on the other end of the chain.

Two problems needed solving on two very different timelines. The immediate one was closing the bungalow purchase without the sale proceeds Feng and Xia had counted on, within days rather than weeks. The longer one was recovering as much as possible of the financial harm caused by Hanna's default — the deposit she had already paid, the eventual resale price of the family home once it went back on the market, and the carrying costs of owning a property they no longer wanted for however long it took to sell again.

What we did

1. Confirmed the default and preserved the deposit. Hanna's deposit, held in trust by the real estate brokerage, was roughly $150,000. A defaulting buyer is not automatically entitled to that money back — under the agreement of purchase and sale, a seller who is ready, willing and able to close can treat the deposit as forfeited toward their damages. We sent formal notice confirming Feng and Xia's position and put the brokerage on notice not to release the funds to Hanna without their consent.
2. Arranged short-term bridge financing for the couple's own closing. With ten days until their bungalow purchase, there was no time to negotiate a delay from the sellers of that property, and no guarantee they would agree to one. We worked with the couple's mortgage broker to put bridge financing in place — a short-term loan secured against the family home, which was still legally theirs pending resale — so the bungalow purchase closed on schedule without depending on Hanna's defaulted deal at all.
3. Relisted the family home for resale. Once it was clear Hanna would not close, the home went back on the market. A resale after a failed closing has to be handled carefully: the listing history and reasons for the relaunch can affect buyer interest, and any shortfall between the original and resale price becomes part of the damages claim against the defaulting buyer, so the marketing and pricing needed to be defensible, not just fast.
4. Tracked carrying costs from the moment of default. Every week the home sat unsold added to what Feng and Xia were out of pocket: bridge loan interest, property tax, insurance, and utilities on a house they no longer wanted to own. We kept a running record of these costs from the day of Hanna's default, because Ontario law allows a seller in this position to claim carrying costs as part of their damages, not just the difference in sale price.
5. Negotiated a settlement instead of pursuing full litigation. The home resold roughly ten weeks after the original closing date, for about $2,150,000 — some $150,000 below the price Hanna had agreed to pay. The forfeited deposit nearly covered that price gap, but carrying costs and bridge financing interest added a further shortfall. Rather than commence a lawsuit to recover the balance from Hanna — a process that would have taken months or years with no certainty she had the assets to pay a judgment — we opened settlement discussions through her lawyer. Sellers in this position generally have a strong claim, and defaulting buyers often prefer to resolve it privately rather than face a formal damages claim on the public record.

The outcome

Feng and Xia's bungalow purchase closed exactly on schedule, funded by the bridge loan rather than sale proceeds that were not there yet. That was the result that mattered most in the short term: no scramble with the sellers of the bungalow, no risk of being found in default themselves on a purchase that had nothing to do with Hanna's decision.

The longer-running piece — recovering the financial harm from Hanna's default — resolved as a negotiated compromise rather than a clean win. The forfeited $150,000 deposit was retained and applied against the roughly $150,000 gap between the original and resale price, covering that piece almost exactly. The remaining shortfall, made up of carrying costs and bridge financing interest, came to roughly $27,000. Through the settlement, Hanna agreed to pay about $18,000 of that amount over several months, leaving the couple to absorb the rest themselves rather than pursue further recovery through the courts.

It was not the outcome Feng and Xia had planned for when they listed their home. But it avoided the two worst versions of this story: losing the bungalow purchase because the money was not there on closing day, and spending years in litigation against a buyer whose ability to pay a judgment was uncertain at best. The couple moved into their new home on time, absorbed a real but bounded loss, and closed the file with a clear picture of what it had cost them and why.

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