Notes on what actually breaks when you run a coding agent on small local models

I've spent the last few weeks running real multi-file coding tasks through small local models and small cloud models on free tiers. Wanted to share the failure points that came up consistently, since some of them surprised me and i wanted to share with the community so maybe it helps someone. Markdown fences are the most common failure across every small model I tested. You can put "output only raw code, no markdown formatting" in the system prompt. The model agrees.