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Rushed buyers, slow conveyancing and greedy vendors to blame for increase in fall throughs ‒ analysis
There are a host of factors behind the increase in property transactions collapsing of late, including ill-prepared buyers and greedy vendors, brokers have said.
Data from property information firm Gazeal suggests that up to 17 March there have been almost 54,000 deals collapse.
A host of brokers told Mortgage Solutions they had seen higher numbers of deals collapsing of late, with a range of contributing factors including buyers being rushed into making decisions, slow legal teams and vendors getting greedy.
Buyers making rushed decisions
Robert Payne, director at Langley House Mortgages, said his firm had seen more deals fall through of late, as well as taking far longer to complete than usual.
He suggested that a big factor here may be the nature of the market, and the way that buyers are being pushed into making quick decisions in order to secure a property, given the fierce level of competition.
Payne continued: “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.”
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Vendor greed
Rob Peters, principal at Simple Fast Mortgage, said that greed was the biggest driver in deals falling through currently.
He said: “Property prices are increasing quickly, demand is high, and there are lots of potential buyers sniffing around and estate agents will always want to get the best price for their clients.”
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, noted that he had one case recently where just prior to the exchange of contracts, the vendor decided to hike the price by £20,000.
He added: “My clients were not happy, to say the least, and didn’t bow to the seller’s demand. Quite rightly they withdrew from the transaction and bought something else.”
Lewis Shaw, founder of Shaw Financial Services, agreed that greed had played a part in the “noticeable increase” in fall-throughs recently, adding that some cases had also hit the wall because of borrowers making assumptions about being accepted for a mortgage.
He added that the timeframes of the conveyancing process were also contributing to deals collapsing.
“The legal process is the biggest downfall of the UK property market and needs a root and branch overhaul to speed up home buying timeframes,” he concluded.
Slow progress
Jamie Thompson, broker at Jamie Thompson Mortgages, reported seeing plenty of fall throughs of late, noting that a common issue currently is with management companies being unable to “or painfully slow” at providing fire safety paperwork for flat purchases.
He continued: “This has put my clients off buying as they realise it could be a nightmare to sell the flat in a few years due to the management company of the block not having any incentive to help them progress a sale.”
This was echoed by Taylor-Barr, who cited an example of a client looking to buy a flat in a high rise. The buildings management company had received a fire safety report two years ago notifying them of a cladding issue, but they had chosen not to get an EWS1 report and simply remove the cladding.
“However they have still not done this and don’t plan to do it until later in the year, resulting in a high rise building, with cladding and none of the required reports,” he continued. “Needless to say the deal fell apart as no lender was going to be happy to secure a mortgage against the flat until the work was completed.”
But, in some cases, potential buyers have benefitted from cases falling through, however, particularly first-time buyers.
Thompson explained: “Vendors had originally accepted cash offers under the delusion that they are somehow the answer to all their problems, only to find that some trumped up developer hasn’t got the funds at all and they come crawling back to a pre-qualified, chain free, ready to go, first-time buyer client who can get to the finishing post in no time.”
An inevitability?
Thompson admitted that cases falling through are somewhat inevitable within the mortgage market.
However, he suggested that the number of deals collapsing might be reduced “if buyers and sellers had a little more skin in the game nearer the start of the process”
According to Peters, it’s crucial for buyers to “make sure they have their ducks in a row” to reduce the chances of transactions collapsing, including signing up a “proactive solicitor”, noting that “slow legal work has been the demise of many a property deal”.
Paul Neal, mortgage and equity release specialist at Missing Element Mortgage Services, suggested that a lack of preparation is often the cause of deals falling through.
He said: “It’s easy to fall in love with a property, make an offer then see if you can get a mortgage. This is usually when it all falls down. The number of people who come to a broker saying: ‘My offer is accepted, can you get me a mortgage?’ ‒ it is the phrase we all dread.”