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It’s every homebuyer’s nightmare. Just when you think the finishing line is in sight, your house sale cannot go ahead. It ‘falls through’. You’ve lost your buyer and that potentially means you’ll lose the house you’re buying because the chain could fall down.
Let’s look at the issue in detail. We’ll find out the multiple reasons why a house sale can fall through and how common it is for a house sale to fall through in the UK.
On average, the proportion of house sales that fall through each year in England and Wales is one-third. But this is just an average and so it can fluctuate.
There are a whole host of reasons why your house sale could fall through. Here are some of the most popular.
Having a survey conducted is a smart move for buyers to protect themselves from taking on a property with problems. And a survey that shows up something untoward can cause a house sale to fall through if the buyer isn’t happy with the survey results. However, if a survey does highlight an issue of note, it is often remedied by the seller, or an agreement is made between the two parties to adjust the price.
In the event of a property being structurally unsound, it would be expected that a buyer will pull out, causing the sale to fall through. If the property is found to have major structural issues, agents are not allowed to remarket the property without first informing new buyers of the problems that have been found. Furthermore, even if the issues have been addressed, it is still necessary for an agent to make buyers aware that structural problems were identified and fixed.
Property transactions have been known to fall through because of a change of heart or personal circumstances. This can be frustrating, especially when you are financially tied to the transaction, but there is little you can do as a seller if the decision has been made by the other party to pull out.
Contrary to popular opinion, having a buyer that has been pre-approved for a mortgage does not necessarily mean that their financing will go ahead. An agreement in principle means that not all of the details have been finalised. There are a variety of reasons why a lender could change their mind over a mortgage offer and cause a buyer to pull-out. For example, if the buyer falsely filled out their application, the finance will be withdrawn.
The former happens when the seller of a property finds a buyer who is willing to pay a greater sum than that which has already been offered by the current buyer. Meanwhile, gazundering is where a buyer lowers their offer at the last minute. The negative feelings that these practices create can cause a house sale to fall through.
This is an interesting one because problems such as vegetation might not be picked up on the survey; although RICS qualified surveyors are trained to look for large masses of vegetation that could suggest the presence of an invasive plant. A professional surveyor is expected to keep up to date with ongoing developments such as the common risk factors that could point to a Japanese knotweed problem.
Brought to England in the Victorian era, the plant lies dormant in winter but it’s the spring when the first signs of Japanese knotweed growth usually appears. The plant’s bamboo-like stem and distinctive red and purple shoots are often accompanied by rolled back leaves that grow rapidly.
RICS had an assessment framework in their resource materials for Japanese knotweed which included pre-inspection checks of the local area, an inspection of the property and the inspection of neighbouring communal areas. RICS had four categories that property surveyors used and each of these categories referred to the Japanese knotweed being within seven metres of either habitable spaces, buildings or boundaries. This ‘seven-metre rule’ was based on the assumption that Japanese knotweed has the capacity to grow up to seven metres underground from the point that it can be spotted on the surface.
The four categories are listed from most severe to the least:
4: Japanese Knotweed is within seven metres of a habitable space, conservatory and/or garage, either within the boundaries of this property or in a neighbouring property or space; and/or Japanese Knotweed is causing serious damage to outbuildings, associated structures, drains, paths, boundary walls and fences and so on. Further investigations by an appropriately qualified and/or experienced person are required.
3: Although Japanese Knotweed is present within the boundaries of the property, it is more than seven metres from a habitable space, conservatory, and/or garage. If there is damage to outbuildings, associated structures, paths and boundary walls and fences, it is minor. Further investigations by an appropriately qualified and/or experienced person are required.
2: Japanese Knotweed was not seen within the boundaries of this property, but it was seen on a neighbouring property or land. Here, it was within seven metres of the boundary, but more than seven metres away from habitable spaces, conservatory and/or garage of the subject property.
1: Japanese Knotweed was not seen on this property, but it can be seen on a neighbouring property or land where it was more than seven metres away.
Whether or not a particular survey will identify Japanese knotweed will depend on the type of survey that has been commissioned, the professionalism of the surveyor and the extent to which the owner of the property has attempted to conceal the plant.
However, updated guidance by the Royal Institution of Chartered Surveyors (RICS), which comes into force in March 2022 has abolished the so-called ‘seven metre rule’ in favour of a lenient approach that means surveyors can use their discretion when assessing the impact of knotweed infestations.
RICS says the advice “reflects an improved understanding” of Japanese Knotweed. It adds: “The ‘seven metre rule’ focused more on what has been demonstrated to be an overstated risk of Japanese Knotweed to buildings, rather than its sometimes-serious impact on amenity.”
RICS added that Japanese Knotweed poses little or no risk of structural damage to robust buildings with substantial foundations such as dwellings, as opposed to less sturdy structures with shallow foundations, such as conservatories, garages or boundary walls.
There is also a recognition that the most appropriate objective when Japanese Knotweed is encountered is to ensure an appropriate level of control rather than to automatically strive for eradication.
Commenting on the rule change, Paula Higgins, CEO of the HomeOwners Alliance said: “This change is well overdue. RICS have been too slow to act on this and have failed to recognise the impact it has been having on homeowners’ lives and finances. The exaggerated response to Japanese Knotweed by surveyors has caused huge upset to homeowners who have been unlucky enough to find it at the bottom of their gardens. No responsible homeowner would leave Japanese Knotweed to grow out of control or leave it untreated, but this rule had created unwarranted fear for too long – and also created a mini-industry of firms providing expensive treatment programmes which homeowners needed to pay for if they wanted to sell their homes.
As such, the presence of Japanese Knotweed does not necessarily mean that a buyer will pull out and a house sale will fall through.
Things are different in Scotland because when an offer has been made, it’s legally binding to prevent the frustration caused by offers being made then withdrawn (and sales falling through).
In Scotland, a prospective buyer must first instruct their solicitor to provide a ‘note of interest’ to the seller. This will indicate that there is interest in the property and means the buyer will be made aware of important aspects of the sale; such as when the seller is accepting offers and the closing date for making an offer. Many conveyancers in Scotland are ‘Solicitor Estate Agents’ and they are bound by the Law Society of Scotland’s guidelines that are designed to discourage gazumping.
When a conveyancer has accepted an offer on the property on behalf of the seller, they cannot accept a subsequent offer from another potential buyer. However, if the seller does want to accept a second offer, the solicitor must withdraw from acting on their behalf and the seller needs to then hire another conveyancer for their sale.
Instead of ‘sold STC’, a property in Scotland would be sold ‘subject to conclusion of missives’. The ‘missives’ are a series of letters between the buyers’ and sellers’ solicitors that include the terms of the sale. Completion of this stage is known as the ‘conclusion of missives’ and from this point onwards, the sale is legally binding.
When a sale does fall through, there can be a number of financial costs, including:
All these would mean a rather large loss as well as frustration and disappointment. HBB Solutions has calculated that the average cost of a collapse is around £2,700. They add that the estimated 326,091 transactions that fell through in 2021 equates to a total loss of £880.4 million; up £74 million on 2020.
If contracts have already been exchanged when your buyer pulls out, you can take legal action to compensate you for the financial cost of the failed house sale. If your house sale falls through before exchange of contracts, the sale is not yet legally binding and you’ll have no legal grounds for recourse or compensation.
This all depends on the reason for your buyer pulling out of the house sale. However, these are three things you can do to help reduce the risk of your sale falling through.
A high-quality, proactive estate agent should gather detailed information from any prospective buyers. This should include information about their personal circumstances their reason for moving, and whether they’re in a property chain. This information will show you whether they are serious buyers and if they’re motivated to move. If your estate agent is not gathering this information ask them to do it so that you can choose between buyers if you’re lucky enough to receive multiple offers.
Some property sales fall through because the buyer or seller feel that the sale is not progressing quickly. A proactive agent and solicitor will manage the progression of the sale and keep it moving forward at a good pace.
You might be wondering how this is in your control, but there is a way. Chain-free buyers are particularly desirable due to the impact that a property chain has on the success of a property sale reaching fruition. If you’re part of a lengthy property chain, you’ll want to make yourself chain-free so that your sale can progress. The way to do this is to either sell your current property and move into rented accommodation before purchasing your next property (so that you’re not part of a chain), or you could sell your property to a cash buying company. This is covered in the next section.
If your property sale has fallen through, you could:
To address this third point, we’ll look at cash buyers in more detail.
Companies that buy houses will buy your house fast for cash, usually within 30 days, with most completing the sale within 7 days. When you speak to these house buying companies, they’ll ask for your details and those of the property, after which they’ll have a valuation. Then they’ll give you an offer. If you accept the offer, they will process the payment and you should receive funds in your account within a few days. This means you don’t have to worry about being in a chain and being a statistic that suffers a sale falling through.
A cash buyer will work with motivated sellers to push through a fast sale. Their job is to buy properties that are either difficult to sell or whose owners need cash in their bank account very quickly.
To achieve these super-fast sales, a seller will take a hit on their price. Cash buyers typically offer around 80% of the current market rate.
It’s important to note that there’s little regulation in this industry so anyone can set up a business and say they’re a cash buyer. However, that doesn’t mean they have cash or that they’re competent. It’s up to you to do your due diligence and check where their money comes from and the level of experience they have.
For your own security, check that the company is a member of the National Association of Property Buyers (NAPB) and The Property Ombudsman. This will give you independent help if there’s a dispute and also means that they have to abide by a code of conduct.
Get everything in writing, for extra peace of mind. This way, you can recheck any details and you’ll have evidence of the price that was offered to you for your property. And on that topic, make sure that the offer they give you for your property is fixed. It’s not uncommon for some less scrupulous companies to gazunder sellers; reduce their offer at the last minute which leaves you with little choice but to accept.
It is possible to sell a property in just 30 days if you use a cash buyer. As they’ll often be using their own money (if they are a legitimate company), no time is wasted sorting out mortgages and they won’t be in a chain, so your sale won’t fall through.
Here’s a quick step-by-step guide, although please do remember that some companies will operate differently. Here’s an outline to the process that most will follow:
A reputable cash buyer can be a life saver in a tough situation (especially if you were in a chain and the sale fell through).
There are review websites (such as allAgents) that collate feedback on estate agents, online agents and fast sale cash buyers. Have a look at the comments that have been left by people who have sold or are selling so as to see how they were treated and if they received a good service (and a good price).
On the topic of price, you’ll also want to find out how each of the different companies reach their valuation for your property. The amount that a fast sale company will offer to you for your property will depend upon the individual company. Some of the most reliable cash buying companies will use independent valuations to decide on a figure and show you the evidence that has enabled them to decide on that number.
Meanwhile, other companies may not use such respected methods and instead flatter you with a higher offer on the phone; only to reduce it when they visit your property. It’s essential to ensure that the valuation you get is a ‘no obligation’ valuation; meaning you’re not forced to sell to that company just because they visited and valued it.
If your house sale has fallen through on more than one occasion, you’ll need to know the reason; whether it’s an issue elsewhere in the chain or something else that has caused your sale to fall through. If the result is that you risk missing out on your dream house, you’ll want to consider using a cash buyer so that you can escape the chains and make your move.
We hope this article has helped you to understand the reasons why a house sale can fall through, and the steps you can take to help prevent it from happening to you. If you have been left without a buyer because the sale fell through, contact us and we’ll be happy to have a chat with you.