What to do if your property transaction falls through - a step-by-step guide

Our money expert talks you through what to do if your property transaction falls apart, and what your recourse is, depending on the stage of the sale purchase

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Buyers and sellers face a tough set of challenges in the housing market. Not least the swift re-pricing of mortgage deals, with banks giving less than 24-hours’ notice before they increase interest rates making an affordable move suddenly unaffordable.

Whether you are buying a house or selling a house, with such uncertainty around high inflation and the prospect of even more interest rate hikes, the number of property transactions falling through before they reach completion is on the rise. As industry body Propertymark told us, 33.3% of transactions per estate agent member branch fell through before completion in May, up from 28.9% in April.

When a property sale falls through it means either the buyer or seller has pulled out of the transaction after agreeing an offer for the purchase price. Even in a stable market, this can happen for several reasons such as:

  • The property chain has collapsed
  • The seller accepts a higher offer from a different buyer after the sale process has begun (known as gazumping)
  • Problems arise from the survey
  • One party pulls out because progress is too slow
  • The buyer tries to lower their offer near to completion causing the sale to stall.

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What to do if your property transaction falls through

Here's our step-by-step guide for what you can do if your property transaction falls through.

Work with estate agents if your property transaction falls through

If more than one offer was received on your property, sellers should ask their agent to go back to other potential buyers to find out if they are still interested. Be prepared to receive a lower offer, however, because your bargaining position may be weaker.

Buyers can employ a similar tactic. Should your purchase fall through, go back to your shortlist of properties which may have rejected your previous offers to see how they’re progressing. They may be back on the market. If so, your offer may now be appealing. 

What can you do if your transaction falls through before you exchange contracts?

If the sale falls through before exchanging contracts, there is sadly little recompense for buyers and sellers for any fees paid out up to that point. However, if you’re selling a leasehold property, and have paid the fee to obtain your leasehold pack, you can reuse this pack at no extra cost when you find a new buyer.

Movers can shop around for a solicitor who offers a ‘no-sale, no-fee’ agreement. Rob Houghton, chief executive of Reallymoving, a comparison site for home move services, says: 'You may have to pay a little extra for this agreement, although some solicitors include it as standard. But if the deal doesn’t complete, you won’t have to pay for their service – even if they’ve done most of the legwork and you’re close to exchange. This is particularly reassuring in the current market where there is greater uncertainty for buyers and sellers.

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(Image credit: Future PLC/Katie Jane Watson)

'It’s important to understand, however, that you will probably still have a bill to pay. There are other costs, or ‘disbursements’, that may have been incurred by the solicitor during their enquiries on your behalf which are non-refundable, such as local authority searches, bankruptcy checks and identity checks. The buyer is responsible for these costs.' Bankruptcy and identity checks only need to be completed once within a three-month period, so if your purchase falls through and you find another property quickly, buyers may not need to pay again.

It’s also possible for buyers to sell their searches to the next buyer of the property. These can cost between £50 and £250 depending on where you live and the type of searches you need. Buyers can arrange this by telling the seller’s estate agent you are prepared to sell the searches if a new buyer is found while the searches are in date.  They are valid for up to 6 months.  

A mortgage booking fee, paid upfront to the lender, to book the mortgage rate in some cases and the valuation fee are non-refundable.

What can you do if the sales falls through after exchanging contracts?

On exchange, the buyer must transfer 10% of the purchase price to the seller’s solicitor as a deposit. If the seller pulls out after the exchange of contracts, they must pay the deposit back with interest. If the buyer pulls out, the seller can keep the deposit and claim costs of moving house, such as removal fees.

Paul Saunders, solicitor and managing director of Amity Law, “Conveyancing has two stages, exchange and completion. Exchange is the formal point at which you are committed to purchase the property and usually happens a couple of weeks before formal completion, where people actually move home. Once exchange of contracts takes place it is very difficult to get out of buying the property.”

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(Image credit: Future PLC/James French)

Can you do anything to prevent a property sale falling through?

While sales can fall through, you can limit the chances by taking the time to properly assess who you are entering into a transaction with.

If you are selling, it's a good idea to qualify your buyer or choose a buyer without a chain. Ask your agent to investigate the buyer’s financial circumstances, such as their proof of deposit and evidence of a mortgage in principle agreement, before you accept their offer. 

Complete maintenance tasks before putting your home on the market. This will decrease the likelihood of issues cropping up on your survey that may cause buyers to pull out.

If you are buying, speak to the estate agent to find out how long a property has been on the market, and what position the sellers are in.

Buyers and sellers should keep good lines of communication open throughout the process to stop either side getting frustrated over delays, without knowing what’s behind the hold up. 

Samantha Partington is a personal finance journalist specialising in mortgages and the property market.

Over the past nine years, Samantha has worked for the Daily Mail, trade website Mortgage Solutions and business title Property Week. She regularly writes for national money pages including Money Mail and Sun Money and supports prop tech firms with content writing.