More than one in three home purchases have fallen through in the last 12 months, with potential buyers typically ending up £2,000 out of pocket.
According to data from online property platform Smoove, 34 per cent of property transactions did not ultimately end up going ahead.
The problem may stem from a crowded housing market with lots of competition, as the research also revealed that new property searches from would-be buyers were up 36 per cent year on year.
The figure climbs to 54 per cent for first-time buyers, according to the firm’s inaugural Home Movers Report.
Out of pocket: Would-be homebuyers can risk losing up to £2,000 in legal and survey fees if their purchase falls through
The cost of moving home, which buyers may not be able to fully recoup if a sale collapses, have also increased due to rising house prices and living costs.
As demand from buyers continues to grow, solicitors are facing capacity constraints, according to the report. It found that the average legal fee has risen by 11 per cent or £140 in the past 12 months, from £1,273 to £1,413.
Homebuyer surveys have also risen in price, costing an average of £525, up 12.9 per cent from £465 the previous year.
Potential homeowners are therefore paying almost £2,000 in associated costs – money which could be wasted if the transaction then falls through.
Jesper With-Fogstrup, chief executive of Smoove, said: ‘Home moving can often be an agonising, horribly stressful experience. The fact that few would argue with this speaks to a failed system.
‘One in three home buying transactions should not be falling through. This figure represents tens of thousands of broken dreams and huge sums of money essentially poured down the drain.’
He said that the law needed to be reformed in order to prevent as many sales collapsing.
Painful process: Delays in surveying and conveyancing have meant buyers may need to wait some time before they get the keys in their hand – increasing the chance of fall-throughs
‘Creating more certainty around property transactions is essential. It will probably require legislative reform to provide greater protection to buyers and sellers once offers have been accepted,’ he added.
‘However, in the meantime, there are many things the industry could do to reduce stress levels and the proportion of transactions falling through.
‘As we’ve seen, the sheer length of time is a major driver of stress and uncertainty. The entire process requires significant digitisation and automation, expediting paperwork and alleviating pain points.
‘People should be able to engage with the transaction process entirely online or via an app, providing digital IDs, signatures and form filling and see its progression in real time. This could really help modernise the industry and transform the home moving experience.’
The reality is the longer it takes to buy or sell a property the more likely the transaction will collapse
Paula Higgins, HomeOwners Alliance
Chris Sykes, technical director at Private Finance, said the mortgage company had also seen an uptick in deals falling through
He said it usually happens for one of two reasons. The first, he said, is concerns about the UK’s general economic outlook leading would-be buyers to change their mind about moving and instead decide to stay put.
The second is a lack of housing stock meaning that one party in a property chain can’t find a home to move to, causing the entire chain to fall apart.
‘I have heard from many clients that all the good properties are gone,’ he says.
The length of time transactions take to complete has also increased, rising 23 per cent to 153 days, more than five months, since 2019.
How to avoid losing money if a sale falls apart
A sale falling through isn’t always avoidable, but there are steps that buyers may can take to protect themselves if it does happen.
Paula Higgins chief executive of the HomeOwners Alliance says: ‘The reality is the longer it takes to buy or sell a property the more likely the transaction will collapse.
‘People’s circumstances change, which means they decide not to go through with the sale or purchase, or they may simply change their mind.
‘And since people can pull out without any financial penalty up until when the contracts are exchanged, frustrated buyers and sellers will find themselves out of pocket.
‘This is especially true for buyers who will have paid survey costs as well as mortgage arrangement and conveyancing fees.
Insured: Prospective buyers can buy insurance to cover any losses if their house purchase falls through unexpectedly.
‘Buyers can take out insurance to cover these costs should the purchase fall through. The basic product offers coverage up to £1500, with a premium offering that will pay out up to £2500 including accommodation and storage fees.’
Higgins also advises instructing a solicitor or conveyancer before making an offer on a house, which will speed up the process once you do put an offer down and limit the amount of time in which another party can change their mind.
The 34 per cent of transactions that are collapsing represents a 4 per cent uptick compared to pre-pandemic.
Nathan Emerson, CEO of Propertymark said: ‘On average, pre pandemic, around 30 per cent of property sales fell through.
‘The current lack of stock will be a contributing factor to the current average, as some buyers have been putting in offers and then withdrawing them if a property that better suits their requirements comes on to the market.’
Keeping on top of your paperwork and responding promptly to requests from your bank is another way that home buyers can avoid delays.
David Hollingworth, from mortgage company L&C, says: ‘It pays for buyers to be on top of things all the way through. From the mortgage aspect, having your supporting documents ready to go so you have everything on hand, income verification, pay slips will only help to speed things through.
If things are late, you may get yourself into an admin queue, and providing information in a piecemeal way could put you at the back of the queue every time.
For first time buyers, Hollingworth also recommends working out an estimate of the associated costs when deciding what size of deposit they can afford to put down, and budgeting for a slight increase in the amount they will need to borrow in case they need to up their offer in order to keep a purchase on track.
‘As there is a lack of supply you may have some homeowners getting further offers after accepting, for example if someone unexpectedly wades in with a higher offer,’ he says.
‘With any chain there is always a possibility something will go wrong that will have a knock-on impact.’
Best mortgage rates and how to find them
Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.
If you are looking to buy your first home, move or remortgage, it’s important to get good independent mortgage advice from a broker who can help you find the best deal.
To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.
Our mortgage calculator powered by L&C can let you filter deals to see which ones suit your home’s value and level of deposit.
You can also compare different mortgage fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes, with monthly and total costs shown.
Use the tool at the link below to compare the best deals, factoring in both fees and rates. You can also start an application online in your own time and save it as you go along.
> Compare the best mortgage deals available now
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
