Sales falling through have always been a problem in property. But they seem to be becoming more common just recently. With that in mind let’s look at the reasons house sales fall through and what buyers, sellers and particularly agents can do to minimise the risk.
Some recent research suggests that as many as 55.8% of property sales fell through in the first quarter of 2023. This compares with 32% a year ago.
The buyer changes their mind
Or buyer remorse. Buyer remorse can creep in once the initial excitement of finding a property and having an offer accepted dies down. The buyer might also find another property to buy, or something which is cheaper. This is more likely in a cool market.
The seller changes their mind
Just as buyers can change their mind so can sellers. This might be when the reality of having to move hits them. Or perhaps when they discover finding a new home at a price they can afford is not as easy as they thought!
The buyer can’t find the money
This could be shortly after the sale agreed, or at a much later stage such as when exchange of contracts is imminent.
Typical reasons for funding problems are a lender’s valuation not agreeing with a buyer’s offer – something more likely in periods when prices are falling. It could also be because of the expiry of a mortgage offer.
The property has issues
In many cases, this will arise after the buyer has a survey done. It might happen if it becomes apparent the property has some significant faults which were not known about before. Or perhaps some faults which were known about turn out to be more difficult or expensive to fix than anticipated.
A chain breaks down
This is perhaps the most common reason a house sale can fall through. Perhaps the buyer can’t sell their house in order to buy their next one. Or the seller can’t find a new house to buy. And so on and so forth all the way up and down the line.
In many ways, when you look at how many properties can be involved in a chain and how many issues can affect each sale and purchase, it is amazing that so many chains get completed at all.
Gazumping and gazundering
Gazumping is where a seller accepts a higher offer from another buyer having already accepted an offer from someone else. Gazundering is where a buyer drops their offer, usually at a late stage in the transaction.
The risks of gazumping and gazundering vary depending on the state of the market. Gazumping tends to be more of a risk in hot markets. Gazundering tends to be more of a risk in cool markets.
It’s possible that conveyancing will take so long that the buyer or seller simply decides to back out. It’s more likely however that conveyancing delays will lead to some other problem, like a change in buyer/seller circumstances or expiry of a mortgage offer.
Fall throughs are very often blamed on the solicitors or conveyancers who are doing the conveyancing. But, in all fairness to conveyancers, it’s more likely to be delay by the other parties in the sale than the conveyancing work as such.
Unexpected changes of circumstances
The buyer or seller has an unexpected change of circumstances. For example, a bereavement, partnership break up or loss of job are common reasons here.
It’s fair to say that little can be done in circumstances like these. Buyers and sellers will rightly need to do what is best for them.
Some recent research suggests the areas with the highest house prices, specifically the south east, have the highest fall through rates (24%). It also suggests that sales of detached houses are more likely to fall through than other property types.
What can be done to avoid fall throughs?
It’s usually the case that the risk of a sale falling through can best be reduced before the sale is agreed rather than after. It’s much more difficult to try to repair a fall through later.
* Sellers should be sure they want to sell, and want to move. They should have a clear idea of what they’re doing next. Agents should be wary of sellers who appear to be just testing the market.
* Buyers should be clear about why they want to buy – and what. And clear about what they can afford and how they will fund the purchase. Agents should try to understand the buyer’s circumstances and share this with sellers where relevant.
* Correct pricing is fundamental to avoiding fall throughs. An appropriate asking price based on an accurate market value not only attracts the right buyers but helps to ensure the sale can be funded and will progress.
Sellers and agents should be wary of offers that are unrealistic.
* Choose the right buyer. Choosing a buyer who is ready to proceed (and keen to proceed) will minimise the chances of a fall through. Buyers whose property is already sold, or at least on the market, are favourable. As are those with a mortgage offer (and ideally one as recent as possible). Cash buyers and first time buyers also offer advantages.
* Feel the need for speed! Buyers, sellers and agents alike should do what they can to move things on as quickly as possible. Deal with enquiries promptly. Issue or deal with paperwork ASAP. Follow up and chase where necessary.
At the end of the day the quicker a property sale gets over the line, ie. contracts are exchanged, the less likely it is to fall through.