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Why Do Property Sales Fall Through and How To Ensure Yours Doesn’t?

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Buying and selling property is known to be up there with the most stressful of life events, including losing a job, becoming a parent and getting divorced. Given the fact that the home buying journey in England and Wales is lengthy and convoluted, with lots of opportunity for things to go wrong, maybe this is to be expected.

When an offer has been accepted, the property is ‘sold subject to contract’ (SSTC), which in plain English means that it is only when contracts are signed and exchanged (between the two parties) that the transaction becomes legally binding. According to recent figures, 306,198 property transactions fell through in 2020, which constitutes a 12.26% rise from 2019. Abortive property transactions cost home buyers an average of £2,700 of unrecoverable costs.

Of course, there are countless reasons why a sale may be aborted, and each failed transaction will be a frustrating and expensive lesson for those involved. But forewarned is forearmed, so let’s see if we can shed some light on why house sales fall through and how such an event can be prevented.

Issues with funding

Some of the most common yet avoidable reasons for fall throughs happen when people fail to carry out payments and instructions in a timely manner at various stages of the property purchase. These include buyers and sellers taking too long:

  • to instruct and pay their initial payments to solicitors
  • to book mortgage signups
  • to respond to solicitors

It is normal practice for property purchases to be financed by way of a mortgage. This can be a complex process in itself, so it’s best to have done the groundwork and got a mortgage agreed in principle when making an offer, and to have funds available to cover the deposit (usually 10% of the property’s price). Many estate agents now insist on this and buyers without a pre-approved mortgage may not be taken seriously.

That said, a mortgage agreement in principle is just that; it is not a guaranteed mortgage offer. For the funds to be finally approved, the lender will be carrying out various checks on the property including their own mortgage valuation. If building defects are found that don’t satisfy the lending criteria, the loan offer may be withdrawn. The same can happen if there are irregularities with the application form or a change in the applicant’s circumstances.

When a mortgage is declined, it can be a real body blow. Often, there’s not enough time to find an alternative lender, especially if the transaction is part of a property chain. And sometimes, it is simply not possible to make the right financial arrangements.

Searching and comparing mortgages deals and providers can increase the chances of landing on the right lender for your needs.

Poor survey results

An independent home survey is an excellent way to do your own due diligence on the property asset. Regardless of whether you are buying with a mortgage and the lender is sending their own surveyor, or you’re a self-sufficient cash buyer, the importance of having your own survey done before you sign on the dotted line cannot be overstated. The survey report can make interesting reading, either providing you with the peace of mind of knowing that the building is in good condition, or flagging up issues of concern. Either way, it’s money well spent.

Chances are that there will be some issues with the property. The questions you need to ask yourself for each defect found are: Is the problem minor and easily fixable? Can you negotiate the repair cost off the sale price? Or does the issue constitute a deal breaker? The latter could include serious roof defects, extensive damp, timber decay and dry rot, structural movement, plumbing/heating defects, evidence of asbestos or Japanese knotweed.

If the survey has identified serious building defects, this should be discussed with the seller who will undoubtedly be motivated to come to a palatable solution. Perhaps, with a bit of give and take, a compromise solution can be found to keep the transaction on track? If not, the buyer is perfectly within his/her rights to pull out of the sale because of poor survey findings.

Gazumping and gazundering

In reality, cases of ‘gazumping’ and ‘gazundering’ are incredibly rare, although the words still evoke a sense of dread when it comes to completing property deals. You may think you’ve bought the property and it’s only a matter of time until the transaction is formalised. But if another buyer comes along in the meantime and offers a higher price, especially if he/she is a cash buyer with nothing to sell, there’s nothing to stop your seller from accepting this offer instead. You have effectively been gazumped.

While gazumping is initiated by the seller, gazundering is done by the buyer, usually just before contracts are due to be exchanged. It’s a last-minute reduction in the price that effectively gives the seller no option but to accept a much lower price or lose the sale. Both gazumping and gazundering may be morally indefensible behaviours, but they are perfectly legal sales tactics, albeit high-risk ones.

There are several strategies you can use to guard against the risk of gazumping. Most importantly, you should ask the agent to take the house off the market when your offer is accepted so no-one else gets to view it. Estate agents are legally bound to pass on any offers received to the seller, so if they keep marketing the property after you’ve agreed a price to buy it, the risk of being gazumped is much higher.

Change of mind

Last but by no means least, sometimes property sales fall through because someone has had a change of heart. There could be all sorts of personal reasons why the buyer or seller decides to withdraw from the transaction including illness, relationship breakdown or a job loss, or just bad timing. When you are dealing with human behaviour, a little bit of unpredictability is part of the equation.

Can you fix a broken chain?

Whatever the reason behind an abortive sale, most fall-throughs affect more than just the buyer and seller of one property. The conveyancing process being what it is, property chains are commonplace in residential sales. A chain can collapse for all kinds of reasons including all of the ones mentioned above.

A chain is a series of three or more interdependent transactions. Assuming that most property owners need to sell their existing home in order to buy their new home, it is usual to have a line of buyers and sellers who all depend on each others’ transactions going through simultaneously. The longer the chain, the greater the risk of something going wrong somewhere.

This is where estate agents and solicitors can play an important role in keeping sales on track. It is their job to facilitate good communication between the parties towards the common goal of exchanging contracts. Many agents have dedicated sales progressors whose job it is to jolly things along, spotting potential glitches and ironing them out before they become bigger problems. Solicitors, too, must make sure to maintain effective channels of communication to ensure steady progress.

It is incredibly beneficial for experienced agents and mortgage advisors to help both parties find some common ground and to smooth over any bumps they may hit on their path towards a successful purchase. But in the end, it is the buyer and seller themselves who will be most motivated to maintain clear communications to help drive the conveyancing process towards a successful contract exchange and completion.

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