5 Mortgage Deal Killers Every Realtor Must Know (And How to Rescue the Sale)
In this episode, Scott Dillingham reveals the exact deal killers that blow up transactions before closing, and gives you the rescue strategies to save the sale before it is gone. Scott starts with appraisal issues , one…
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Show notes
Deals die every day because of five preventable mortgage mistakes — and most realtors do not see them coming until it is too late. In this episode, Scott Dillingham reveals the exact deal killers that blow up transactions before closing, and gives you the rescue strategies to save the sale before it is gone.
Scott starts with appraisal issues, one of the trickiest deal killers because realtors and brokers have the least direct control over the outcome. When a home appraisal comes in lower than the purchase price, the financing gap can collapse an entire transaction. Scott explains how working with a mortgage broker provides a significant advantage here. Brokers can dispute the appraisal by submitting recent comparable sales to challenge the appraiser's valuation. If that fails, they can order a second appraisal through a different approved appraiser, or pivot to an entirely different lender, an option that clients working directly with a single bank simply do not have. In Canada, mortgage lenders will only fund up to the appraised value, so buyers must either make up the shortfall with additional funds or find a lender willing to work with a more favourable valuation.
Next, Scott tackles undisclosed debts, a problem that often surfaces at the worst possible time. While Equifax is the primary credit bureau used in Canadian mortgage lending, it does not capture everything. Some debts appear only on TransUnion, and others may be uncovered when the real estate lawyer conducts their due diligence searches on the borrower before closing. Scott emphasizes that debt ratios for insured mortgages in Canada are capped at 44% total debt service (TDS), but different lenders calculate minimum payments differently, creating opportunities for a broker to find solutions even when one lender says no.
Job changes are the third deal killer Scott addresses. He advises realtors to strongly counsel clients against switching employers between mortgage approval and possession, as employment stability is a cornerstone of mortgage underwriting. Exceptions exist for scenarios like being headhunted with a significant salary increase and no probationary period, but these require careful handling with the broker. The fourth issue is condo status certificates, which can derail deals at the last minute since lawyers typically review them close to closing. Scott recommends building a condition into the offer that requires satisfactory review of the status certificate and reserve fund upfront, particularly for older condominiums that carry higher risk for underfunded reserves and special assessments.
Finally, Scott discusses property issues including environmental concerns, zoning complications, and distressed homes. He highlights the purchase plus improvements mortgage as a powerful tool for homes that fail initial lender inspections, allowing buyers to address property deficiencies and roll renovation costs into the mortgage. He also notes that experienced brokers have access to lenders who accept mixed-use buildings and can make exceptions for commercially zoned residential properties, solutions that are typically unavailable through a single bank.
Key Takeaways
- Full Transparency Is Non-Negotiable: Clients who hide debts, job changes, or financial issues put their deals at risk. Disclose everything upfront so brokers can strategize solutions before deadlines hit.
- Low Appraisals Are Manageable: Dispute with comparable sales, order a second appraisal through an approved appraiser, or switch lenders entirely — options a mortgage broker can facilitate that a single bank cannot.
- Undisclosed Debts Can Surface Anywhere: Equifax does not capture all debts. TransUnion reports and lawyer searches can reveal hidden liabilities. Different lenders calculate debt ratios differently, creating alternative pathways to approval.
- Advise Clients Against Job Changes Before Possession: Employment changes during the mortgage process are a leading cause of deal collapse. Exceptions exist but must be handled carefully with your broker.
- Review Condo Status Certificates Early: Build this condition into offers to avoid last-minute surprises from underfunded reserve funds, special assessments, or pending litigation.
- Distressed Properties Have Solutions: The purchase plus improvements mortgage allows buyers to finance renovations alongside their purchase, addressing lender concerns about property condition while keeping the deal alive.
- Mortgage Brokers Offer More Flexibility Than Banks: Access to multiple lenders, alternative qualification methods, and specialized products for unique property types give brokers a clear advantage in saving deals.
Links to Show References
- LendCity Mortgages (Book a Call): lendcity.ca
- Appraisal Institute of Canada (AIC): aicanada.ca
- Condominium Authority of Ontario — Status Certificates: condoauthorityontario.ca
- (00:00) - Introduction — Why Full Client Transparency Saves Deals
- (00:00) - Deal Killer #2 — Undisclosed Debts and Hidden Liabilities
- (00:09) - Deal Killer #4 — Condo Status Certificate Red Flags
- (00:23) - How a Mortgage Broker Solves Problems Banks Cannot
- (00:30) - Deal Killer #1 — How to Handle Low Home Appraisals
- (00:38) - Deal Killer #5 — Property Issues, Zoning, and Distressed Homes
- (00:41) - Deal Killer #3 — Why Job Changes Can Collapse a Mortgage
- (00:50) - Closing Remarks and How to Book a Call with LendCity
Realtor questions from this episode
What are the five mortgage deal killers Scott covers?
Appraisal issues, undisclosed debts, job changes, condo status certificates, and property issues such as environmental concerns, zoning or the condition of the home. His top advice is to have the client be fully transparent with the broker from the start.
What can be done when an appraisal comes in under value?
Scott says they first dispute the appraisal with recent comparable sales. If the appraiser will not change it, they order a second appraisal. Because some lenders will not support a second appraisal, a broker can move the file to another lender, and the appraiser must be on the lender's approved list.
Should a client change jobs after being approved for a mortgage?
Scott says to tell the client not to change jobs until after they take possession of the property. He notes rare exceptions, such as a headhunted move with higher pay and no probationary period, and says any job change should be disclosed to the broker first.
Transcript
Transcript of the episode as recorded. Rates, fees and program details are as stated on the recording date and may have changed.
Welcome to the Close More Deals podcast.
Welcome to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm gonna talk to you about the five biggest deal killers and what we can do about them. I think high level two, the most important thing is tell your client to be fully transparent with us. I think that's the thing. Like, clients will come in and they'll hide stuff or they'll limit stuff. And at the end of the day, if we just had all the information up front, it would be so much easier for the client because it's okay if these challenges or situations arise.
We can always get through it. But the the the first one I wanna discuss with you is appraisal issues. So I've I've got them all up here on my screen, and and I'm gonna make sure we touch on them. So what's happening in certain markets, right, is is appraisals are coming in undervalued. So this one's a tough one because we do have the least control with this, but there are still options that we can do to help make the deal a success for you.
And, again, please keep in mind, I'm telling you resources that I know that we have access to. If you are working with a different broker or bank, these options may not be available because not all lenders support this. Okay? But what we'll do is we'll order a second appraisal. That's really it. We'll we'll first actually, we dispute the appraisal. So we get recent comps, and we show the appraiser why we believe that they're wrong. If the comps are good, usually we can get the appraiser to up it, but if not, we'll order a second appraisal.
Now here's where a broker comes in fantastic because sometimes the lenders won't support a second appraisal. You're stuck. So we'll just say, okay. We'll forget you then. We're going to another lender. And we just easily change, and then we're we're good to go. So that is an option. Obviously, these appraisers have to be approved and on the lender's approved list, you can't just pick anybody and, you know, get a good value and hope it works. Like, it's it's gotta be approved by the lenders to to make it work.
The second issue that we find is undisclosed debts.
The second issue that we find is undisclosed debts. So clients will, either not you know, they'll hide debts or or maybe there's something on, you know, a different credit report that the client's aware of. Primarily, we use Equifax. Everyone uses Equifax. That's kind of the gold standard in Canada. So it doesn't always show everything. Sometimes there are things on TransUnion. Sometimes they have debts that, you know, it doesn't show on their credit report, but when the lawyer does a search on the borrower, they uncover these different things.
So I think on this one, truly the best is disclosure. If you're working with, you know, five percent down, you're stuck. Those debt ratios, those banks and lenders, they're forced to be at 44% because it's it's an insured mortgage. Where you can get away with certain things is I previously mentioned in another episode where some of the banks will factor in a minimum payment against all of your debts where others won't. And then we look at child tax benefit, and there's there's different things that we can do to still optimize it.
We have very much seen it where clients, you know, their one bank said, oh, you have too much debts. We can't move forward. Those debts were fully disclosed to us, and we are able to still make it work with other lenders. So it's not that we can't do it. It's just that disclose upfront. Because what happens is if if there's deadlines or or timelines and we're up against them and then we discover the client lied and there's no more time. Right?
It's it's game over where if we know all these debts upfront, we can strategize, and make it work. Another thing is job changes. Clients think, you know, oh, you know, I got approved. I can change jobs and stuff like that. No. What you wanna do is tell your client if you're changing your job, don't do it until after you take possession of the property. There's rare cases where, you know, they're changing their job and they're gonna be buying in the new city.
Obviously, that's something that needs to be disclosed, but if your…
Obviously, that's something that needs to be disclosed, but if your client wants to change their job, tell them no. Now there are some caveats here as well. Right? Like, if if they're changing their job and they're gonna make $30 a year more and the employer is willing to not have a probationary period, maybe this person was was headhunted. Right? In those scenarios, that's okay. So we'll go over it, like, if there's ever a scenario there. Another challenge is condo status certificates.
The reason why this is such a challenge is usually it's the lawyer who checks all this, and they check it right before closing. So as as a REALTOR®, you can have that be a condition, right, built into your offer where you ask for proof of satisfactory funding in the status certificate. Right? You can look at the condo fund reserve, and you can see if there's funds there. So I encourage you if you're buying a condo to do that upfront. Newer condos are generally less risky for this than older condos because they don't have additional expenses.
Like, there is expenses, but they're not going to have all these different repairs and maintenance issues than an older condo would. So it does help to minimize things. Okay. And then lastly, our property issues, such as environmental concerns, zoning, quality of the home. We see a lot of clients that buy these properties that are extremely distressed, and the lenders, they don't want anything to do with them. So there's programs for that. Right? So we had it where a client bought a home, CMHC wanted to do the appraisal.
They went out there. They said this place is terrible. We're not doing it. So then I went back to the lender, I'm like, okay. Well, let's do a a purchase plus improvements, and let's address all of CMHC's concerns, and then let's resend it in for approval. We did that, and they approved it because they knew it was gonna come up to a certain level that they wanted it to be. So there can be workarounds there. Also, the zoning one, that one's tricky, especially if it's like a mixed use property or a home that's zoned agricultural or a a home that's zoned commercial in the city, but it's not used for commercial purposes.
Those are rare, but I'm sure everyone here listening to this has seen…
Those are rare, but I'm sure everyone here listening to this has seen that. Right? It it's it it is common. It's rare, but it's it's it's still quite common. So in those scenarios, we have lenders that fully accept mixed use buildings. We have lenders that'll make exceptions if it's commercially zoned, but it's a residential property and it's only use as residential. So there's there's different things that we can do that, again, just directly going to your bank or lender. You're gonna miss these opportunities.
So, again, I hope this helps and it shared some insights on how we can help you to close more deals. Looking forward to working with you. If you found this show valuable, please like and subscribe. And of course, book a call with someone on my team. It's in the chat below. We all have a deep level of understanding of what's going on in the market. Plus, we have an underwriting team and all these different things that make, you know, getting your clients approved a priority. So, anyways, looking forward to seeing you next week. Take care.