It can be both expensive and worrying when a house buyer pulls out before an exchange. It not only slows down your property selling journey but it also puts you at risk of losing your dream home. However, it happens more often than you might think.
Around 25% to 30% of house sales in England and Wales fall through before completion. This equals roughly 300,000 property sales each year. The HomeOwners Alliance research suggests that 51% of sellers lost an average of £2,700 when a sale fell through before it had reached completion. A further 12% of sellers lost more than £5,000 as a result of a failed sale.
Looking for a quick answer? Use the menu below to jump straight in:
- What happens if my buyer pulls out before exchange of contracts?
- Why do house sales fall through less often in Scotland?
- Why Has My Buyer Pulled Out?
- How to reduce the risks of a buyer pulling out of a house sale.
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What happens if my buyer pulls out before exchange of contracts?
If your buyer pulls out before exchange there is not a lot you can do from a legal perspective. The buyer has the right to pull out of a house sale without any legal or financial implications right up until the point of exchanging contracts.
The buyer can pull out of a house sale after the contracts have been exchanged, however, there will be both legal and financial consequences to this. The buyer will not only forfeit their deposit but they will also be liable for any other costs that are incurred by the seller.
In the event that your buyer does pull out before the exchange of contracts, it may be worth contacting your estate agent or solicitor to find out the reasons behind the sale falling through.
Whilst they are not under any legal obligation to tell you, they will usually try and explain the reasoning behind the decision out of courtesy.
If the reason why your buyer is pulling out is the result of an issue that was raised during the property survey, you may have to agree to fund any necessary work or negotiate a price reduction in order to get your sale back on the right track.
If your buyer is resolute in their decision, then your best plan of action is to get your property back on the market to try and secure another buyer.
Why do house sales fall through less often in Scotland?
Whilst the buyer pulling out of the house sale before the exchange of contracts is a fairly common problem in England and Wales, fewer property sales fall through in Scotland.
This is due to several factors:
- Before they put their home on the market, sellers must have a home report done. This home report ensures that only serious sellers and buyers are involved in the process.
- Another bonus of the home report means that potential buyers are well-informed on the property before they make a decision on it. It reduces the risks of any unwanted surprises further down the line.
- To discourage gazumping, properties are taken off of the market once an offer has been accepted. If the seller does decide to pull out of the process to pursue another offer, they cannot use the same solicitor for the new sale.
What is gazumping?
Gazumping occurs when another party makes an offer on a house that you are in the process of purchasing and has that offer accepted, pushing you out of the purchase you started.
Why Has My Buyer Pulled Out?
There can be many reasons behind a buyer’s decision to pull out of a house sale. Below are some of the common causes.
House Survey Surprises
A property survey, which is a standard step in the purchasing of a property and is a useful tool at the buyer’s disposal, can often highlight certain issues that make potential buyers uneasy about proceeding with the sale.
Some of the most common issues that are picked up in a property survey are:
- Structural movement
- Roof problems
- Concerns about the property’s electrical safety
- Changes that have been made to the property without the relevant building regulations or planning permissions
- Damp on the property
Last year, 11% of failed house sales were directly linked to the property survey.
Failed renegotiation attempt
If any causes of concern are brought up in the property survey, or if the buyer decides that the property is worth less than the price that was initially offered then they may attempt to renegotiate the price. If these renegotiations are not successful then the buyer can pull out.
The property chain
When you sell your home, there is a good chance that it will become part of the property chain. The property chain is a sequence of linked purchases, each of which is dependent on the preceding and succeeding purchase.
The more links that are in the chain, the more complicated the property transaction will be. It also leaves the chain more vulnerable to collapse.
A property chain can also cause major delays in the house purchasing process, which can in turn jeopardise the success of the sale.
The buyer changed their mind
From time to time, a buyer may just change their mind on the sale and back out of the deal.
Unable to secure a mortgage
When the market is going through times of uncertainty, mortgage lenders tend to be far more cautious about the value of properties. There will be times when a buyer will be unable to secure a mortgage offer, even if they had successfully secured an agreement in principle before.
If a mortgage lender has valued your property at less than the purchase price, your buyer may not be able to make up the difference. Or they may have a change of personal circumstances which leaves them unable to secure the mortgage they require.
The buyer found a new deal
Your buyer may continue to look for other properties outside of your negotiations. If this happens then your buyer may pull out of the deal in favour of a house that better suits their needs.
How to reduce the risks of a buyer pulling out of a house sale
Whilst having a buyer pull out of a house sale can be stressful and time-consuming, it is more common than you might think.
There is no way to guarantee a sale, however, there are many ways to go about reducing the risk of a house sale falling through.
Try to minimise the links in the property chain
Even though they may make you a lower offer, a chain-free buyer may be one of the best ways to ensure a house sale does not fall through. If you put your house on the market, there is a high chance that you will end up on the property chain. The more links in the chain, the more vulnerable you become to collapse.
Finding a new buyer can be expensive and time-consuming, so if the property survey highlights any areas of concern for your buyer, you may have to be prepared to carry out certain work on your property in order to keep the buyer on side.
If this is the case, then the best plan of action should be to keep the line of communication open with the buyer and see if the issue can be resolved to avoid the sale falling through.
Research buyers before accepting their offer
When your estate agent presents you with an offer, they should provide you with a breakdown of the potential buyers’ circumstances. The information they may give you could include whether or not they are part of the property chain, if they are a first-time buyer, and the reasons for their move.
This information is important to read through, especially if you receive multiple offers, as it will allow you to get a better idea of the potential buyers and to be able to go into the sale aware of any potential risk factors.
Be involved in the sale
It is important that you are as involved as possible when progressing the sale of your property in order to avoid your buyer pulling out before exchange.
Make sure that you have organised any relevant paperwork, have a solicitor lined up, and that if you are buying another property that you have your mortgage in principle in place.
Ensure that once the offer has been accepted that you respond to any questions or queries the buyer may have swiftly and keep in regular contact with your estate agent and solicitor.
Ask for a deposit
Another option to help protect yourself from the buyer pulling out before exchange is to ask for a token deposit. This deposit can be paid to your solicitor and will leave you in a stronger position should negotiations stop. The deposit would help to cover some of your legal fees if the deal collapses and you are not at fault.
Seek a solution
Occasionally your buyer’s mortgage lender can value your property at less than the original agreed price. If this occurs and your buyer has no extra savings in place to help make up the difference, then they, unfortunately, may have to pull out of the sale.
If you find yourself in this situation, you may want to consider lowering the price of the purchase in order to keep the buyer. If one mortgage lender has down-valued your property, it is likely that others may as well. If you refuse to lower the price, you may find yourself in a similar situation again with new buyers further down the line.
Go direct to a home buying company
If a buyer pulls out before exchange and you are left in the lurch, the best way to guarantee a sale is to sell your property to a home buying company. Whilst a home buying company will offer you less than market value for your property, they are able to offer a certainty and speed that is unrivalled on the open market.
This sums up everything you need to know about what to do if your buyer pulls out before an exchange of contracts has taken place. If you have any questions or queries, or even some experience in this, please do not hesitate to get in touch!