The process of buying and selling property is something that most homebuyers aren’t particularly familiar with. It’s a huge, often life-changing decision to move house, with long-term financial commitments that will shape household budgets for decades to come. This is where estate agents play a crucial role in providing their expertise and market knowledge; clients trust their agents to guide them safely through the transaction.
Unfortunately, not all residential property sales reach the desired outcome. Industry figures reveal that about a third of house sales in England and Wales fell through in 2021. And, with both demand for properties and asking prices now at an all-time high, perhaps we shouldn’t be surprised to find out that things can and do go wrong. After all, there’s plenty of opportunity for a sale to become derailed between an offer being accepted and the transaction becoming legally binding when contracts are eventually exchanged.
It’s what every property buyer and seller dread most of all. We know that moving home is widely recognised as one of life’s most stressful events – even more stressful than getting divorced – so emotions are bound to run high. But the complex legal process of buying and selling property in the UK must also take its share of responsibility. A failed property transaction before it becomes a contractual agreement is (at best) inconvenient for everyone concerned. However, it can also involve significant financial losses for one or both parties.
Let’s take a closer look at the main problems that can trigger a fall-through and see if we can learn any lessons that might help buyers and sellers minimise the risk of their property transactions not going ahead as planned.
Home survey findings contain dealbreakers
An independent property survey is usually the first (and often the only) opportunity a home buyer has to get professional feedback on the condition of the property they are about to buy. In a world where commercial realities are still largely governed by the principle of caveat emptor, it’s a prudent move to take a look ‘under the hood’ of the building before committing to the purchase.
Obviously, buyers will be hoping for professional reassurance from their surveyor that their chosen new home is essentially sound and represents a good investment. They will also appreciate that minor issues are likely to be identified – after all, it’s the surveyor’s job to find fault – and hope that a small price adjustment or fast remedial action by the seller will be sufficient to resolve the issue.
However, serious building defects can constitute a dealbreaker, triggering an immediate withdrawal from the property transaction. These include:
- Subsidence and structural movement, often evidenced by a crack in the wall, a wonky floor, a door that won’t close properly or a sash window that is jammed shut
- Roof and gutter defects including water ingress, damp walls, penetrating and rising damp, ventilation issues, condensation and mould
- Timber decay and wood rot including wet rot, dry rot fungus and woodworm damage caused by infestations from insects such as the common furniture beetle or death watch beetle
- Serious defects with services including electricity, plumbing and heating
- Notoriously invasive and destructive garden pests such as Japanese knotweed
Unexpected change of financial position
The vast majority of home buyers take out a residential mortgage to finance the purchase of a property. It is now recognised best practice for prospective buyers to have a mortgage in principle agreed with a lender when they make an offer on a property. In fact, most estate agents insist on this being the case and look unfavourably on buyers who don’t have their mortgage pre-approved or have alternative verifiable funding in place.
However, a mortgage decision in principle (DIP) or agreement in principle (AIP) does not guarantee funding. The mortgage is only formally approved after the lender has carried out his own mortgage valuation and other checks on the property and the applicant(s), and all lending criteria have been satisfied.
There could be all sorts of reasons why the application may not be successful after all. From irregularities with the application form or a change in the applicant’s circumstances (e.g. job loss, illness or family break-up) to actual building defects, the lender is free to withdraw their mortgage offer at any point. No mortgage means the buyer is suddenly financially unable to proceed with the purchase. Sourcing new funding takes time, which may not be acceptable to the seller, so the deal is off.
Just under a third of UK homes were bought by cash buyers last year. With no mortgage (and possibly no property chain) to worry about, there is less likelihood that the transaction could come apart for financial reasons. However, this won’t stop the buyer from walking away on account of a nightmare survey result, or by simply changing his mind about the property.
Gazumping, gazundering and gazanging
The process of buying and selling property in England and Wales can take weeks and months. It is only after the property survey, mortgage offer, local searches and legal enquiries have been successfully dealt with that contracts are finally exchanged. Unfortunately, during that time there is ample opportunity for things to go wrong.
Gazumping, gazundering and gazanging are examples of sharp practice that, although technically perfectly legal, go against the principles of fair play and honourable business dealings. All three are frowned-upon high-risk tactics that can demolish trust and goodwill in an instant and have the very real potential to cause property transactions to fall apart quickly.
Gazumping happens when the seller accepts a better offer from a different buyer, leaving the original buyer out in the cold. Gazundering sees the buyer dropping the agreed offer price at the last minute, pressuring the seller to accept thousands of pounds less for the transaction to go ahead, or lose the deal. Gazanging occurs when a seller pulls out of the sale and takes his property off the market, having previously accepted an offer.
Sudden change of personal circumstances
In life as in business, things don’t always go according to plan. Families argue and relationships break down, people get made redundant, and illness can be unpredictable and bring unbearable loss. When there has been a sudden change in personal circumstances, moving home may be the last thing on a person’s mind.
Withdrawing from the property transaction for personal reasons is a completely understandable reaction and, while intensely frustrating for the other party, it really is just one of those things. Whether the buyer or seller pulls out, a change of heart can happen for all sorts of reasons. For reasons of common courtesy, an adequate explanation and apology should be provided to the other side.
Break in the property chain
The typical scenario of sellers needing to sell their existing property in order to buy their next home leads to the formation of property chains. It’s a line of buyers and sellers linked together, which creates a precarious situation in which everyone is exchanging and completing on the same day. The only exception are the individuals at the top and bottom of the chain.
Property chains are can be unbelievably stressful. Any delay or problem anywhere in the chain will have repercussions for all the other links, so perhaps it’s not surprising to hear that one in three property chains break. The longer the chain and the more buyers/sellers are involved, the higher the risk of something somewhere going wrong before contracts are exchanged. There is a myriad of reasons why chains collapse, including all the ones mentioned above.
What can estate agents do?
Like it or not, property deals fall through for all sorts of reasons, meaning annoyingly estate agents fees go down the drain!. This can be hugely frustrating for all concerned, particularly when something like a failed mortgage application or a bad survey result makes it pretty much impossible to rescue the situation. That said, most abortive sales can in fact be prevented.
Effective communication is the holy grail here. The behaviours of many buyers or sellers can be managed with good communication. If delays or inactivity threaten to derail the process, communication is the key to keeping the momentum going. It is a well-known fact that lack of progress or, worse, total inactivity, is often the trigger that causes a transaction to fail.
This is where estate agents should step up and use their considerable professional skills to pull out all the stops for their clients. Many agencies have recognised that it is in their best commercial interest to drive the sale to a successful conclusion, employing dedicated sales progressors whose job is to guide the transaction safely towards exchange and completion. A key part of their skill set is to liaise as necessary between all stakeholders and spot any signs of cold feet or changed minds and mitigate the risk of things going wrong before it is too late.
Conveyancing solicitors also have an important role to play. They too appreciate the need for channels of communication to stay open to ensure steady progress without any undue delays in the conveyancing process, so that contracts are exchanged within a reasonable timeframe. It goes without saying that a positive working relationship between estate agents and property solicitors towards a common goal should be promoted at all times.
From the perspective of the buyer and seller, the risk of their deal falling through must be one of the most nerve-wracking aspects of the entire house buying process. “Any collapse of a house sale is a tragedy for the buyer and seller – and affects others too, including agents, conveyancers, etc. Transactions that fall through typically leave buyers and sellers discouraged and out of pocket by thousands of pounds,” says Chris Hodgkinson, managing director of HBB Solutions.
Estate agents are a key enabler. They have the advantage of professional experience and an in-depth understanding of the sales process. They should be primed to spot any signs of trouble and offer early effective intervention to stop tiny molehills from turning into insurmountable mountains. Armed with superior negotiation skills and a keen motivation to drive the process towards a successful outcome for all, the power of a good estate agent should never be underestimated.