What to do When the Seller Pulls out of a House Sale
A seller pulling out of a sale leaves the buyer exposed. They likely paid conveyancing costs to their solicitor, mortgage brokers, and surveyors.
Buyers can often be completely oblivious to the reason and left thinking about what to do. There normally is a reason, from the seller being frustrated with the buyer's solicitor, or even having a challenge with their onward purchase.
Whether due to gazumping, a property chain collapse, or other unforeseen circumstances, a sale falling through can have significant financial and emotional consequences. This can lead to lost deposits and legal fees, wasted time, and the added stress of finding a new property.
In this article we'll run through how to handle a wide variety of reasons why a seller would pull out and what you can do - potentially even saving your house purchase.
Is it legal for a seller to pull out?
In England and Wales, the seller isn't contractually or legally bound to sell to a buyer until the exchange of contracts. This means they can change their mind or accept a different offer without facing legal consequences. This is why no-sale, no-fee conveyancing is so important.
However, there are certain exceptions. If a seller's actions include a breach of contract, like misrepresenting the property or failing to fulfil their obligations under the legal agreement, the buyer may have legal recourse.
For example, if a seller knowingly hides a significant defect in the property, the buyer may be able to claim misrepresentation. If you're concerned about a seller's actions or believe they may have breached the contract, seek legal advice.
Our solicitors can assess your situation and advise you on your options. They can also help you understand your legal protections and help negotiate with the estate agent or seller if necessary.
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If your seller pulled out after the exchange of contracts, you might be due compensation. Our solicitors can help with this and advise you of the next steps.
- What are my responsibilities?
- Is the seller in breach of contract?
- Can I claim compensation?
Why would a seller pull out? The top 7 reasons
- 1
A broken property chain
- If the seller's onward chain collapses, they may be forced to pull out of the house sale to avoid being left in a position where they have sold their property but cannot purchase their new home.
- The buyer could offer to wait for the seller to avoid the house sale collapsing, but keep a close eye on other potential properties on the market as an incomplete chain can have a domino effect of pulling out.
- 2
A change in circumstances
- Sellers may experience unexpected changes in their personal or professional lives, such as job relocation, relationship changes, or financial difficulties, leading them to reconsider selling their property.
- In some cases, sellers may become emotionally attached to their home and decide to keep it, even if they had initially planned to sell.
- If the seller's circumstances have changed, there is little you can do as a buyer to affect the situation.
- 3
Frustration with the process
- Sellers may become frustrated with the length of time it takes to complete a sale, especially if the process is delayed due to issues with the buyer's chain or other factors. Learn about how to put pressure on solicitors here.
- A potential solution for the buyer here is to offer the seller a tangible completion date, giving everyone involved in the conveyancing process a goal to aim for.
- 4
The seller has a better offer
- On occasion, a seller will receive a better offer from another buyer and decide to accept it and pull out of the original sale.
- To combat this, the buyer could offer the seller a completion date that is faster than the other buyer, but the risk here is banking on the seller being time-motivated rather than money-motivated.
- 5
Unexpected repairs or maintenance
- If a seller discovers significant repairs or maintenance issues previously unknown, they may postpone or cancel the sale to address these problems.
- 6
Rising interest rates
- When interest rates increase, it becomes more expensive for buyers to obtain mortgages. This can lead to a decrease in demand for properties, as potential buyers may be less able or willing to afford higher monthly payments.
- As a result, sellers may be less confident in their ability to find a buyer at their desired price and may decide to postpone or cancel their house sale.
- 7
Decrease in demand
- Changes in demographics, shifts in consumer preferences, or local economic and market conditions, can also affect the demand for properties.
- For example, if a local industry experiences a downturn, it may lead to job losses and a decrease in demand for housing.
- Similarly, if a new development is completed in an area, it may increase the supply of properties and reduce demand for existing homes. These can influence a seller's decision to sell and the price they can command for their property.
What happens if a seller pulls out before the exchange of contracts?
Sale delay - chain collapse
If a seller pulls out before the contract exchange, it can lead to significant disruptions and delays in the property chain.
For example, a seller pulling out of a property at the top of the chain can cause a domino effect, leading to delays or cancellations for buyers further down the chain.
The seller finds a new buyer
If the seller has found a new buyer or accepted a different offer, they will rescind the contracts to the first buyer and re-issue them to the new buyer. They cannot issue contracts beforehand.
The seller might choose to inform both buyers of a contract race and issue contracts to both parties. Essentially, this means the first buyer ready to exchange gets the property in a first-to-the-finish-line race.
What happens if a seller pulls out after the exchange of contracts?
Notice to complete
- If the seller pulls out after the exchange of contracts, you can issue a notice to complete; a formal document giving the seller a specific deadline to complete the sale, normally 10 working days. The seller is liable for the buyer's costs after the exchange.
- If the seller fails to complete within the specified timeframe, the buyer can terminate the contract, have their deposit returned, and seek compensation.
Reclaiming costs
If the seller breaches the contract by pulling out after the exchange of contracts, you may be able to reclaim costs such as mortgage arrangement fees, survey costs, or removal expenses. To reclaim costs, you may need to provide evidence of the expenses incurred. This could include:
- Copies of invoices for mortgage arrangement fees, survey costs, removal expenses, or other relevant costs.
- Bank statements showing the payments made for these expenses.
- Any correspondence with the seller or their solicitor regarding the house sale and the costs incurred.
You can then negotiate with the seller to reclaim the costs. If the seller refuses to reimburse the costs, you may need to take legal action. It's important to note that the ability to reclaim costs may depend on the specific circumstances of the case.
Factors such as the reason for the seller's breach of contract and the terms of the contract itself can influence the outcome. In some cases, a buyer may be able to obtain a legally binding court order for 'specific performance'. This means that the court orders the seller to complete the sale.
However, specific performance is discretionary, and the court may refuse to grant it if unfair or impractical to do so.
Solicitor fees when the seller pulls out
If a seller pulls out of a house sale, the fees payable to your solicitor depend on the contract you have.
No-Sale, No-Fee:
Most solicitors offer some kind of fee protection like a no-sale, no-fee policy which could cover some or all of your legal fees. However, you will still be liable for third-party costs incurred such as a mortgage application fee, searches, or a valuation.No Protection:
Your solicitor will issue an invoice for the work undertaken either on a time-based basis (such as hourly) or as a percentage of the fixed fee agreed upon before instruction. This is why a fixed fee could save you money because a time-based approach will account for all time spent at the solicitor's hourly rate, whereas a fixed fee is capped.
Can I request compensation?
If the seller's actions constitute a breach of contract, misrepresentation, or negligent conduct, you could be able to claim compensation. This is only applicable after contract exchange.
For example, if a seller knowingly misrepresents the property's condition or fails to disclose material defects, the buyer may have grounds to claim compensation. The amount of compensation awarded when a seller pulls out of a house sale will depend on various factors:
- The severity of the breach of contract or misrepresentation.
- Evidence of financial losses you have incurred, such as lost deposits, mortgage arrangement fees, or survey costs.
- In some circumstances, the amount of compensation awarded will be reduced. For example, if the buyer contributed to the delay or failure of the sale, their compensation may be reduced.
Read more about potentially suing a previous owner of a property.
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