Accepting an offer on your home is an exciting time, but unfortunately it’s only the start of the sales process.
Nothing is certain with your property sale until contracts have been exchanged. Unfortunately, this happens right at the end of the process, and almost one in three sales will fall through before they ever get to exchange.
But when is a house sale most likely to fall through?
A house sale can fall through at any time before exchange of contracts, however there are peak times when the sale is most at risk.
- It can happen early on due to mortgage issues,
- In the middle after the survey,
- Or at the last minute due to gazumping or a sudden change of heart.
The longer a sale takes, the more likely it is to fall through.
In this article, we will look at what stage house sales can fall through, why property chains collapse, and what you can do about it.
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1. Reasons house sales fail at the start
Even with an enthusiastic and committed buyer, who loves your home and really wants to buy it, your house sale is far from guaranteed. The first challenge your buyer faces is getting a mortgage.
1.1. Difficulties getting a mortgage
As many as one in six sales fall through due to mortgage issues alone. Mortgage rules have tightened considerably in recent years, with lenders becoming much more cautious in who they lend to and the properties they lend on. This results in more people struggling to get a mortgage.
A recent report by Aldermore Bank found that just one in five first time buyers were able to get a mortgage at their first attempt, and 53% of these were rejected more than once.
Which? found that:
- 43% of applicants aged 18-24 were rejected,
- 27% of those aged 25-34 were rejected, and
- 15% of those aged 35-44 were rejected for a mortgage.
What can you do about it?
Tips for sellers
My best advice here? If your buyer's not going to be able to get a mortgage, there's nothing you can do to change that. The sale's going to fall through.
BUT, there is something important you can do to help your overall situation:
If the sale's going to fall through, you just want it to fall through as soon as possible.
This saves you from wasting too much time before getting your house back on the market.
How long could you waste if things are left to drag on?
It can take as little as two weeks for a buyer to learn they can't get a mortgage. At that point they can withdraw from the purchase and leave you to move on.
But I've seen the process drag on for 8 weeks or more!
This happens when a buyer's being slow in progressing their mortgage application, and when they're being dishonest or withholding information about their difficulty obtaining a mortgage.
So what should you do?
Set your expectations at the start of the sale:
- Tell the estate agent you expect the buyer to have their mortgage applied for within the first 1-2 weeks of the sale.
- If it's not been applied for, you need to know why. Are they having difficulties getting a mortgage, and just keeping the information from you?
Don't let things drag on for weeks or months here.
If the buyer's mortgage application still isn't in, and if they aren't giving you concrete updates about what's happening, you should probably move on and get your house back on the market.
This is one of those situations where going for a free or cheap online estate agent can really bite you in the backside. They probably won't be pushing the buyer along, they won't give you updates about the challenges the buyer's facing, and weeks can easily slip by. Don't let them!
2. Reasons house sales fail after survey
Once your buyer's made an offer and submitted their mortgage application, your buyer will then get a survey done on the property.
Many buyers will get the bare minimum survey required by their lender, but some will get a "home buyers report" or a full structural survey for their own peace of mind.
Surveys usually take place midway through the conveyancing process, around 2-4 weeks after the initial offer.
Problems with surveys are one of the main reasons why property chains break. In fact, according to the Homeowners Alliance, 27% of house sales fall through due to a poor survey.
2.1. Serious issues could be uncovered
It's unlikely that minor issues will de-rail a sale, but a bigger problem can.
However, it is important to maintain good communications with your buyers and be prepared to compromise on costs and/or repairs in order to stop them walking away. The Which report found that 4% of sales failed because buyers and sellers were not able to resolve a disagreement.
2.2. Risk of down-valuations
Even if your buyer qualifies for a mortgage and no major issues are found on the survey, lenders may still "down-value" a property from the price agreed between the seller and buyer.
If this happens, your buyer won't be able to get a mortgage for the full amount they expected. This can stop the sales process before it has even got started.
Tips for sellers
Do what you can to make the property as presentable as possible for your survey. This can help prevent a lot of potential issues.
Sometimes though, the surveyor's going to uncover an issue you couldn't identify and resolve in advance. Or sometimes they'll just disagree on the valuation.
Unfortunately, this can make your sale fall through.
Like I said above, there's not much you can do in this situation. You just want to make sure you get here quickly, so you can go on to plan B afterwards.
Don't wait months waiting for your buyer to get the survey done. I'd expect it to be done between weeks 2 and 4 of your sale.
3. Reasons house sales fall through at the final hurdle
Even if your buyers have secured their mortgage and your home has passed its survey with flying colours, your sale is still not guaranteed.
I'll cover some of the main issues in this section, but if "chains" are starting to sound like a lot of "pain", it might be worth exploring alternative selling methods...
We've designed a short, free quiz to help you do just that.
Using a genuine home-buying service is one way to get your sale (and your chain) back on track. A well-funded house buying company can buy your house in as little as 7 days, or a timeframe to suit you. Although it's the easiest and fastest way to sell your house, it's not for everyone.
Take our free quiz and see if a house buying company is right for you.
If it is, I can introduce you to the company I know and trust when you get to your quiz results page.
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Since an offer is not legally binding, your buyer may reduce their offer at the last minute.
Some buyers do this in the hope that you're too far along the sales process, and might just decide to go with the lower price.
This is known as gazundering and is common in a buyers’ market where there are more properties than there are buyers.
The reverse can happen too: sellers can also receive a higher offer during the sale, and choose that buyer instead. This is known as gazumping and is common in a sellers’ market where there are less properties than there are buyers.
3.2. Cold feet or a change of heart
Even after getting past all those other obstacles, your sale can still fall through. Buyers can pull out after making an offer, and they often will.
They may not even really face many penalties for pulling out at the last minute:
- Most solicitors don't charge when a house sale falls through, and
- Many lenders offer free surveys, so they might not even be out of pocket for that.
It's not unusual for buyers to get cold feet during the process or towards the end, and withdraw.
There's not much you can do if that happens. The best way to prevent it is to try and keep the sale moving quickly, and make sure the house is nicely presented if the buyer ever pops round to measure up for furniture or carpets or anything else.
4. Reasons house sales collapse when they take too long
There are so many things that can go wrong with a house sale. There's not much you can do to prevent many of them, but one thing's for sure:
The longer your sale takes, the more likely it is for something to pop up and make it fall through.
Remember the saying "time heals all wounds"? In property, it's "time wounds all deals".
If a house sale is taking too long, the sale may collapse simply because your buyers have lost patience.
They may need to move fast in order to sell their own home as part of a chain, or they may have other time constraints, such as a baby on the way or a career move, which mean they cannot wait any longer.
Once again, it is important to maintain communication with your buyers so that you understand their circumstances, you can help manage one another's expectations, and can move the process along if they are getting frustrated.
Trying to buy a house with no onward chain is certainly one way of trying to reduce future issues.
4.1. Tips for sellers and buyers: Communication
Communication is key. In my own house sales, I'd normally move on quickly if a buyer is dragging their feet. I'd just put the property back on market and find a buyer who's prepared to move more quickly.
But I've sold properties to buyers who've taken months and months and months, and I've stuck with them throughout. Why? Communication.
If they're facing an issue with their mortgage, or with their own sale and are keeping me updated every step of the way, I've always been happy to work with them. Others are the same.
This is a good way to approach house sales. See it as a joint effort between you and your buyer to get the sale done.
If your buyer isn't communicating, cooperating and giving updates, you shouldn't give such a long leash.
5. Reasons why a house sale can fall through at any time
Alongside the main reasons discussed above, house sales can fall through at any time just because your buyer changes their mind. This could be simply down to a change of heart about the property, or it could be due to a change in circumstances, such as redundancy, relationship breakdown or the loss of a loved one.
File this under the "time wounds all deals" category.
There is very little you can do to save your sale in these circumstances.
My advice? Try and get the sale done quickly, but be prepared to be flexible, don't get your hopes up too much, and think through what your "plan b" would be if you do lose the sale.
6. How to rescue a failed house sale
You can avoid some of the problems discussed above by being prepared:
- Pre-approved buyers – you can avoid some of the disappointments of mortgage issues by asking your estate agent to only send potential buyers who have been pre-approved for a mortgage.
- Set expected timeframes upfront - you can reduce long delays by being clear with your expectations from the outset. Explain that your buyer should have their mortgage applied for within the first 7-14 days, and should pay for their searches with their solicitor too. This flushes out buyers who aren't serious, but it also sets the tempo, and establishes an expectation of good communication throughout the sale.
- Pre-priced repairs – if you know there is an issue with your home, such as a structural problem, then you can either get it fixed in advance, or at least get a selection of quotes. This can help you deal with any survey issues more quickly and confidently.
- Keep moving – the longer the process takes, the more chance there is of problems arising, so you need to keep the process moving by staying in touch with your conveyancer. Ask them to stay in touch with the buyers’ legal team too, and make sure your estate agent is acting as a go-between and keeping everyone informed.
- Keep talking – many problems can be solved with a little flexibility and compromise, so keep a constant dialogue going with your buyers so you can sort any minor issues fast before they become a major stumbling block. This should be done through your estate agent. If they're just getting in the way though, consider a way to establish a direct line of communication with your buyer.
Of course, some property chain issues can be avoided completely if you can "break the chain".
6.1.Cash house buying companies: a last resort
Even with your very best efforts, your house sale can still fall through at any stage of the process.
However, all is not lost; you can still get your move back on track.
House buying companies can make you an offer within 24 hours, and complete in as little as two weeks.
If this sounds like what you're looking for, the first thing you need to do is find out whether or not this is really the right option for you...
I designed a short 60-second quiz to help you do just that.
If a Cash House Buyer is the right option, I'll introduce you to the company I know and trust when you get to your quiz results page.
Hit the button below to get started:
The house buying company I work with can offer you a formal, guaranteed offer within 24 hours, and complete as quickly as you need. They'll also coordinate with the other parties in your chain to help keep everything together, just like in Anna's sale in this case study.
A professional cash house-buying company can be a really good option to repair a broken chain - especially if you really want to avoid losing your onward purchase. Unfortunately, it comes with a compromise: You should expect an offer of around 80-85% of the price you agreed with your previous buyer.
It's worth a look if you want to hold everything together. Bear in mind too that the other parties in your chain may be willing to absorb some of the discount to help help everything together.
By Matthew Cooper, Co-Founder of Home Selling Expert