They say that buying and selling a home is one of the most stressful life events you can experience – more than getting divorced or becoming a parent, according to recent survey findings. Apparently, the home buying process can age you by 2 years!
Perhaps this shouldn’t come as a great surprise since the process of buying and selling property in England and Wales is so complex that there’s plenty of scope for things to go wrong. The transaction only becomes legally binding when the contracts of sale are exchanged between the two parties.
Industry figures show that roughly a quarter of house sales fall through in the UK every year, which equates to about 225,000 sales, costing UK homebuyers in the region of £600 million every year. And according to Rightmove, the proportion of failed property transactions in Britain rose to nearly a third. Clearly, these are painful statistics.
In an effort to understand why this unfortunate turn of events occurs so often, let’s take a look at the most common reasons for property sales falling through. Perhaps there are some lessons we can all learn and put into practice when it’s our turn to move house.
Every financially responsible home buyer will commission an independent property survey as part of the buying process. This provides valuable professional insights into the property’s condition and serves as due diligence on the buyer’s investment. Not bothering with a survey is a false economy, since it’s only possible to make an informed purchase decision in the full knowledge of all the facts.
The survey findings play a key part here. Of course, every buyer will be hoping for a clean bill of health, but the likelihood is that some issues may come to light. While many identified defects can be quickly remedied by the seller prior to exchange, or a price discount negotiated to allow for the cost of repairs by the buyer, the survey could flag up serious issues with the building may well constitute a dealbreaker. These include:
● Structural movement, subsidence and heave
● Defective roofs and guttering
● Damp, condensation and mould
● Timber decay and wood pests
● Asbestos containing materials
● Plumbing, heating and electrical issues
● Japanese knotweed
The vast majority of homebuyers rely on a mortgage in order to finance their property purchase. It is established best practice to arrange finance before looking for a place to buy, and to have a mortgage in principle agreed when making an offer. Most estate agents now expect this to be the case, and may not take any offers seriously unless there is evidence of a pre-approved mortgage.
However, an agreement in principle is not a guaranteed offer. For the mortgage to be finally approved, the lender will want to carry out a mortgage valuation and various other checks. There are many reasons why a loan offer may be withdrawn, for example if there’s a change in the applicant’s financial circumstances such as being put on furlough, irregularities with the application form or a problem with the building itself.
Property buyers who don’t need a mortgage are clearly in a more secure financial position, which lessens the risk to the seller. That said, buyers can pull out for all sorts of reasons, whether it’s bad survey results or a simple change of heart.
The conveyancing process being what it is, chains are commonplace in residential property sales. A property chain is a series of three or more interdependent property transactions. The majority of homeowners need to sell their existing property in order to buy the next one, and there can be a long line of buyers and sellers who all depend on each other’s transactions going through at the same time. The more links there are in the chain, the greater the risk of something going wrong.
What’s more, as one industry source points out, “the links don’t just involve the buyers and the vendors. Each of them is likely to be working with estate agents, conveyancers, mortgage lenders and surveyors too.”
Broken chains are one of the main reasons for sales falling through. A chain can collapse for any number of reasons including all of the ones mentioned in this article.
Unfortunately, not every property buyer or seller plays fair. There are some who take full advantage of a system whereby the sale does not become legally binding until relatively late in the conveyancing process. Typically, there is a delay of several weeks or months between the initial offer having been accepted and this agreement becoming legal. Property surveys, mortgage offers, local searches etc are all carried out during this period, and it is only when all parties concerned are satisfied that contracts are officially exchanged.
Gazumping and gazundering are behaviours that are technically perfectly legal, though they are considered sharp practice. Gazumping occurs when the seller finds a new buyer – usually someone who is prepared to pay more or can proceed quickly, often with cash and nothing to sell. Gazundering happens when the buyer submits a cheeky last-minute change of purchase price, giving the seller no option but to accept the new price or abort the sale.
It goes without saying that both practices are not only frowned upon but that they carry a high risk of the whole transaction coming unstuck.
Finally, many house sales do fall through for no other reason than that someone has changed their mind. The seller may decide to take their property off the market for personal reasons – whether it’s an illness, a job loss or relationship breakdown. Similarly, the buyer may pull out for personal reasons. Maybe they’ve decided not to move house for the time being, or there’s been a change of personal circumstance. Or perhaps they’ve found a better property elsewhere.
While a change of heart is clearly frustrating for everyone else involved, there’s nothing much anyone can do.
While property deals collapse for all sorts of reasons, the majority of fall-throughs can in fact be prevented. Failed finance and bad survey results may be impossible to overcome, but other problems can often be managed with good communication. It is a well known fact that lack of progress or, worse, inactivity, is often the trigger that causes a transaction to fail.
This is where estate agents and conveyancers have a responsibility to do the best for their clients. The larger agents will have a dedicated sales progressor whose job it is to ensure the transaction moves towards a successful exchange and completion, liaising as necessary between all stakeholders. Solicitors can also ensure their channels of communication are open to ensure steady progress. Ultimately, it is the motivated seller and buyer who should maintain clear communications with their professional partners, and drive the process towards a successful outcome.