Moving house is one of the most stressful and expensive things you can do in life, so when the whole process collapses and costs you thousands of pounds in wasted expenses, it can be devastating.
New research shows the cost of a property sale breaking down has now reached a whopping £2,727 spent on pointless legal costs and associated fees for marketing your home.
The study, from campaigning group the HomeOwners Alliance and IMMO, a service that connects buyers and sellers online, found that more than 300,000 property transactions fall through each year.
That means homeowners in England and Wales are spending an eye-watering £818million a year on property sales that don’t materialise.
One in five home sellers has seen the sale of their home collapse, costing £2,727 on average
Just under a third of collapsed sales happened as a result of the buyer’s finances not being in order, according to the research, while one in five collapsed after a sale further up the property chain fell through.
The frequency of property sales collapsing and the spiralling costs that accompany it caused two thirds of adults to think that both buyers and sellers should be forced to put down non-refundable deposits when an offer is accepted.
And 80 per cent of UK adults would like to see buyers required to show proof of funds before being able to put in an offer to buy a property.
Paula Higgins, co-founder of HomeOwners Alliance, said: ‘We often hear about would-be buyers losing their dream homes as a result of sellers accepting higher offers but less is said about sellers forking out thousands in wasted fees only for buyers to change their minds, leaving the seller back at square one.’
| Cost | Percentage |
|---|---|
| Less than £250 | 4% |
| £250-£500 | 16% |
| £501-£1,000 | 16% |
| £1,001-£2,000 | 10% |
| £2,001-£3,000 | 5% |
| £3,001-£5,000 | 6% |
| More than £5,000 | 12% |
| Dont know/ cant recall | 28% |
| Prefer not to say | 3% |
| Average cost incurred | £2,727 |
The research showed that in the vast majority of cases, 69 per cent, the reason for the sale collapsing was down to the buyer pulling out, not the seller.
‘Buyers need to have a little more skin in the game,’ added Higgins. ‘An earlier commitment – for example through reservation agreements – would go some way to avoiding these situations.’
There are no laws in England and Wales against buyers or sellers pulling out of an agreed sale, so until both parties exchange contracts the home seller has no legal obligation to sell and the buyer no obligation to buy.
However, the Government recently promised to ‘encourage’ the use of voluntary reservation agreements to help crack down on gazumping, in addition to a raft of new rules to crack down on ‘rogue’ estate agents.
The Ministry of Housing said it aims to carry out out research on reservation agreements with the aim of trialling them by the end of the year.
Why do property sales fall through?
According to the HomeOwners Alliance, 8 per cent of sellers with a failed sale experienced gazundering.
| Net buyer related reasons | 69% |
|---|---|
| Buyer decided not to buy | 39% |
| Buyer finances were not in order | 28% |
| Sale further up the chain fell through | 20% |
| Gazundering | 8% |
| Estate agent couldn’t find a buyer | 6% |
| Buyer pulled out after survey results | 6% |
| Issues arose during conveyancing results | 6% |
| Other | 7% |
| Don’t know | 5% |
| Source: HomeOwners Alliance | |
Unlike gazumping, in which a third party makes a higher offer on a property at the last minute resulting in the first prospective buyer losing out, gazundering happens when the original buyer lowers their offer just before the exchange of contracts, forcing the seller to choose between the sale collapsing or accepting less money.
Other common reasons for buyers to change their minds included chain breaks further up the ladder, unsatisfactory survey results or legal searches relating to the property throwing up problems.
How can home sellers protect themselves?
Gazumping
Until the Government’s proposals become law, sellers and buyers will have to make do with the options that already exist.
The good news is, there are already several of these – though take-up remains low.
One company looking to tackle gazumping is insurance and law firm Gazeal, which offers a binding contract that locks buyers and sellers into completing property transactions from the minute an offer is agreed.
Once the agreement is made, buyers get a two week period to ensure they’re satisfied with the property, within which time they can back out of the deal if legitimate issues with the property arise.
After this, the contract is binding and could result in hefty legal costs recovered by the injured party if broken.
Chain breaks
More than 300,000 property transactions collapse every year due to broken chains and buyers changing their mind. One in 10 of those who incurred costs estimated them to be over £5,000.
More than 300,000 property transactions collapse every year due to broken chains and buyers changing their mind
One company looking to address this issue is estate agent Nested, which gives sellers a cash advance on their home sale if they don’t sell it within three months, allowing them to move without needing to sell first.
Nested founder Matt Robinson said: ‘The Government’s idea to encourage deposits is welcome.
‘But it is not clear how they expect a buyer to deposit a large sum while being in the dark about the integrity of the property and title they are buying.
‘The introduction of deposits is unlikely to make much difference. Wholesale changes are needed and we can’t see that coming from the Government.’