Buying and selling residential property may be what conveyancers and estate agents do on a daily basis, but your average homeowner only moves house once every 11 years. It’s a major life-changing decision and a long-term financial investment that will shape household budgets for decades to come. The stresses and uncertainties involved are matched by the complexity of the conveyancing process that most property buyers and sellers have little knowledge of – and that’s where estate agents and conveyancers have a huge responsibility to guide their clients to a successful outcome.
Unfortunately, not all sales end with a successful completion. In fact, in 2021, one in three purchases fell through – sobering statistics indeed. In 2022, the demand for property is as high as ever while the economic climate has become more volatile. War in Ukraine, the ongoing effects of the pandemic, the realities of Brexit, rising inflation and the cost of living crisis are all playing on people’s minds, affecting decision-making.
Add the lengthy legal process of buying and selling property in England and Wales into the mix, and it shouldn’t come as a great surprise to find out that transactions can and do go wrong. After all, there’s no shortage of opportunity for a sale to become derailed between an offer being accepted and contracts being exchanged. And while an abortive property sale before it becomes legally binding may be no more than a minor inconvenience to some, it could spell personal and financial disaster for others.
Let’s review the main reasons why property sales fall through and see what conveyancers and estate agents can do to guide their clients safely through the transaction and help minimise the risk of it going wrong.
Bad survey results
Buyers who instruct an independent surveyor to carry out a home survey will be looking for honest professional feedback on the condition of the property they are about to invest in. While everyone will be hoping for a clean bill of health, minor niggles are to be expected. What’s more, as one leading surveyor explains, “if problems are highlighted that you could not have been aware of when your offer was agreed, you should be able to renegotiate the sale price to reflect the cost of necessary repairs. Of course, you may decide that you don’t want to buy it at all.”
Dealbreaker building defects are likely to include evidence of subsidence and structural movement, dry rot and other severe timber decay, major damp issues, roof and gutter defects, serious defects with plumbing, heating and electrics, and invasive garden pests such as Japanese knotweed.
Mortgage problems
Buyers who require a mortgage will have their offer to buy a property accepted on the basis of an AIP (agreement in principle) from their lender. However, a decision in principle is not the same as an approved loan. That only happens after the mortgage company has successfully carried out its own valuation and other checks on the property and the applicant, all lending criteria having been satisfied.
There are many reasons why the mortgage application may be turned down. It may be a change in the applicant’s circumstances such as a job loss or family break-up, or irregularities on the application form. Perhaps there’s a defect with the building itself, or the remaining lease on a flat is too short. To cut a long story short, if the mortgage is not approved, the buyer will be unable to proceed with the purchase.
Gazumping or gazundering
Sadly, gazumping and gazundering can still plague property transactions today, though plans are afoot to outlaw these practices. Gazumping occurs when the seller accepts a better offer from another buyer, leaving the original buyer without a property to buy. Gazundering occurs when the buyer unexpectedly lowers the offer price, usually at the last minute, pressuring the seller into accepting the new deal or else.
These frowned-upon practices are high-risk strong-arm tactics to achieve a financial advantage that should have no place in honourable business dealings. With no regard for trust and goodwill between buyer and seller, there’s a very real possibility that one or the other party will pull out and the deal falls apart.
Change of circumstance
They say life happens when you’re busy making other plans. Relationships break down and families split up, people lose their jobs, experience illness or personal loss. Certainly, when there’s been an unexpected change in personal circumstance, it is perfectly understandable that something as major as a house move may be put on the back burner. A change of heart can happen for all kinds of reasons and one would expect a fair explanation and apology to be issued by the party that is pulling out.
Whether the seller or the buyer withdraws from the transaction for personal reasons, it can be hugely frustrating for everyone else concerned. Unfortunately, there’s nothing much that can be done about it other than to accept the situation and move on.
Break in the chain
For most people, property chains are a simple fact of life when it comes to buying and selling property. A seller will usually need to sell their existing property to finance the purchase of their next home and so on, leading to the formation of a series of buyers and sellers linked together in a precarious situation whereby everyone has to exchange on the same day, and complete on the same day. The only exceptions are the top and bottom of the chain.
Buying and selling in a chain can be incredibly stressful for all parties concerned, and the longer the chain the greater the chances of something going wrong somewhere before contracts are ready to be exchanged. Any delay or issue anywhere in the chain will have repercussions for all other links and as many as one in three chains break.
How can conveyancers and estate agents help their clients?
Property sales fall through for a myriad of reasons, as mentioned above. Realistically speaking, it will be extremely difficult to rescue a deal that is threatened by a nightmare survey result or failed mortgage application. That said, many abortive sales are preventable, and both agents and conveyancers should be able to spot the signs and act in good time.
One of the key things that everyone must do is to keep communicating. Buyers and sellers may not realise that delays and inactivity are often the first sign of trouble, but their professional advisers will be fully aware that oiling the wheels of communication is critical to keep the momentum going and the process on track. This is where experienced estate agents, conveyancers and property solicitors have a real responsibility to show up for their clients and use their professional skills to add value.
Many of the larger estate agents now have dedicated sales progressors whose job it is to accompany the transaction from offer accepted to contracts exchanged and completion. With an in-depth understanding of the sales process, superior negotiation skills and a keen commercial interest in driving the sale towards a successful outcome, they can spot any signs of trouble and provide early effective intervention, liaising as necessary between all stakeholders and mitigating any risks of things going wrong.
Obviously, conveyancers and solicitors also appreciate the need for open and easy channels of communication to ensure that steady progress is made towards exchanging contracts within a reasonable timeframe. It is possible to arrange for a Lockout Agreement to secure a pre-contract exclusivity period for the buyer, but this type of agreement doesn’t bind either party to proceed with the transaction. Exclusivity Agreements are few and far between, and they arguably create as many problems as they solve.
Finally, published government proposals to reform the residential conveyancing system do exist but without a clear plan or timeframe to implement any such changes to improve the home buying and selling process, they remain little more than discussion points at present.
