More than 1 in 4 house sales in England and Wales fall through every single year. This can be for a huge number of reasons. But are there consequences? When can you pull out of a house sale in the UK?
In short, even after contracts have been exchanged, it is technically possible to pull out of a house sale or purchase. The financial and legal costs of doing so simply grow the nearer to the actual sale you get.
Here is everything you need to know about pulling out of a house sale or purchase in the UK:
When Can You Pull Out Of A House Sale?
You can pull out of a house sale effectively at any stage – right up until the day contracts are due to be exchanged – without any additional penalty.
It is actually still possible to pull out of a sale after contracts have been exchanged. However, the complications and consequences do grow significantly after that point.
(It’s worth noting that laws are slightly different in Scotland. In Scotland, you can only pull out of a house sale before the phase known as the conclusion of missives.)
Can You Pull Out Of A House Sale After The Offer Accepted Phase?
Yes, even after an offer has been accepted, there are no legal consequences of pulling out of a house sale you are involved in.
There can still be financial costs. But these are more in the nature of sunk costs (that is to say, the money you’ve already spent on the process so far) rather than extras added on top.
In general, it has been estimated that sellers can lose an average of £2700-£5000 when a house sale fails.
Can Buyers Pull Out After The Exchange Of Contracts?
Once contracts have been exchanged, a buyer can still pull out. The legal and financial consequences of doing so though are much more severe:
- Forfeit deposit – the seller will almost certainly end the contract, meaning the buyer will forfeit their deposit.
- Claim for damages and fees – in some cases, sellers have been able to claim for damages against buyers who pull out of a sale after contracts have been exchanged. For example, if house prices go down in the intervening time. Buyers may also have to pay any other costs the seller incurs.
- Funds committed – any costs incurred by the buyer so far are also lost. This might include money spent on conveyancing fees, property surveys, mortgage advice, and so on.
Despite this, there may be unforeseen events that suddenly limit a buyer’s ability to make the purchase. Or perhaps new information comes to light regarding the condition of the property.
What Happens If You Pull Out Of A Sale Of A House?
If you pull out of a house sale as the seller, depending on the contract you signed, you will probably have to pay:
- Estate agent fees – many estate agents expect to be paid for finding a buyer willing to pay the price you want. If you later decide not to go ahead, as far as they are concerned, they have still done their job and expect to be paid for it.
- Conveyancing fees – the same is true of any conveyancing solicitors and other fees associated with the conveyancing process. Even with solicitors who don’t charge you a fee if there is no sale, there may still be the cost of disbursements that can’t be recovered.
- Valuation fees – valuing a house before sale tends to cost money and cannot be recovered if you change your mind even for a very important reason.
This makes checking the contract to see what fees you have agreed to pay a vital preliminary step before choosing to walk away from the sale of a house. It’s also important to take stock of the costs you have already paid and how they stack up against the negatives of making the sale.
The party who is not pulling out of the sale can also issue a “Notice to Complete”. This is essentially a ten-day countdown to go through with the sale during which the other party may have to pay interest.
What Can You Do If Your House Buyer Pulls Out Before Exchange?
From a legal standpoint, if you haven’t exchanged contracts, there is not much you can do if your buyer pulls out from a house purchase. In England and Wales, even an acceptance of an offer is not legally binding.
This does depend on the reason why your house buyer pulled out. One of the main reasons house sales fall through – and indeed one of the problems with how house sales in the UK work in general – is that you agree a sale price first and carry out surveys and other due diligence after.
(In Scotland, the law is slightly different. Far fewer house sales fall through in Scotland – in large part, because sellers must have a “home damage report” survey completed before they put their property on the market.)
In cases where due diligence reveals problems, you might be able to address any work the property requires in order to persuade the buyer not to give up on the sale. Or you might agree to a reduction in the asking price to reflect that information.
In general though, the best approach is always to talk with your conveyancing solicitor and any other legal experts involved in the process before you decide whether you can pull out of a house sale or what to do if someone pulls out on yours.
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