A buyer pulling out of property sales is a big problem in the UK. These days it is common for a buyer to pull out of 20% of property transactions. This can create a lot of stress and heartache for the seller as well as cost them an average of £2,727 every time a house sale falls through.
Recent Study confirms Average Loss
The figure of £2,727 is the result of recent joint research conducted by the Homeowners Alliance who campaign on behalf of homeowners, and IMMO which is a service that brings together property sellers and buyers online.
The study revealed that over 300,000 property sale transactions collapse each year and the average figure of £2,727 is the result of the fees that people pay to promote their properties and legal costs that are wasted. Adding all of this up means that there is around £818 million lost by homeowners in England and Wales annually on property transactions that collapse.
What are the reasons for Property Transactions collapsing?
The research revealed that over 30% of failed property transactions were due to the buyer not having the financial backing that they needed. A further 20% of property transaction failures were the result of transactions in another part of the chain collapsing.
This alarming number of property transaction failures has changed the thinking of both sellers and buyers and they now believe that both parties should have to make deposits that are non refundable as soon as an offer is accepted. This would help to reduce the costs associated with house sale collapses.
Another popular request from property sellers is that buyers prove that they have the funds available before being able to make an offer on a home. Of course it is not just a one way street – buyers can lose out too if sellers accept higher value offers from other buyers. But these cases are certainly in the minority.
The main reason for a property sale collapse was due to the buyer pulling out according to the study. This is happening in 69% of cases. This is why it is important that buyers have more responsibility and “something to lose” if they pull out of the deal. People have been discussing the idea of reservation agreements for a long time now.
In England and Wales either a buyer or seller can pull out at any time until contracts are exchanged. There are no laws to prevent this from happening. The Government are keen to see the use of voluntary reservation agreements so that unscrupulous estate agents will not encourage gazumping.
What can Property Sellers do?
It is likely that the laws will change in the future to provide more protection with property sales. Until that happens there are some other options such as entering into a binding contract that commits both the buyer and the seller immediately after the agreement of an offer.
Gazeal, the law and insurance firm, offers such contracts and they provide the buyer with a two week grace period to check that they are fully satisfied with the property. If there is a legitimate reason to back out of the deal then they can. They cannot just back out because they have changed their mind.
To overcome breaks in the property buying chain, Nested estate agents are offering property sellers a cash advance if they are unable to sell their property in the first 90 days. This will assist them to move to a new home without having to sell their home first.