An offer can look good to you and still leave the buyer short of the money needed to close. The buyer may be comfortable with the price, the down payment and the monthly payment in their own projection. Their lender may reach a different conclusion about how much the building can borrow.

For a seller, that gap matters before it becomes a request for more time or a lower price. I wouldn't dismiss a financed buyer because the loan still needs work. I would be wary of a purchase that only succeeds if every financing assumption breaks the buyer's way.

The building has to carry the payment

A lender considers how much it is lending relative to the property's value, known as loan to value, or LTV. It also considers whether the property's income can support the debt payments. Passing the value test doesn't settle the income test.

Debt service coverage ratio, or DSCR, compares the cash flow the lender accepts with the annual debt payments it uses in underwriting. Lower accepted income or a higher payment makes the same loan harder to support. An appraisal that supports the contract price doesn't fix a cash-flow shortfall.[1]

This explains why a buyer's planned down payment can turn out to be too small even when nobody has changed the purchase price. The buyer may have expected to borrow against the building's value, only to find that its income supports less debt. More of the price then has to come from cash.

The payment assumptions matter too. An initial interest-only period can make the buyer's early payments look manageable while the lender tests a payment that includes principal. The loan may therefore be smaller than the buyer expected without the lender taking a lower view of the building's value. Programs differ; the payment used to qualify the loan is what matters for this comparison.[1]

I wouldn't treat a familiar down-payment percentage from the buyer's last purchase as reassurance. This building's income and the proposed debt have to work together.

Your income and the lender's income may be different

The buyer may be paying partly for future rent growth. The lender may give that future income less credit than the buyer does. That doesn't necessarily make the buyer's investment plan wrong, but it can mean the buyer needs more equity to pursue it.

Current income needs care as well. The rent roll shows scheduled charges, while collections show what tenants paid. Vacancy, concessions and uncollectible rent affect the income available for payments. A lender's allowance for those losses can reduce the loan even if the headline rent total in the sales package looks strong.[1] Our rent-roll guide explains those income distinctions in more detail.

The buyer's operating costs may also be higher than yours. An acquisition tax estimate needs to account for any expected reassessment, and the buyer's insurance cost may differ from the premium you've been paying. Carrying your old bills into the buyer's projection can overstate the income left to pay debt.[1]

Replacement reserves create another possible difference. An allowance for replacing building components can reduce the cash flow used to size a loan. A required cash deposit into a reserve account is a separate demand on the buyer's funds. One affects borrowing capacity; the other affects how much money must be available. The applicable treatment depends on the loan.[1]

Read the figure as text

Lower accepted rent

Effect on the purchase: Less income available for debt

Higher acquisition expenses

Effect on the purchase: Less cash flow after operating costs

Reserve expense allowance

Effect on the purchase: May reduce cash flow used to size debt

Larger tested payment

Effect on the purchase: Same income supports less debt

A lower lender income figure deserves an explanation, not an automatic concession from the seller. If the lender has an outdated rent roll or has misunderstood an expense, correcting the information may help. If the difference reflects a real recurring cost or income loss, a more confident sales presentation won't remove it. The buyer's financing plan has to accommodate it.

A smaller loan doesn't necessarily require a smaller purchase price

The buyer may have additional cash and be willing to use it. Before treating a financing shortfall as a reason to reduce your price, the sale discussion needs to establish whether the buyer can cover it at the agreed price.

Financial ability and willingness are different. A buyer with available funds may decide that contributing more equity makes the investment less attractive. That's a change in the buyer's economics, not proof that your building has lost the same amount of value.

Available cash also has more jobs than covering the difference between the loan and the price. Buyer closing costs, required reserves and work that must be funded at closing can use money that otherwise appears available for the purchase. A deposit already in escrow is part of the buyer's contribution, not additional money that can be counted again.

Partner funds and proceeds expected from another closing deserve particular attention. They may ultimately be available, but until the commitment and timing are established, the seller is relying on something beyond this property's financing. Your broker should resolve that issue with the buyer rather than leave you to infer it from a bank balance.

I would give more weight to a buyer who can explain how they'll fund a smaller loan than one whose answer is simply that the lender likes the deal. That doesn't guarantee a closing. It does reveal whether the buyer has room to solve a financing problem without immediately asking you to pay for it.

Read the figure as text

Income was misunderstood

What would address it: Correct information and lender review

Loan is smaller than expected

What would address it: Available equity the buyer will commit

Cash also needed for reserves

What would address it: Funds beyond the price gap

Loan review is unfinished

What would address it: Time tied to specific remaining work

More time helps only if it solves the problem

An opening loan quote can be useful, but it may precede a full review of the building and buyer. A strong lender relationship doesn't eliminate the need for that review. Nor does an appraiser's visit mean the lender has accepted the appraisal. Federal guidance for regulated financial institutions places appraisal review before the final credit decision.[2]

Those distinctions matter to the seller's schedule. Waiting for an appraisal review is different from waiting for the buyer to find additional equity. The first may be unfinished loan work. The second may mean the purchase still lacks enough committed money. Neither should be described merely as a routine delay.

A quoted rate creates another timing risk if it hasn't been locked. If the payment rises, the loan amount may change, depending on the program and other limits. A lock also has terms and an expiration; it isn't a promise that every other funding condition has been met.

Before you build your own next purchase around the closing date, your broker needs a specific explanation from the buyer and lender of what remains and whether it can realistically be completed on time. More days can help finish a report or resolve an income question. They don't, by themselves, provide missing equity or make an unaffordable payment work.

The buyer's lender should confirm the actual financing terms, and your attorney should interpret the purchase agreement before you act on a contingency or deadline. Loan progress and contract rights are separate matters.

For owners preparing to sell, the Westside selling guide covers the broader preparation and timing decisions. FIG can review your building's value with the likely buyer financing constraints in view, so the pricing discussion starts with what a buyer can support rather than an optimistic loan assumption.

Sources

[1] Fannie Mae, Multifamily Selling and Servicing Guide, February 12, 2025 edition, Part II, Chapter 2. Historical background on income, acquisition expenses, reserves and debt coverage, not current program terms or a loan offer.

[2] Interagency Appraisal and Evaluation Guidelines, effective December 10, 2010, Section XV, page 77462. Appraisal review guidance for regulated financial institutions, not a universal apartment-loan approval process.

This is for general informational purposes only. Consult with your CPA, tax advisor, and/or attorney for guidance specific to your situation.