A study suggests property sales that fail before they are completed cost £607 million every year. However, with many people expecting the fall through rate to rise this year, there could be more failures, and more cost, for buyers to contend with in 2021.
There are many reasons why a property deal might collapse, including:
An issue with the mortgage
If a mortgage offer expires before the buyer is able to conclude the deal or the mortgage offer is altered because of a change in buyer circumstances, it is not uncommon for a deal to collapse. It might also be that the mortgage lender values the property at a level lower than the buyer has agreed to pay for the property, and this can also lead to the sale collapsing.
Issues found in the survey
One of the reasons buyers arrange a property survey when purchasing a home is to make sure the property is in good condition. If a survey reveals a problem, the buyer has to think about whether they should conclude the deal. In some cases, the buyer will proceed, and they might look to arrange a discount.
However, there will be times when the buyer decides to walk away from the property deal.
Gazumping leads to a deal collapsing
Gazumping is an issue, and if the vendor accepts a higher offer from another buyer, even after they have accepted an offer from the first buyer, that deal collapses, and the first buyer will likely feel aggrieved.
Conveyancing delays are an issue
Buying a home is a legal matter, and there is a lot of work involved in ensuring the deal can conclude. If a delay occurs, some buyers lose patience or decide that they don’t want the deal to continue. Therefore, conveyancing delays are often a key factor in deals collapsing.
Broken chains cause delays to break down
If you know anything about the property market, you know the risks associated with property deals. In many cases, there is no issue with the buyer or seller directly, but because another deal that is connected to theirs collapses, the deal falls through.
When property deals collapse, there are costs that cannot be reimbursed. Fees such as conveyancing fees, survey costs, and mortgage fees are not paid back, which means buyers lose out on money with no benefit.
Due to the significant levels of demand in the property market, if the 1 in 4 ratio continues throughout 2021, there could be as many as 225,000 property deals collapsing this year.
Of course, there is a chance that the ratio could worsen, such is the bottleneck in the current property market. There is also a chance that some buyers, if they miss out on the stamp duty holiday, will decide to walk away from the deal. If this occurs, the collapsed figures are likely to be higher.
Silas J. Lees MRICS, WiggyWam CEO, says: “Agents don’t get paid until a sale completes, so these fall-through statistics hide within them a vast unseen cost for agents. Aborted sales can be disastrous to the agent pipeline and in meeting monthly overheads. For buyers and sellers, the risk of a transaction falling through, together with the associated abortive costs, is a major obstacle which stops many from moving in the first place. For agents, it is probably their biggest frustration, especially when the deal is so close to exchanging contracts.”
Silas continued by saying; “There needs to be a push in the market; a move towards more transparent and efficient processes. It’s the only way for fall-through rates to significantly drop.”
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