A Market Shift Buyers Can Feel
If it feels like the real estate market suddenly changed its mood, you’re not imagining it. We are heading into a clear market downturn, layered on top of the usual winter slowdown. But this year, the challenges are heavier. Higher mortgage interest rates, declining property values, and tighter lending rules have created a perfect storm, especially for buyers who signed agreements when the market was hotter and borrowing was cheaper.
At Feld | Kalia, we speak to buyers every single day who are anxious, confused, and worried about what comes next. One of the most common questions we hear is:
“I bought a pre-construction property a few years ago. I can’t afford to close anymore. What are my rights? Can I get out? What happens if I can’t close?”
This article is written for you. It’s meant to be clear, honest, and practical. No legal jargon. No sugarcoating. Just real guidance during a tough market.
We’ll walk you through what’s happening in the market, why this downturn feels different, what buyers need to know , especially pre-construction buyers, and how a real estate lawyer can help protect you when the stakes are high.
Why This Downturn Feels Different: Interest Rates, Inflation, and Buyer Pressure
Real estate markets move in cycles. Slowdowns happen. Winter slowdowns happen every year. But this time, the pressure on buyers is coming from multiple directions at once.
1. Mortgage Interest Rates Have Risen Fast
Over the past few years, buyers got used to historically low interest rates. Many purchase decisions — especially pre-construction purchases, were made based on those numbers. Today, mortgage rates are significantly higher, and that change alone has dramatically reduced affordability.
A buyer who qualified for a $900,000 mortgage in 2021 may only qualify for $650,000 or less today. That gap matters—especially when closing on a pre-construction property that was priced during peak market conditions.
2. Property Values Have Softened
In many Toronto and GTA neighbourhoods, resale values have dipped. This creates another problem: buyers are being asked to close on properties that may now be worth less than the purchase price.
Lenders base mortgages on the current appraised value, not the price you agreed to years ago. If the appraisal comes in low, the buyer must make up the difference in cash.
3. Lending Rules Are Tighter
Banks are more cautious. Stress tests are stricter. Even buyers with good incomes and solid credit histories are finding financing approvals harder to secure.
Together, these factors are squeezing buyers from all sides — and pre-construction buyers feel it the most.
The Winter Market Effect: Why Slowdowns Are Normal
Traditionally, winter is a quieter season for real estate. Fewer listings, fewer showings, and slower transactions are expected. But normally, buyers benefit from reduced competition.
This year, winter is amplifying existing stress:
- Higher carrying costs due to interest rates
- Fewer comparable sales for strong appraisals
- Increased fear and uncertainty among buyers
Instead of feeling like an opportunity, this season feels like a wall buyers are hitting.
That’s why it’s more important than ever to understand your legal position — especially if you’re locked into a contract signed years ago.
Pre-Construction Buyers Under Pressure: The Biggest Pain Point Right Now
Pre-construction purchases are long-term commitments. Buyers typically sign agreements 3–5 years before closing, based on assumptions about future income, interest rates, and property values.
In a rising market, that gamble pays off. In a downturn, the risk becomes real.
The Reality Buyers Are Facing
Here’s what we’re seeing:
- Buyers cannot qualify for the mortgage amount needed to close
- Appraisals come in lower than the purchase price
- Closing costs are higher than expected
- Life circumstances have changed (job changes, family changes, increased expenses)
The result? Buyers are afraid they will default — and many don’t fully understand what that means.
The Hard Truth: What Happens If You Can’t Close on a Pre-Construction Property?
This is where we need to be very clear and honest.
Yes, You Can Lose Your Deposit
In almost all pre-construction agreements, if the buyer fails to close, the developer has the right to terminate the agreement and keep the deposit.
Deposits are often substantial — sometimes 15–25% of the purchase price. That can mean hundreds of thousands of dollars.
Yes, You Can Be Sued
Many buyers are shocked to hear this, but it’s true.
If a developer resells the unit for less than your original purcase price, they can sue you for the difference—plus carrying costs, legal fees, and other damages.
This is called breach of contract, and it is a real risk.
Yes, This Happens More Often Than People Think
When markets decline, developers do enforce their rights. These are businesses, not charities. Assuming they “won’t bother” is a costly mistake.
Is There Any Way Out of the Agreement? What Buyers Always Want to Know
This is the most common follow-up question we hear:
“Is there any way to get out of the agreement?”
The honest answer is: sometimes, but it depends entirely on your contract and your timing.
1. Review of the Agreement Is Critical
Every pre-construction agreement is different. Some contain:
- Limited termination rights
- Developer disclosure obligations
- Assignment clauses
- Conditions tied to financing or approvals
A careful legal review can sometimes uncover:
- Missed disclosure requirements
- Errors in notice provisions
- Rights tied to material changes
This is not something you can assess by skimming the contract. Details matter.
2. Assignment Sales (If Permitted)
Some agreements allow buyers to assign the contract to another purchaser before closing.
However:
- Developers often charge assignment fees
- Prices may be lower in a down market
- Approval is usually required
Even so, an assignment may reduce losses compared to defaulting entirely.
3. Negotiation with the Developer
In certain situations, developers may be open to:
- Extended closing timelines
- Structured resolutions
- Limited settlements
This is not guaranteed, but having legal counsel approach the developer professionally can make a real difference.
4. Early Legal Advice Can Change Outcomes
The worst thing buyers can do is wait until the day before closing—or after they’ve already defaulted.
Early legal guidance gives you options. Late action limits them.
Buying, Selling, or Refinancing in a Down Market: What Smart Buyers and Owners Should Do
A downturn doesn’t mean you shouldn’t act. It means you should act carefully.
For Buyers
- Get realistic mortgage pre-approvals
- Understand total closing costs upfront
- Review agreements carefully before signing
- Work with professionals who explain risks clearly
For Sellers
- Price strategically, not emotionally
- Understand timing and legal obligations
- Ensure clean title and documentation
For Owners Refinancing
- Expect stricter lender requirements
- Plan ahead for renewals
- Understand penalties and legal costs
Every move in a down market needs stronger planning—and solid legal support.
How Can We Help: Real Estate Law Without the Stress
At Feld | Kalia, real estate law is what we do — all day, every day.
We help clients with:
- Purchases and sales
- Mortgage refinances
- Title transfers
- Pre-construction closings
- Contract reviews
- Downturn-related disputes
There are no hidden fees. You can find out instantly how little it will cost to have us by your side.
We have one idea in mind: real estate transactions shouldn’t feel overwhelming. We bring in trust, clarity, and teamwork to our clients.
We’ve closed on almost every major downtown Toronto project. We know how developers operate. We know where problems arise. And we know how to guide clients through them.
Why Legal Guidance Matters More in a Downturn
When markets are booming, mistakes get masked by rising prices. In a downturn, mistakes get expensive.
This is when:
- Contracts get enforced strictly
- Deposits are on the line
- Lawsuits become real
Having a real estate lawyer isn’t about being dramatic—it’s about being prepared.
We handle the legalities so you can focus on the move, the transition, and the next chapter.
A Final Word: You’re Not Alone—And You Have Options
This market is tough. Buyers are under pressure. And fear is understandable.
But panic helps no one.
If you’re worried about closing on a pre-construction property, thinking about buying or selling in a down market, or unsure about refinancing at higher rates, the best step is simple: get informed.
At Feld | Kalia, we don’t push. We explain. We guide. We care.
When it comes to something as big as real estate, every ‘i’ needs to be dotted and every ‘t’ crossed. Leave that to us—so you can focus on the packing, the moving, and yes, the housewarming party.
If you like what you hear, let’s get started.
Toronto Real Estate Market FAQ: What Toronto Buyers Need to Know Right Now
1. Walking away from a pre-construction condo in Toronto is rarely simple or risk-free
A pre-construction Agreement of Purchase and Sale is a legally binding contract in Ontario. Most buyers cannot simply walk away because interest rates have gone up or financing has become difficult. Failing to close usually puts the buyer in breach of contract, which can trigger serious financial consequences.
2. Losing the deposit is often only the first financial loss
In Toronto pre-construction projects, deposits are typically non-refundable if the buyer defaults. These deposits are often 15% to 25% of the purchase price. Many buyers assume losing the deposit ends the matter, but that is not always the case.
3. Developers can sue buyers who fail to close on a pre-construction unit
If a buyer cannot close and the developer resells the unit for less than the original purchase price, the developer may sue the buyer for the difference. This can also include additional costs such as carrying costs, interest, marketing expenses, and legal fees incurred by the developer. In a declining real estate market, these claims can be significant, and many buyers are surprised to learn that losing the deposit does not always end their financial exposure.
4. I qualified for a mortgage when I signed, but I don’t qualify now. Isn’t that the bank’s fault?
Unfortunately, no. Mortgage approval at the time of signing does not guarantee approval at closing. Financing is always assessed closer to the closing date, based on current interest rates, lending rules, and your financial situation at that time. If financing falls through, the buyer is still legally responsible for closing under the agreement.
5. What if I simply don’t have the cash to cover the shortfall—what happens next?
If you can’t make up the difference between the appraised value and the purchase price, you may be unable to close. At that point, the developer can treat it as a default. This may lead to termination of the agreement, loss of the deposit, and potential legal action for additional damages.
6. Can the developer really force me to close even if the unit is worth less now?
Yes. Market value changes do not affect the enforceability of the contract. If the unit appraises for less or comparable units are selling for less, the developer can still require you to close at the agreed price, as long as they have met their contractual obligations.
7. What if my personal situation has changed—job loss, divorce, or increased expenses?
Life changes are very real, but they usually do not provide a legal excuse to exit a pre-construction agreement. Unless the contract specifically allows termination for those reasons (which is rare), the buyer remains bound by the agreement.
8. Is it better to default early rather than wait until the closing date?
Not necessarily. Defaulting early does not usually reduce liability and may weaken your negotiating position. Each situation is different, which is why it’s important to speak with a real estate lawyer before taking any action or communicating intentions to the developer.
9. Can the developer change things about the unit or project and still force me to close?
Developers are allowed to make certain changes, but only within the limits set out in the agreement and disclosure documents. Some changes are considered “material,” and others are not. Whether a change gives you any rights depends on the specific wording of your contract and the nature of the change.
9. If the developer resells my unit, how long can they come after me?
Developers may pursue claims after resale, once they can calculate their losses. This can take time. Buyers are often surprised when legal action happens months—or even years—after they thought the matter was over.
10. Will defaulting on a pre-construction purchase affect my credit?
It can. If legal action is taken or judgments are registered, your credit and future borrowing ability may be impacted. Even beyond credit, a lawsuit can affect your ability to qualify for financing or participate in future real estate transactions.
11. Is it worth spending money on a lawyer if I’m already struggling financially?
This is a very common concern. However, legal advice early on can sometimes prevent much larger losses later. Understanding your exposure, timing, and options can help you make decisions that reduce risk rather than reacting under pressure.
12. What’s the first thing I should do if I’m worried I can’t close?
Don’t panic — and don’t ignore it. Gather your agreement, any notices from the developer, and your current financing information. Then speak with a real estate lawyer who can review the situation calmly and explain what you’re facing, what your options are, and what steps (if any) make sense next.
Reach out to us via email at info@wearelaw.ca to discuss your real estate needs today. Or, for an instant quote anytime, check out our online cost calculator at www.WeAreLaw.ca. Let’s make your condo journey a breeze together!