10 Reasons Why Your Commercial Real Estate Deal Might Collapse

The saying “Don’t count your chickens before they hatch” is something that has become so apparent to me in the last few years as a commercial realtor.  There have been a number of deals that have fallen through as a result of some of the following.  Why is this important to know? I believe that if you understand why deals collapse you may be better prepared when you buy or sell commercial businesses or buildings. 

1. Financing Falls Through

The most common culprit. Whether it’s due to a shift in interest rates, changes in lending criteria, or a weak borrower profile, if financing can’t be secured, the deal’s dead in the water.

2. Environmental Issues

Contamination, underground tanks, or asbestos can trigger alarm bells for lenders and buyers. If a Phase 1 or Phase 2 environmental report uncovers serious issues, expect delays—or a deal collapse.

3. Zoning Conflicts or Restrictions

If the buyer’s intended use isn’t supported by current zoning, and a variance or rezoning isn’t feasible, the deal may die right there. Always verify land use early.

4. Due Diligence Red Flags

Unexpected repair costs, deferred maintenance, structural issues, or questionable leases uncovered during due diligence can cause buyers to walk—or renegotiate aggressively.

5. Appraisal Comes in Low

If the property does not appraise at or above the purchase price, the lender may reduce the loan amount or back out. The buyer either comes up with more equity or the deal falls apart.

6. Title or Legal Issues

Clouded title, liens, easements, or unresolved ownership disputes can grind deals to a halt. A solid lawyer and timely title search are crucial to avoid surprises.

7. Tenant/Vacancy Problems

For income-producing properties, buyers want stable, paying tenants. If a major tenant leaves, or if lease terms are unfavorable (e.g. short-term or under market), the value and interest in the deal can plummet.

8. Unrealistic Seller Expectations

If the seller is inflexible on price, timelines, or conditions—and refuses to budge based on market feedback—it’s hard to move forward, especially in shifting markets.

9. Poor Communication Between Parties

When brokers, lawyers, lenders, or principals don’t stay aligned or responsive, small issues can balloon into deal-killers. Clear communication is underrated but essential.

10. Economic or Market Shifts

Sudden changes in the economy—like rate hikes, inflation, or geopolitical uncertainty—can cause buyers or lenders to pull back or re-evaluate risk mid-deal.

Did I miss anything? Let me know, I would love to hear from you. 

Dave.