According to upfront information provider Gazeal, in the first 10 weeks of this year 53,856 property sales fell through, which is an astoundingly high number.
If this trend continues, over 100,000 transactions will collapse by mid-year and by the end of 2022, we could see 250,000 property sales falling through.
Why So Many Property Sales Fell Through
There are many factors that contribute to so many property sales falling through, including buyers not being prepared, legal teams working too slowly and sellers becoming greedy, according to some brokers.
Unprepared Buyers In A Fast Market
The current property market is very fast. With demand outstripping supply, buyers need to act fast if they want to secure their dream home. This puts them under a lot of pressure, which can result in them being rushed to make a decision, driven by the fear of losing out.
A decision that is made under pressure is often not the right one. So many buyers change their minds afterwards. This is one factor why so many property sales fell through in recent weeks.
And once they have withdrawn from the sale, they might also have set off a chain reaction.
Once these buyers have had time to think, they often see a different property or have doubts about the one they have committed to and change their mind, breaking down the chain as a consequence when they pull out.Robert Payne, Director at Langley House Mortgages
But because the market is so fast, many buyers also go into viewings unprepared. Making an offer on a house before they have a mortgage agreed in principle. When they then find out they are unable to lend enough money to buy the house, they have to pull out of the sale.
Greedy Sellers In A Seller’s Market
When supply is lower than demand, sellers are in a better position and can ask for a higher price. But many sellers get greedy and increase the price after a sale has been agreed, if they feel they could get a better price if they were to go back on the market.
According to Rob Peters, the principal at Simple Fast Mortgage, this is the main reason why so many property sales fell through over the past weeks.
Many buyers also found out after their valuation for their mortgage, that the lender had downvalued the property they wanted to buy. If the buyer is able to increase their deposit, they might still be able to go ahead. But more often than not, buyers have already stretched themselves, which means they are unable to commit to the sale.
And if the sellers are greedy, they will not agree to lowering the price, even if that might rule out many other buyers who will require a mortgage.
Slow Legal Processes
Another reason why so many property sales fell through in recent months is slow legal processes. Either because searches are taking longer to come back, or the conveyancing process is slow.
Slow legal teams can not only add to the time it takes to complete a sale, but also to the stress levels of both sellers and buyers.
How Can Property Fall-Throughs Be Minimised?
One way to keep the number of property sales falling through down, according to Gazeal, is by sellers providing more information about the property upfront. If buyers had information about restrictive covenants, flood risk in the area and such like, there would be less surprises further down the line and less chances of buyers pulling out.
I’ve said it plenty, but more upfront information is a win-win-win as far as I can see. We need to support all parts of the transaction if we truly want to improve the home buying and selling process, and make it faster, more robust and more transparentBryan Mansell, CEO of Gazeal
What Buyers And Sellers Can Do
As a buyer, you can make sure that you are in the best possible position. Get a mortgage agreed in principle, if you need a mortgage, before making an offer on a property. If you have to sell your house, put it on the market and wait until you have accepted an offer.
This will put you in a strong position as a buyer and enable you to move quickly when you find your dream home. Don’t rush into decisions though, as you might regret your decision later.
As a seller, consider carefully what sales price you choose. While you might be able to get an offer even if the price is very high. Keep in mind that mortgage companies will value down a property if they believe the price is higher than its true value. This is especially important if the majority of your buyers will need a mortgage.
Also, provide as much information on your property as you can, so that buyers don’t have a reason to pull out further down the line.
While it is tempting to accept a higher offer after you have accepted an offer already, consider that a change might prolong the process and your seller might not be willing to wait.
Another thing to consider, while a lot of property sales fell through in recent weeks, this is a common occurrence and always has been. With a process that is only legally binding once contracts have been exchanged, there are many hurdles at which everything can fall and, statistically, 250,000 fall-throughs in a year is not that much more than in previous years.