Selling a home can be a stressful process, with many obstacles that can arise. One worst-case scenario is having an agreed house sale fall through, leaving you in limbo. This situation can happen for various reasons – some within your control, others unavoidable.
While disheartening, some practical steps can get the sale back on track or help you move forward. This blog will cover the fundamental questions about a collapsed sale and provide actionable tips.
Can I legally withdraw from a house sale?
Once you have agreed and signed a deal with the buyer, you have entered into a legal contract. This contract outlines obligations for both parties, including completion dates and other terms. If considering withdrawing from the sale, first review this contract thoroughly. There may be conditions allowing you to pull out, such as if the buyer cannot secure a mortgage.
However, you cannot simply change your mind and walk away. Withdrawing for no valid, documented reason likely constitutes a breach of contract.
What happens if the buyer pulls out of the sale?
While you cannot easily walk away, the buyer may withdraw despite the signed contract. Their lender declining the mortgage or personal circ*mstances changing can lead to this. If the buyer rescinds without grounds, they break the purchase contract. In this case, you may be entitled to compensation for losses this causes you.
When a buyer does back out, the sale immediately falls through, even at an advanced stage. You must go back on the market and seek other buyers.
Key reasons house sales fall apart
Many issues can scupper what seemed like a sure house sale, even at the eleventh hour. Here are some of the most common reasons transactions unravel:
Mortgage problems
The number one cause of sales falling through is homebuyers failing to secure a mortgage in time or the lender declining at the last minute. Stricter affordability checks make securing finance tricky today, catching buyers unaware.
Issues in the property chain
If other links in the buyer’sproperty chain fall apart, it collapses your sale, too. For example, if they cannot sell their home in time to purchase yours. This is the peril of longer chains.
Delays from legal proceedings
Lengthy conveyancing delays or unexpected legal troubles can mean buyers or sellers cannot complete on time. They may then exercise the right to terminate the contract.
Down valuations of the property
If the buyer’s mortgage lender values your home at less than the agreed price, they may only offer finance based on this lower amount. This leads many buyers to walk away.
Change in circ*mstances
Sudden changes impacting finances or situations like health or employment can force buyers to pull out, even after exchanging contracts. While frustrating, personal emergencies may leave them little choice. You have limited options to oppose this.
When buyers withdraw their home offer, no definitive reasons must be given. But understanding what scuppers transactions can help renegotiate terms or take preventative steps regarding finance, timescales, etc., when relisting your property after a fall-through.
Financial implications of a collapsed sale
As highlighted, the ramifications of an agreed house sale falling apart can be costly. Until actual completion, uncertainty remains, and failed transactions directly hit your pocket in various ways:
Losing the sale itself
Having no proceeds from the sale impacts plans to rely on these. It may mean you cannot buy your desired home or pay off existing debts as intended. Remaining in a property you wish to leave creates indirect stress costs, too.
Conveyancing fees
You still owe conveyancing solicitor fees for work undertaken on the failed sale. Further charges will apply when finding another buyer and progressing the sale anew. Minimum legal fees for selling are around £850 but rise significantly if issues arise.
Mortgage early repayment charges
If simultaneously remortgaging to a new property, early repayment charges from your current lender may apply. This can amount to thousands based on your outstanding loan term and deal type.
Double move logistics
If arranged removals or redirection of post, cancelling and reorganising these brings frustration and possibly extra fees depending on suppliers’ terms.
Tallying up these numerous expenses highlights why a failed sale potentially costs thousands of pounds, besides the headaches generated. Keep thorough accounts of the financial impact of any potential claim against a backing-out buyer.
At what stage can a buyer withdraw their offer?
In England and Wales, the property buying process follows three main stages which determine obligations around withdrawing from an agreed house purchase:
- Making/Accepting an Offer
This informal initial stage means either party can back out without legal consequences. Buyers may proceed with surveys before confirming intentions. Sellers can keep marketing the home. Once positive surveys are received, though, buyers should sign intent to formalise the transaction.
- Exchanging Contracts
Signing a legally binding contract obliges both parties to complete the sale. Buyers pay a non-refundable deposit of around 10% of the purchase price. Withdrawal at this advanced stage allows the other party to pursue financial damages. But there are still a few circ*mstances where one side can withdraw without penalty.
- Completing the Sale
This final legal stage makes the transfer binding. The property deeds change hands, and outstanding monies get paid on the pre-agreed completion date. Failure to complete by the buyer or seller constitutes a contract breach. Compensation claims or legal action may follow against the party responsible for non-completion.
While rare, buyers can get cold feet and withdraw their interest even after exchanging. But once contracts are signed, there is no backing out without consequences. The sale becomes legally watertight at the completion stage, barring extreme circ*mstances.
Withdrawing an Offer After Making It
What if you are a prospective buyer and wish to retract your original offer?
Legally, you can withdraw your initial offer on a property at any point before the exchange of contracts. However, this risks annoying sellers and agents you were negotiating with. If the seller verbally accepted your offer or turned down another bidder relying on your proposal, they could argue for compensation costs.
To withdraw gracefully, communicate promptly and clearly to the estate agent and vendor. You must rescind the offer with apologies and reasons why. Expect frustration or appeals from the seller to reconsider. Politely stand firm in your retraction, but leave the door open should your situation change and you want to approach them again later.
Are buyer’s solicitor fees refundable following a Collapse?
Upon a failed house sale, the buyer loses the deposit monies paid to the seller’s solicitors when exchanging contracts. And you, as the vendor, remain liable for the legal fees you accrued, irrespective of the outcome. But can buyers reclaim solicitor costs spent pursuing the defunct purchase?
Unfortunately, conveyancing fees already incurred cannot be refunded when transactions unravel. Work is completed on searches, paperwork, transfers, and liaising with lenders up to the point of withdrawing. Solicitors charge for time expended on these failed completions.
While no one can refund buyers’ sunk costs, you may recoup losses from relisting and legal expenses if they breached the contract by withdrawing without valid grounds at an advanced stage.
Turning to Cash House Buyers as a Fallback Option
When an agreed sale falls apart, it causes much frustration and uncertainty. Rather than relisting on the open market, an alternative exists in direct sales to cash property buyers. These professional house purchaser firms and individual investors buy properties outright with cash. It forms part of their investment or development strategy. They have funds that are immediately accessible to purchase homes without requiring mortgages or external financing. This avoids the risk of lender rejections that often derail mainstream sales.
Cash buyers have pre-approved funding pools and act quickly, avoiding length chains. Once they inspect your property and make an offer, they can complete deals within seven days. Such reliable speed and certainty of completion are precisely what you need after a failed first sale attempt. It gets your property sold, finances back on track and the moving process underway promptly again.
