When Buying A Home Falls Through

After spending significant sums on searches, surveys, mortgage fees and legal fees, if your residential property transaction falls through, where do you stand and are you able to recover these costs?

Buying a home can be a stressful time, but the financial implications of a purchase falling through can be even more daunting.

Why do transactions fall through?

There are many reasons why some transactions do not proceed. Difficulties in a long chain, where all transactions are dependent on one another; sellers changing their mind or having a change in circumstances; legal stumbling blocks arising such as access issues, breaches of covenants or lack of planning/building regulations; buyers being unable to secure mortgage finance; or an adverse survey, are all common causes of failed transactions.

How common is it?

The national rate of fall-through is around 25-29 per cent this year. In our experience, around 10 -15 per cent of all transactions we deal with will abort for many different reasons.

When would the other side be liable?

In conveyancing transactions in England and Wales, a buyer or seller is not contractually bound to a transaction until contracts are formally exchanged. So, it is not until after the exchange of contracts that your seller could be issued with a penalty that would potentially cover your abortive costs.

Can I protect myself?

You can take out Failed Residential Transaction Insurance against abortive costs for residential property purchases. This usually covers up to around £1,500 for the costs associated with a failed transaction, such as legal fees and search costs. Some policies may also cover mortgage and survey fees. It is important to check the fine print to see whether it is appropriate for you, and the terms under which you can claim.

As with any insurance policy, there will be specific circumstances which are covered and some which are excluded. For example, a policy may cover some or all of the following:

• The seller accepting an alternative offer on the property after previously accepting yours
• An adverse legal search
• A survey which highlights the need for significant remedial work (at least 10 per cent of the value of the property offered)
• The mortgage lender's valuation being less than the sum offered to buy the property
• An employer no longer relocating, so the house move is no longer appropriate
• Involuntary redundancy
• Death, unforeseen illness or injury

How much will it cost?

The cost of this policy can be dependent on your circumstances but will typically start at £50 +VAT. At JCP we encourage all our clients to take the insurance out at the outset as cover is unlikely to be available as the transaction progresses. Also, the insurance would not cover any costs incurred by you before you took out the insurance, so the earlier you put it in place, the better your protection.

As you can see, failed transactions can cause real issues for both buyers and sellers. Our Residential Conveyancing Team can offer tailored advice and support to fit your specific circumstances.

For more information or guidance, please contact our team at hello@jcpsolicitors.co.uk or call 03333 208644.