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One in five sellers experience a sales collapse

Thursday 17 May 2018

More than 300,000 property transactions fall through every year due to buyers pulling out of the deal, costing sellers a total of £400 million.

The annual HomeOwner Survey from HomeOwners Alliance and proptech platform IMMO explored the experiences of home sellers and revealed that a massive 20 per cent have experienced a sale collapse, with just over half (51 per cent) incurring costs averaging £2,727.

The report found that overall, more than two thirds (69 per cent) of home sales that fell through did so because of buyer related reasons, including the buyer changing their mind or finding another property (39 per cent) and the buyer’s finances not being in order (28 per cent).

Nearly one in ten (eight per cent) with a failed sale have experienced gazundering; where the buyer lowered their offer just before the exchange of contracts. Of sellers who have had a breakdown in their sale, 51 per cent incurred costs related to the transaction falling through, including legal and conveyancing fees (23 per cent), legal search costs (13 per cent), lower offer on property (21 per cent) and survey costs on purchase property (15 per cent).

Worryingly, the research found that uncertainty may actually put people off selling. One in three (34 per cent) homeowners say risks of property chains breaking down and nearly one in five (19 per cent) homeowners say uncertainty regarding the sale price they may get for their property might prevent them from selling.

The research comes after the government announced plans to improve the home buying and selling process with a number of measures, including the introduction of voluntary reservation agreements. These legally binding agreements, advocated by HomeOwners Alliance, would require both buyers and sellers to put down a non-refundable deposit to commit both sides earlier in the process.

Paula Higgins, Chief Executive 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 mind, leaving the seller back at square one.

“Gazundering and time wasting is a huge problem. The homeselling system is so unreliable it’s deterring homeowners from selling – adding to the ongoing housing shortage crisis as a lack of suitable homes is one of the barriers to people moving up the property ladder. Buyers need to have a little more skin in the game too. An earlier commitment – for example through reservation agreements – would go some way to avoiding these situations.”

Samantha Kempe, Co-Founder of IMMO.co.uk, commented: “The current system has created a fundamental power imbalance between the seller and the buyer, with the seller often at the buyer’s mercy during what is often the largest financial decision of their lives. Sellers should be able to proceed with the sale of their property knowing what price they will receive and feeling assured that the sale will go through.”

Among UK adults, 80 per cent would like to see buyers show proof of funds before being able to put an offer to buy a property. In addition, 65 per cent of UK adults support the idea of a reservation agreement requiring buyers and sellers to put down a non-refundable deposit to commit both sides earlier in the process.

Selling a home is not always as straight-forward as it may seem. According to the research, nearly 22 per cent home sellers say they had six or more different people view their home before selling. The average number of viewings is just under five.

Lack of clarity of the sale price and risks of property chains are barriers to selling. One in three (34 per cent) homeowners say risks around property chains breaking down and nearly one in five (19 per cent) homeowners say uncertainty regarding the sale price they are likely to get for their property might prevent them from selling. One in five (20 per cent) home sellers experienced a sale not going through to completion.

Among sellers who have had a breakdown in their sale, 69 per cent say buyer related reasons were the cause. Sellers indicate the main reasons for a sale breaking down include: the buyer changing their mind/ finding another property (39 per cent), the buyer’s finances not being in order (28 per cent), or a sale further up the chain falling through (20 per cent).