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Why do house sales fall through?

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?

why do house sales fall through

Why do house sales fall through?

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 buyer changes their mind
  • The seller gets a higher offer – known as gazumping
  • The buyer can’t get a mortgage
  • Conveyancing delays
  • A bad survey
  • The buyer can’t sell their own property –a broken chain
  • The buyer drops their offer at the last minute – known as gazundering

The reasons are often influenced by the conditions of the housing market and wider economy at the time.  A survey of fall through rates by Quick Move Now has found 50% of failed sales in 2022 were due to the buyer changing their mind or after an unfavourable survey. While another 30% of failed sales was due to difficulty getting a mortgage. With the current cost of living crisis alongside record high house prices, you can see why in 2022 buyers might reflect and reconsider part way through the process.

How often do house sales fall through?

Data from Quick Move Now has found that one in three property sales in England and Wales fell through in the second quarter of 2022.

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, one in five transactions failed to go through to completion.

Will I lose money if my sale falls through?

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.

Protect yourself from a financial hit if your house purchase falls through with our Home Buyers Protection Insurance

How to avoid your house sale falling 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.

1. The buyer changes their mind

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

What can I do to avoid this?

  • Do everything you can to keep things moving. In particular, reply promptly to queries from your conveyancing solicitor
  • Sellers should send over any paperwork required early in the process (such as the TA6 form)
  • Buyers should arrange searches, surveys and a mortgage as soon as possible
  • Read our guide on how to speed up conveyancing

2. Gazumping

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.

What can I do to avoid this?

  • Again – keep things progressing towards exchange of contracts. Once contracts are exchanged, the agreement is legally binding
  • Ask for the property to be taken off the market once your offer is accepted. This reduces it’s exposure to new potential buyers
  • For more tips read our guide to gazumping.
  • If another buyer comes in with a much higher offer than you, there’s very little you can do to stop the seller accepting it. But you can insure yourself against this happening by taking out home buyer protection insurance

3. Mortgage problems

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.

What can I do to avoid this?

  • Sellers should ensure their buyer has a mortgage agreement in principle in place.
  • Once your offer has been accepted, buyers should get their mortgage in principle turned into a formal mortgage offer asap.
  • Buyers should avoid any major financial changes ahead of or while moving house e.g. changing jobs or contract type, as this could impact your borrowing power.
  • Use a mortgage broker. They can help you find the best deal and improve your chances of having your application approved. Read our guide to making a successful mortgage application for more help.

Down valuations may be another factor at play for buyers trying to get a mortgage. A down valuation is when your mortgage lender believes the property is worth less than your offer price. As 2022 progresses, lenders are increasingly cautious that rising borrowing costs may lead to lower house prices. This would mean they would struggle to recoup their money should the borrower default on the loan.

What can I do to avoid this?

  • Before making an offer, carefully research the sold prices of similar properties. You’ll want to make sure you’re not over paying.
  • In the event of a down valuation you can either ask the seller to lower their price or raise extra funds to boost your deposit

4. Conveyancing delays

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.

What can I do to avoid this?

5. A bad survey report

Another common reason for a house sale falling through is if the survey highlights problems with the condition of the property.

What can I do to avoid this?

  • Sellers should try to be objective when preparing their house for sale. If you’re looking for a quick sale at full asking price, make sure the condition of your property is top notch. Otherwise, don’t be surprised when the survey identifies problems and becomes a source of delay.
  • Buyers should make sure they get a house survey that gives them the level of detail they are looking for. Our guide can help with the different types of house survey. If the property is in need of repair, you can get quotes for works and use these to renegotiate your offer. Read our guide to surviving a bad survey for more tips and advice.

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6. The housing chain breaks

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.

What can I do to avoid this?

  • Think twice before entering a transaction with a long chain
  • Having a good estate agent and conveyancer should help keep the chain moving
  • Sellers could hold out for a chain free buyer: a first time buyer or cash buyer for example
  • As a seller you could break the chain by moving in with family, or rented.

See our guide for more ways to break the housing chain before it scuppers your move.

7. Gazundering

‘Gazundering’ is a practice whereby a buyer lowers their offer at the last minute, just before contracts are exchanged.

 What can I do?

  • Be realistic about your asking price. If you set your house price way above what it should be there is much more chance of a buyer lowering their offer.
  • Move quickly! The quicker you can get to exchange of contracts the better.
  • Have a second, interested buyer in reserve. If you are concerned your buyer might deploy this underhand tactic, then it may be worth asking your estate agent to keep in touch with other prospective buyers.
  • Work out your finances. If you’re in a chain, chances are you’ll not want gazundering to scupper your move. See if you can absorb a reduction in price and still move.

Frequently Asked Questions

What percentage of house sales fall through?

In 2022, thirty-one percent of property sales fell through before completion in the second quarter of the year, according to Quick Move Now. Of the sales that collapsed, 30 percent failed due to buyers being refused funds by mortgage companies. This suggests growing caution from lenders.

Protect yourself from a financial hit if your house purchase falls through with our Home Buyers Protection Insurance

How many house sales fall through after exchange?

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.

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.

What happens to a mortgage offer if a sale falls through?

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.

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