Property purchasing specialist, HBB Solutions, has looked at the most common contributing factors that lead to a property sale falling through.
Fall-throughs are commonplace in the UK housing market and It’s thought that one in ten property purchases fails before completion. However, with the market booming in recent months, it’s estimated that fall-throughs have been as common as one in four sales.
The home buying process is often long and complex; there are plenty of opportunities for a sale to fall through and a myriad of contributing factors, but some are more common than others and arming yourself with a little knowledge could help prevent it from happening to you.
The conveyancing process – in other words, the process of completing all of the legal processes required when buying a property – takes a notoriously long time in the UK. There is a world of technology entrepreneurs out there trying to find a way to speed it up, but so far to little avail.
In theory, it should take about three months to complete a purchase, but when the market is busy, as it has been since the pandemic, it’s not uncommon for the process to take six or even twelve months. This leaves plenty of time for any range of factors to scupper the sale before it completes.
Chains are everyone’s biggest enemy in the housing market. A chain is created when multiple house sales are dependent on each other’s success. House 1 needs to be sold so that the owner can afford to buy House 2, and the current owner of House 2 needs the sale to be completed in order to be able to buy House 3, and so a chain is created. If one sale falls through, the chain is broken and can cause a ripple effect whereby all of the other sales connected to the chain also fall through.
Many buyers will place an offer on a home before completing all of the vital surveys and checks that inform them of the true condition of the property. When they do get around to commissioning the surveys and the results come back showing the property is in a worse condition than they thought, the buyer will commonly retreat from the purchase.
As a buyer completes their checks and surveys on a property, it’s common for them to start negotiating on the purchase price. If, for example, a survey has found significant damp in the property, the buyer will demand the price be lowered to account for the additional money they’ll have to spend to fix the damp. The negotiation process that follows can often lead to a complete breakdown of the sale.
Mortgage problems are one of the most common reasons for a fall-through. It might be that a buyer submitted an offer before confirming they could get a mortgage, or it could be that the buyer’s mortgage lender values the property at a lower figure than the seller demands (down valuation) thus leaving the buyer short on funds. Furthermore, a buyer’s life circumstances might change, affecting how much money the mortgage provider is willing to lend.
Buyers are encouraged to ensure financial requirements can be met before submitting any offers. Sellers are advised to communicate clearly with any potential buyers and gain reassurance that they can honour the purchase agreement.
Gazumping describes those occasions when a hopeful buyer has their offer accepted by a seller only to later discover that a rival buyer has swooped in with a higher offer that the seller has chosen to accept. This process is most common in areas of high demand, where multiple buyers are competing for a small number of available homes.
Gazundering describes those occasions when a buyer agrees to buy a property for a certain amount of money only to lower the offer, often very late on in the buying process, in the hope that the seller will be forced to accept the lower offer. If, however, the seller refuses the lower offer, trust and communication is broken and the sale falls through.
Estate agents should do all of the legwork for their clients. They should be chasing paperwork, chasing signatures, ensuring clear communication between all stakeholders in the sale, from mortgage lenders to surveyors. If an agent isn’t doing their job properly, it can cause huge delays in the buying process and sometimes even result in sales falling through.
Managing Director of HBB Solutions, Chris Hodgkinson, commented:
“The home buying process within the UK is notoriously precarious and it also takes a considerable amount of time, during which a myriad of factors can cause the transaction to collapse.
Unfortunately, in many cases, there isn’t a great deal that buyers and sellers can do to prevent it and it can be incredibly frustrating and deflating.
However, they can ensure that they are in the strongest position possible and this starts with the buyer’s initial financial position and having a mortgage in principle that is unlikely to change further down the link.
As a seller, it also pays to be upfront and honest about the property itself, as anything you try to hide is likely to come to the forefront later on when surveys are undertaken.”