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You’ve found your dream home and your offer has been accepted. But you can’t sit back and relax yet. There is a risk the deal could fall through. But why do house sales fall through? At what stage? And how can you keep your move on track?
Buying or selling a home is a lengthy process with a number of different people and professionals involved. This means there are lots of things that can go wrong and cause a sale to fall through.
But why do house sales fall through exactly? The most common reasons are:
The reasons are often influenced by the conditions of the housing market and wider economy at the time. With the current cost of living crisis alongside record high house prices you can see why buyers might reflect and reconsider part way through the process.
Nearly 3 in 10 (28.8%) residential property sales fell through before completion in 2024, according to Quick Move Now.
The data suggests that there is continued buyer caution. The main reasons for sales falling through include the buyer changing their mind, pulling out after the survey, or unsuccessfully attempting to renegotiate a lower purchase price after the sale had been agreed.
And when we look back at previous years data, it looks like things are getting worse. Our YouGov study of Home Selling Pain Points back in 2018 found that at that time, only one in five transactions failed to go through to completion.
In all likelihood, yes you will be out of pocket if your house sale falls through. How much you’ll lose depends on where you are in the process. As time goes on, the losses can increase.
Our research found that the average seller experiencing a failed transaction ended up £2,727 out of pocket, and one in ten surveyed incurred more than £5,000 in costs.
If the transaction falls through, the buyer will have to absorb the costs associated with local searches, mortgage arrangement fees and getting a survey. Both parties will need to pay their conveyancer for all the work done to date, unless they have a ‘no sale, no fee’ conveyancing agreement.
As a buyer, the best way to protect yourself from losing money in the event of a failed transaction is by taking out Home Buyers Protection Insurance. You can do this when you have an offer accepted on a property and must have taken out a policy before you appoint a conveyancer. This insurance will enable you to claim back some of your conveyancing fees, survey costs and mortgage fees if your purchase falls through.
Cover for conveyancing, mortgage and survey costs, should your property purchase fall through.
Now we know why house sales fall through, let’s explore why they happen and what you can do to avoid it happening to you.
Buying a house takes about four months, but you could find several months pass between an offer being accepted and keys changing hands. The longer it takes to exchange contracts, the more opportunity there is for things to go wrong. People can change their mind or find a better offer.
Gazumping is when another party makes a higher offer on the house you are in the process of buying and has that offer accepted, thus setting you back to square one.
Mortgage problems can vary. For example, offers can expire before the purchase has managed to complete or a change in circumstances may mean the buyer can no longer borrow as much as they need.
Buyers usually have a mortgage agreement in principle before making an offer. This is the best form of reassurance buyers can give that they have the money in place, but it isn’t a guarantee.
Down valuations may be another factor at play for buyers trying to get a mortgage. Your lender will want to carry out a mortgage valuation survey. A down valuation is when your mortgage lender believes the property is worth less than your offer price.
Conveyancing delays often happen where both parties are not as responsive as they should be. Delays also occur in more complex cases, such as if the purchase is part of a divorce case, probate, or a leasehold property.
Another common reason for a house sale falling through is if the survey highlights problems with the condition of the property.
Get instant house survey quotes from Chartered Surveyors in your area.
If you are a buyer but first have to wait until the seller buys their next home, you’re in a property chain. If just one person drops out, then the whole property chain can collapse, and you and everyone else in that chain can be back to square one.
See our guide for more ways to break the housing chain before it scuppers your move.
‘Gazundering’ is a practice whereby a buyer lowers their offer at the last minute, just before contracts are exchanged.
Most collapsed house sales happen before exchange. The reason for this is simple, once you’ve exchanged contracts there is the risk of losing large amounts of money if a sale falls through. Though less common, it is still possible for things to go wrong between exhange and completion.
After contracts have been exchanged the buyer has put down a deposit – usually 10% of the purchase price – which they will lose if they walk away from the sale. With the average house price in 2022 standing at around £270,000 that means the average buyer stands to lose £27,000 if they abandon a house purchase after contracts have exchanged.
If a seller refuses to proceed after exchange of contracts, they are liable for the buyer’s costs including legal, mortgage and survey fees and could, potentially, be sued for damages.
If your property sale falls through after you’ve got had mortgage approved, it doesn’t have to be the end of the road for that deal. Many lenders will let you transfer your mortgage application to another property. They will need to value the new property though and your mortgage offer could change depending on the results of the valuation.
Depending on how much time has passed since your mortgage offer the deal may have expired. Mortgage offers usually last six months. This means you’ll have to resubmit your financial information in order to be approved again, by which time, in the current climate, the lowest rate mortgage deal you were looking at may no longer be available.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
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