In commercial real estate, the period between loan commitment and closing is where deals die. Not at underwriting. Not at the term sheet. At the closing table, or close enough to it that the damage is the same: lost earnest money, failed transactions, damaged relationships, and months of wasted time and legal fees.
Most of these failures are preventable. They follow recognizable patterns, and borrowers who understand those patterns are in a position to avoid them. Here are the five we see most frequently — and what to do about each one.
1. Title issues discovered late
Title problems are among the most common deal killers in commercial real estate, and they are almost always discovered later than they should be. The core issue is that title searches take time, and buyers who order title late in the transaction have little runway to resolve problems before closing deadlines loom.
Common title issues that kill closings include: unresolved liens (mechanic's liens, tax liens, judgment liens), easements that conflict with the intended use of the property, encroachments identified in the survey that the seller cannot cure, and chain-of-title defects that require legal action to clear. Each of these issues has a solution — but the solution requires time, and time is the one thing a late-stage closing does not have.
Order the title search and the survey the day the purchase and sale agreement is signed. Not when you feel confident the deal will close. Day one.
Best practice: order the preliminary title report and the ALTA survey simultaneously, as early as possible. Review them yourself before sending them to the lender. Flag anything unusual and get title counsel involved immediately if there is a question. Issues discovered at week two are problems. Issues discovered at week eight are disasters.
2. Environmental contingencies and Phase I surprises
Lenders require Phase I Environmental Site Assessments on virtually all commercial real estate transactions. Phase I is a records review and site inspection — it does not involve soil or groundwater sampling. But Phase I can identify Recognized Environmental Conditions (RECs) that require further investigation through a Phase II assessment, and Phase II can reveal contamination that materially affects the value and financeability of the property.
Phase II investigations take time — often 60 to 90 days or more, depending on the scope and regulatory involvement. If a Phase II is triggered late in the closing process, the deal is effectively on hold. If the Phase II reveals contamination that requires remediation, the deal may be fundamentally restructured or abandoned.
The prevention: review the property's prior use history before you put it under contract. Former dry cleaners, gas stations, industrial operations, and properties in industrial corridors carry elevated environmental risk. Understanding the history does not mean you avoid these properties — many of the best value-add opportunities exist in exactly these situations — but it means you budget for the environmental process appropriately and set realistic closing timelines.
3. Appraisal comes in below contract price
A lender's loan amount is based on the lesser of the purchase price or the appraised value. When an appraisal comes in below the contract price, the loan proceeds are reduced accordingly — and the buyer must either bring additional equity to closing, renegotiate the purchase price, or walk away from the deal.
Appraisals come in below contract price more often than buyers expect, particularly in markets that have been moving quickly. An appraisal methodology relies on comparable sales, and in a market where prices have risen sharply, the comps available to an appraiser may not support a price that feels perfectly rational to a buyer who has been watching the market in real time.
Mitigation strategies: have your own sense of value — and supporting comparables — before you put a property under contract. Engage a lender early enough that the appraisal is ordered promptly, giving you maximum time to contest a low value or restructure the deal. And understand, before you go into contract, what your maximum equity contribution looks like if the appraisal requires it.
4. Borrower financial documentation gaps
Commercial lenders require extensive borrower financial documentation: two to three years of personal and business tax returns, personal financial statements, entity documentation, operating agreements, rent rolls, property financial statements, bank statements, and more. The list is long, and the lender is not flexible about what they need — they are required to obtain and verify this documentation for regulatory and risk management purposes.
The problem is almost never that a borrower lacks good financials. The problem is that the documentation is not ready when the lender requests it, creating delays that push closing past contract deadlines. Tax returns that have not been filed. Entities that need to be reorganized before closing. K-1s that do not match what appears on a personal tax return. Bank statements with unexplained large deposits that require written explanation.
The solution is to assemble a complete financial package before the loan is submitted, not after. Work with a loan originator who has done this process enough times to know what a specific lender will ask for, so that the first submission is as complete as possible. Every back-and-forth round trip on documentation is 5 to 10 business days of delay.
5. Lender re-trade on terms
This one is more common than borrowers realize, and it is perhaps the most frustrating because it happens late in the process after the borrower has invested significant time, money, and energy. A lender issues a commitment letter — which feels like a done deal — and then, during the closing process, finds a reason to change the terms. A lower loan amount. A higher rate. Additional reserves. A changed prepayment structure.
Re-trades happen for several reasons. Sometimes the lender's internal credit committee changes the deal after initial commitment. Sometimes conditions discovered during due diligence — a property inspection, an appraisal, a tenant issue — give the lender contractual grounds to modify terms. And sometimes, frankly, a lender re-trades because they can.
Protecting yourself: understand what is and is not locked in your commitment letter. A commitment with a rate lock is very different from a commitment with a floating rate. Read the conditions to closing carefully — conditions that give a lender broad discretion to re-trade based on "material adverse change" or "lender's satisfaction" are real risks. And if you are working with a lender you have not used before, ask your broker or attorney about that lender's closing track record. Reputation in this market is information.
The common thread
Reading across these five failure modes, a common thread emerges: most of them are problems of timing and preparation, not of fundamental deal quality. A good deal with bad process can fail. A challenging deal with excellent process can close. The difference is almost always made in the first two weeks of the transaction, when the habits that will determine the outcome are set.
Work with a capital advisor who has navigated enough closings to recognize these patterns before they become problems. The value of experienced guidance is not in the financing terms — though those matter — it is in the institutional memory of what kills deals, and the systematic approach that prevents it.
CAPITICS manages the lender relationship from intake through closing, anticipating and addressing issues before they become deal-killers. Reach out before your next transaction.