For UK home buyers and sellers, exchanging contracts is a major milestone in the process. An offer has been accepted, finances arranged, terms agreed and contracts signed, putting the process well on the way to completion.
Although it’s rare, a house sale can fall through even after contracts have been exchanged. However, as the exchange of contracts represents a legally binding contract, pulling out of the transaction results in negative consequences whether it is the buyer or seller who acts to end the sale. In this article, we’ll take a closer look at what happens when a house sale fails after exchange, the reasons why this can happen and the best actions to take to avoid issues and protect your interests.
Consequences of a sale falling through after exchange
As mentioned, whether you’re a buyer or seller, there are consequences when you pull out after exchanging contracts. At the exchange, buyers are required to pay a deposit, which is typically 10% of the sale price. If a buyer backs out after the exchange, they will usually lose this deposit and may even need to supply compensation to cover a seller’s losses.
For a seller, the consequences are equally severe. Buyers are entitled to take legal action against sellers to recover losses like additional costs incurred from having to find another property or from delays to their own house purchase. If sellers are part of a chain, they may also lose the house that they planned to use the sale of their own to fund.
Home Buyers’ Protection Insurance will reimburse non-refundable costs such as mortgage fees or survey costs, but only if a sale falls through for reasons beyond the policyholder’s control. It does not cover changes of mind or attempts to lower offers without good reason.
Reasons a sale might still fall through
There are many possible reasons why parties in a house sale transaction may pull out. After exchange, the death of a seller or buyer doesn’t instantly invalidate the contract, which is legally binding. However, sales can sometimes fall through or face delays due to legal complexities.
House sales can also fall through due to mortgage issues, as lenders can withdraw offers before completion. Property problems arising from the legal conveyancing process or buyers survey can also impact sales. This may involve structural issues and subsidence, or legal and title issues like boundary disputes and misrepresentation.
Understandably, a property chain collapse can cause sales to fail. Problems like another seller or buyer in the chain pulling out can result in the entire transaction collapsing, with multiples parties unable to access the funds they require to complete individual sales.
System failures can also disrupt property sales at various stages, causing substantial financial losses and delays for all involved.
What you can do to avoid and protect against house sales falling through
While it won’t cover your costs if you simply decide to pull out of a house sale transaction, it’s worth considering purchasing a home buyers’ protection insurance policy. With a policy in place, you’ll have a measure of protection that will allow you to recover expensive processes like building surveys and recoup key costs like mortgage fees.
It is vital that you always discuss any possible issues with either your conveyancer or solicitor, so you fully understand the options open to you and any legal implications. The more clearly you can communicate, the better. Solid communication between solicitors, estate agents, conveyancers, buyers and sellers will help mitigate issues and affords more time for problems to be effectively resolved so sales are not affected.
Being prepared is a key part of purchasing or selling a house. Buyers should ensure that all necessary funds and agreed arrangements are in position and all parties should be aware of any risks involved, especially when they are exchanging and completing on the same day.
Are you buying or selling a house in North Wales?
To stay protected when you’re buying or selling a house, experienced legal assistance is essential. As professional conveyancing solicitors in North Wales, at Bennett Smith Solicitors, we understand that house sales are complex transactions that require continuous care and will do our utmost to keep the process always streamlined with clear communication. For dependable legal support, reach out to our knowledgeable team today.
