House buyers may take months to find the ideal home. Anticipation sets in when an offer is accepted, but having agreed on a sale price isn’t the end of it. Under English law both the buyer and seller can legally withdraw from the agreement at any time prior to contracts being exchanged. Statistics published in the Guardian reveal that almost one third of all house sales that fell through in the first half of 2011 were due to the seller withdrawing.
The costs to the buyer of the seller withdrawing can run into hundreds or thousands of pounds. Costs will depend on the type of property survey commissioned, with a structural survey carrying a high price tag. There will be searches to pay for, legal fees and in some cases arrangement fees on a mortgage. Some buyers may have given notice on rented accommodation and find they need to search for an alternative rental.
Since home information packs were withdrawn as the responsibility of the seller in 2010, there have been far more speculative sellers putting their homes up for sale. They can test the waters and get a feel for the type of price their home would bring, and then withdraw their property from the market. They can also accept a higher price for their home, leaving the buyer gazumped, though this happens in far fewer cases than that of sellers simply withdrawing. Naturally buyers can also gazunder the seller by reducing their original offer, but they could well lose the property by doing so, plus any costs they have incurred.
It is possible to protect the costs which a buyer incurs in the house buying process by entering into a legal agreement with the seller, in the form of a pre-contract agreement guaranteeing the seller will pay a proportion of the purchaser’s costs if the seller withdraws. If the seller is genuinely attempting to sell their property and accepts an offer with every intention of proceeding, then it is a reasonable request that they should repay the costs of a survey if they withdraw. The buyer will however incur the additional legal expense of having a pre-contract agreement drawn up.
Buyers also have the option of purchasing insurance to cover any wasted expenses, if the seller withdraws or if they are gazumped. It is worth comparing prices of insurance against a pre-contract agreement, especially if one has already lost out on a property which an offer has been accepted on.
With the rise in the number of house sellers withdrawing their properties from sale, leaving property purchasers out of pocket, it is worth giving consideration to the potential financial losses one could incur. If provision to cover such losses is not considered it could leave the buyer short of funds to proceed with another offer.