Research shows both buyers and sellers affected
Two recent surveys have highlighted the high number of property transactions that fail to complete every year. For both home buyers and sellers this represents stress, heartache and, often, a hefty financial cost.
31% of home buyers lose out
Research by Market Financial Solutions (MFS) found that almost a third (31%) of property purchases fail to complete. They quizzed a nationally representative sample of 2000 people who had had an offer accepted on a property over the last 10 years. Of these, 31% saw the deal fall through; and a staggering 61% of Londoners reported a failed transaction.
The key reasons for failure were:
- Breakdown in the chain – 41%
- Delays in getting a mortgage – 33%
- Offer of mortgage in principle rescinded – 16%
Respondents also reported that gazumping is alive and kicking. 39% stated that a deal had fallen through when the seller accepted a higher offer from another buyer.
Cost to sellers of failed property transactions
The average cost to sellers of a failed property transaction is £2,700, according to the HomeOwners Alliance and Immo.co.uk. Their annual survey explored the experiences of home sellers rather than buyers and found that 20% of sales fell through on average. This equates to a whopping 300,000 transactions every year. And the £2,700 isn’t the whole story – 12% of those affected paid out more than £5,000 in legal and other fees.
The top reasons for failed sales were:
- Buyers changing their minds or finding another property – 39%
- Buyers’ finances not in order – 28%
- Breakdown in the chain – 20%
And countering the MFS findings on gazumping, 8% reported that the cause of the collapse was gazundering – a buyer lowering their offer just before exchange of contracts.
The financial cost is not the only consequence of a deal falling through. The MFS survey found that 11% of respondents settled for a property they liked less when their initial offer didn’t work out. And, although it isn’t quantified in either survey’s results, emotional stress is inevitable when an anticipated sale or purchase falls through.
While the research appears to offer conflicting reasons for failed property transactions, what’s clear is that there is a significant risk of non-completion. Lexelle Home Buyers Protection Insurance gives your clients protection against key risks. It offers reassurance that their legal fees and associated costs will be met if their purchase does fall through – more details here.