What to do if your property transaction falls through

Selling a property can be an extremely stressful time for all involved, with one of the biggest worries often coming after you’ve accepted an offer on your home: ‘what if my buyer pulls out of the transaction?’

There are a host of different reasons why a property transaction could fall through. With reasons varying from a purchasers personal financial circumstances changing to the collapse of a chain, it’s understandable that vendors are eager to reach the milestone of ‘exchange of contracts’ as quickly as possible to legally lock their buyer into completing the transaction (or sacrificing their deposit should the transaction still fail to complete).

In this article, we discuss the risks of non-completion and what you can do if you find yourself in the unfortunate position of losing your buyer before your transaction completes.

Selling and in a chain

If you’re a second-stepper or you’ve sold a property before but avoided being in a chain, you may be wondering how this experience is different. Essentially when selling a property, you become a link between your property sale and the purchase of your new home. Each link is a person financially dependent on the sale of their property to move.

There could be multiple housing transactions within your chain, and the law of averages means the risk of something going wrong with one of the transactions within a chain of 4 or 5 properties is much greater than where there is a single transaction.

It’s for this reason that the shorter the chain, the safer your position will be, and why properties are often advertised with ‘no onward chain’ as a key selling point. It’s also the reason that first-time buyers are an attractive proposition to vendors, as they typically don’t have a property to sell in order to fund the purchase.

What could cause a property transaction to fall through?

As much as you can try to mitigate a buyer getting itchy feet, sometimes these things are out of your control when moving home, including:
• The collapse of a chain
• The buyer finds another property
• The buyer’s mortgage offer falls through
• A change to the buyer’s financial circumstances
• Issues uncovered by the property survey

These are just a few reasons why a property transaction could fall through, see our previous article for further details.

Ways to protect yourself from your transaction falling through

Not every house move is straightforward and often there will be unavoidable issues that crop up during enquiries or as part of the conveyancer’s investigations. With this in mind, there are a number of ways in which you could approach the sale of your property to maximise the chance of keeping your buyer on side until exchange of contracts.

Weigh up your options:
If you find yourself in the fortunate position of having a number of buyers interested in your property, make sure you find out as much about their circumstances as possible before deciding which offer to accept.

You may be tempted to go with the highest offer; however, this doesn’t guarantee the buyer is the best choice, think about who is in the strongest position.

For example, a cash buyer will not be dependent upon a mortgage to complete the purchase, and first-time buyers may not require a house sale to fund their purchase. These elements all add up to making the selection of a suitable buyer key in maximising the change of a smooth transaction.

Issues uncovered by the survey
Sometimes things uncovered by a property survey, no matter how minor they seem, can scare off prospective buyers. This is especially prevalent amongst first-time buyers who are trying to get their heads around the whole process of buying a property and dealing with quite possibly the largest financial transaction of their lives.

If the survey uncovers something that compels the buyer to walk away, you could reduce the asking price to reflect the cost of the issue. While this isn’t always ideal, if it means the buyer will continue with the transaction then it could save both parties financially in the long run. Similarly, it can often be worth agreeing to resolve any issue prior to exchange of contracts as a means to put the buyer’s mind at rest. £1,000 replacing a flat roof for example may be a small price to pay if it ensures the buyer remains in the transaction.

Ask for a token deposit
If you’ve previously been affected by a transaction falling through you could ask your buyer for a ‘token deposit’ to demonstrate they are serious about the purchase of the property. This could cover some, if not all, of your expenses and costs (including conveyancing costs) should the transaction fall through as a result of the buyer’s actions.

The deposit is not mandatory, more of a goodwill gesture, that would be paid back to the buyer upon exchange and completion or alternatively offset against the total transaction amount due at completion.

‘No move, no fee’ conveyancing
Another way to protect yourself from a large legal fee is to appoint a ‘no move, no legal fees’ conveyancer. You may be asked to pay a nominal up-front fee to cover the cost of a no-sale-no-fee transaction, and third-party costs e.g. disbursements are still payable. However, the overall cost can be significantly less than if you instruct a conveyancer that charges by the hour.

What to do if your sale falls through before exchange?

While there is no legal ramification if your buyer decides to walk away from the sale before exchange, it could leave you both with expensive financial costs still to pay to your conveyancer.

First of all, you should evaluate the reason(s) as to why the buyer pulled out in the first instance. Was it because the buyer or the survey uncovered any issues that need to be addressed? If this is something you can fix immediately then it’s worth doing so to ensure future buyers aren’t put off by the same problem.

The next step would be to restart the process again by re-marketing your property for sale. This can be extremely frustrating when you’ve previously been down this road and understand the costs involved, however, if you’re in no rush to move quickly it is your best option.

Some recompense can be had by potentially reselling searches (local authority searches, water & drainage searches, mining searches etc) relating to your property to your future buyer, (if available from the outgoing buyer, and within a suitable date range) thereby speeding up the process for a second attempt at completing the transaction, though this is sometimes not possible as they will have been commissioned by the buyer who exited the transaction, not the vendor.

It’s worth noting that the housing market can change rapidly, and if you’re relisting your property, it’s worth getting a new valuation to ensure you achieve the best possible price for your home. In a buoyant market (as is the case at the time of writing) your property may have increased in value when you remarket it offering a potential silver lining to your previous transaction falling through.

If you’re looking to move home get an instant quote from Enact today. Our fees are fixed, and if your move doesn’t go ahead, we won’t charge a fee for our work.

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