What happens if buyer pulls out before exchange of contracts?


What happens if buyer pulls out before exchange of contracts

Just when you thought you’d sold your house only to have your buyers pull out before exchange of contracts.

So what happens if buyer pulls out before exchange of contracts? If your buyer pulls out before exchange of contracts you can either put it back on the market with your estate agent or go for a quick sale with a house buying company instead. What you do depends on how quickly you need to sell your house or if you are happy to wait for another buyer to come along.

There are many reasons why buyers pull out before exchange of contract. But what ever the reason is, if you need to sell your house fast, the reason doesn’t necessarily help you.

What to do if house buyer pulls out

What you do if your buyer pulls out from your house sale depends on a number of factors. The first of which is what stage the house sale process has reached.

If your buyer pulls out soon after you’ve accepted their offer, this doesn’t pose as too much of an issue. Not much time has been wasted and you can simply relist your house with the estate agent once more.

However, if your buyer pulls out just before exchange of contracts, this is a completely different scenario.

I thought the best way to answer this question was to look at the reasons why buyers pull out. Then to provide specific solutions for each of these reasons.

What are the reasons buyers pull out from buying a house?

There are multiple reasons why buyers pull out from buying a house.

Reasons why buyers pull out:

  1. They’ve made offers on multiple properties.
  2. The buyers fail to get a mortgage.
  3. The valuation is less than their offer.
  4. Problems are found during the house survey.
  5. The buyers change their mind.
  6. One or both buyers lose their job due to redundancy.
  7. They lose their house sale as their own buyers pull out.

Let’s take a look at each of these in more detail and what to do in each case.

1. They’ve made offers on multiple properties

They've made offers on multiple properties

You may not realise it, but buyers often make multiple offers on houses. They don’t have to disclose this fact to you or the estate agent. Also, there’s technically nothing wrong with the practice either. But morally is where it could be pulled into question.

It’s not such a problem until their offers start getting accepted. Those buyers who continue with multiple accepted offers are wrong to do so. But hopefully you’ll soon find out about this, and not too far into the sales process.

Once sellers begin to accept their multiple-offers, the buyer has to decide which house they want to proceed with. They need to decide which house they want to begin spending money on legal fees and valuation fees etc.

So unless the buyer is prepared to spend money on multiple properties with legal fees etc., which is unlikely, you’ll find out quite quickly after you accepted their offer if they don’t choose your property.

The solution: It’s probably best to simply put your house back on the market with the same agent. Not too much time will have been wasted.

2. The buyers fail to get a mortgage

The buyers fail to get a mortgage

In the situation where the buyer fails to secure a mortgage, you’re more likely to be further down the conveyancing track. This will be frustrating, but there’s not much you can do. That is other than to offer to lend the buyers the money yourself.

This may sound mad, but it does happen. This is what happened to me many years ago when I struggled to get a mortgage on a property. It’s referred to as vendor finance.

A buyer’s fail mortgage application is more likely to happen further into the sale process. It’s possible the buyer’s solicitor will have already commenced the legal conveyancing. Which means there will have been interaction with your solicitor and costs incurred.

Your solution: You are probably best to simply put your house back on the market. Unless there’s been significant delay to get to this stage. If you want to sell your house quickly, you may want to explore the idea of a house buying company instead.

A discussion with a property company may be worth it even if you do also put your home on with your estate agent too.

3. The mortgage valuation is less than their offer

The valuation is less than their offer

A mortgage valuation of less than your buyer’s offer is more likely to happen in a property downturn.

For example in the situation we find ourselves in as I write this article. Currently we find ourselves in the middle of a Covid-19 Pandemic. Whilst properties have seen a bit of a boost after the first lockdown, this will likely be short lived.

Banks are starting to become nervous about what’s going to happen to the property market, which is causing surveyors to down-value properties by up to 20%!

The point at which your house is being valued by your buyer’s mortgage company will be further down the conveyancing track. Most of the legal conveyancing should have already been done at this point.

Your options if your buyer pulls out before exchange due to mortgage valuation less than their offer:

  1. Renegotiate the price: You might be well advised to consider renegotiation of the price to accommodate the reduced mortgage valuation. The problem you face is it may affect your onward purchase too. In which case you may need to renegotiate the price you’re paying for your new home as well.
  2. Re-market your property: You may have to put your house back on the market with your estate agent. The problem is deciding on what price do you relist it for. Having just had a mortgage valuer put a lower value on your property would put into question your previously marketed price. If it sells once more at the higher price to a buyer who requires a mortgage, you may find yourself in the same boat. But in this case you’ll be several months down the road. Think about this potential dilemma when you’re renegotiating the price in point one above.
  3. Sell your house to a house buying company: You may be able to get the price you need on your house with a house buying company. This may involve a creatively structure sale whereby you get some of your equity now, and some further down the track. Which means: If you would prefer to sell your house for more money; If you can afford to not take all the equity now; But you need to sell now, this might be a good option for you to explore.

4. Problems are found during the house survey

Problems are found during the house survey

There are many problems that can get picked up at the survey stage. This could be the surveyor has picked up on a damp problem or worst still subsidence.

If this happens you have a problem, as a high percentage of buyers won’t buy a house with a damp problem, and an even higher percentage won’t touch a house with subsidence.

For this problem you have four solutions, as follows:

  • Fixed the problem yourself: Either way the problem needs to be fixed. If the buyer is happy to proceed on the basis that you fix the problem, this will simply cause a delay until such time as the works are completed. But if your present buyer are not happy to proceed, you’ll need to fix the problem in order to sell your house in any event.
  • Renegotiate the price: You may be able to renegotiate the offer price with the buyer to take account of the problem picked up by the surveyor. The problem the buyer may have is if their mortgage is refused or a retention is placed on the mortgage.
  • Re-market your house with the defect: You could try to sell your house using an estate agent with the defect left in place. But you are legally bound to tell any prospective buyers about the problem. Plus you’ll need to reduce the list price to take account of the costs involved. You may find the only buyers who will take on certain problems will be builders or investor. In which case, the price reduction won’t just be for the cost or repairs, but will also include their profit on the project too.
  • Sell your house to a house buying company: A house buying company are usually happy to deal with the type of problems that get picked up in a survey. There might be creative ways to resolve your dilemma from a simple and straightforward conversation about your situation.

5. The buyers change their mind

The buyers change their mind about buying your house before exchange of contracts

As annoying as this sounds, buyers can and do change their mind. There’s nothing much you can do about it if this is what happens, other than to re-market your property.

However, if the buyers change their mind when you’re nearing exchange of contracts, this will be very frustrating. You may be several weeks down the conveyancing process from when the offer was first accepted.

If this is the case and the buyers change their mind right at the last minute, you could consider a discussion with a house buying company to see whether a solution could be found for you.

6. One or both buyers lose their job due to redundancy

Unfortunately redundancy is something you simply cannot plan for. If one or both of your buyers are made redundant during the conveyancing process, this is unfortunate. It’s not their fault, but it might leave you high and dry and having to go back to the drawing board.

You have two choices in the situation where you buyers are no longer proceedable. This is to remarket your house with your estate agent and hope to get a buyer quite quickly. Or speak with a house buying company about other options.

Bear in mind that you don’t always have to accept a below market offer with a house buying company. There are many creative ways in which a house sale can be achieved.

7. They lose their house sale as their own buyers pull out

One of the biggest problems with the way the conveyancing process works in the UK is how a house sale can fall through right up until exchange of contracts. This is not helped by the fact that there are often several people in a conveyancing chain.

If your buyer is in an upward sales-chain and they lose their buyer for what ever reason, this impacts on the sale of your house too. For this situation you have four options.

  • Wait for your buyer to re-sell their house: This is quite risky and it will depend on the sales-chain below you. If your sellers are happy to wait, and their sellers etc., this is an option. However, if everyone is on board with this solution, you are probably best to fix a time-scale for it to happen.
  • Remarket your house with your estate agent: You could do this either immediately or if option one fails and your buyers don’t manage to hit the time-scale.
  • Contact a house sale company: It’s always worth exploring this option, as you may be able to sell your house quickly on a win-win basis.
  • Put your buyer in touch with a house buying company: If your buyer is extremely keen on buying your house, but they are not able to secure a buyer, you may like to put them in tough with a house buying company. They have nothing to lose and this could end up with an all-round win for everyone concerned.

If you would like to discuss any of the above problems with me, please do not hesitate to either comment below or contact me on the contact us page.

I hope you’ve got something from reading this article about what happens if buyer pulls out before exchange of contracts

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