Why do property transactions fall through?

Buying or selling a property can be a rather stressful time even when it all goes smoothly, but it is even worse when things don’t go as planned. It is not uncommon for either a buyer or a seller to pull out of the transaction before the exchange of contracts. This not only causes a lot of stress but it can cost a significant amount of money on solicitor’s fees, valuation fees and estate agent fees. So why do property transactions fall through? In this article we will take a look at some recent statistics and also look at the main reasons why property transactions fall through.

Property transaction failure statistics

In the third quarter of 2022, according to a recent study, over 90,000 property transactions fell through. This was a 15.6% jump on a quarterly basis and also a 3.6% compared to the same period the year before. The number of transactions that failed was a 5 year high. When looking at the costs associated with these failures, the average failure cost £3,337 which was 18.7% up on the previous quarter and 16.3% up on an annual basis. It is clear, then that a lot of transactions do fall through and this was increasing as 2022 progressed, but what causes transaction failures?

Why do Property transactions fall through?

There are many reasons why property transactions fall through.

  • Changes in the mortgage market are what have caused the most recent upsurge in transactions falling through. With the rise in inflation and the Bank of England’s sharp interest rate hikes, along with the fallout from the mini budget in September 2022, the mortgage market tightened up and removed a lot of the more affordable mortgage products and also raised their own interest rates. This left a lot of people in the situation where they could no longer afford to buy the property.
  • Poor survey reports are another big reason for buyers pulling out. Buying a home is a big financial commitment and often buyers will put in an offer based on what they have seen. They will then arrange for a survey to be carried out. In some cases, these surveys highlight issues with the condition of the property leading to the buyer no longer being happy to continue with the purchase.
  • Searches are part and parcel of buying a property and some transactions fall through when the searches show up things that the buyer is not happy with. This could be the potential for a large road development, the property being in a flood plain or even the presence of a public path through the property.
  • Issues with chains and frustrations at the time being taken for the transaction can cause transactions to fail, especially if the whole chain collapses. All it takes is one person in the chain to have issues and the whole chain can suffer. Often people will pull out if the chain is too complex.
  • Gazundering and gazumping, great words, aren’t they? These last minute, frowned upon but not illegal practices, often cause transactions to collapse. Gazumping is when a seller accepts a higher offer despite having already accepted an offer from someone else. This is perfectly legal. Gazundering is when the buyer, at the last minute reduces their offer to a point that is unacceptable to the seller.
  • Changes in circumstances can happen, especially given that a property transaction can take up to 4 months. It is quite common for either the buyer’s or the seller’s circumstances to change meaning that they can’t continue with the transaction.

There are many reasons why a property transaction will fall through and nothing is guaranteed until the transaction completes. Typically, 73% of transactions fail because the buyer pulls out and only 23% because the seller pulls out.