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Can You Pull Out of a Property Sale or Purchase?

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After exchanging contracts, all parties involved are legally bound to the agreement and must abide by its terms. If someone withdraws from a property sale or purchase after this stage, they could be subject to serious legal or financial consequences.

In England and Wales, it is possible to back out of a house sale or purchase before contracts are exchanged.

At Property Saviour, we strive to provide our users with reliable and helpful articles. To do so, we work closely with several property and finance experts who regularly review our content.

In this article, we’ll explain when it’s possible to back out of a property sale or purchase and how to do so successfully.

Table of Contents

How To Pull Out of a House Sale or Purchase in the UK?

If you choose to withdraw from a house purchase or sale, you must inform your conveyancing solicitor. They will then advise the other people involved and explain the next steps to ensure the transaction is officially cancelled.

Before deciding to withdraw, it is essential to consider the consequences, particularly if it is after the exchange of contracts. If the withdrawal is early in the process, it should be straightforward. However, further along the process, it can become more difficult and costly.

The financial effects of withdrawing from a house purchase or sale can include:

  • The buyer losing their deposit,
  • Both parties lose non-refundable costs such as conveyancing fees,
  • The responsible party is being taken to court to cover any losses.

What is the Exchange of Contracts?

The exchange of contracts usually happens during week 8 of the buying process. After the buyer’s conveyancer has completed all the necessary checks, both parties sign the documents and the exchange commences.

This creates a legally binding agreement to complete the transfer of ownership. The exchange typically happens 7-28 days before the completion date.

Before the exchange of contracts, either party in England and Wales is allowed to back out of the sale. But, if either side breaches the contract after the exchange, they could face severe penalties.

In 2017, the Department for Business, Energy and Industrial Strategy conducted research on buying and selling homes in the UK. They found that 40% of buyers and sellers thought their transaction was delayed even after the exchange of contracts.

Moreover, 21% of sellers had their sales fall through after accepting an offer. Buyers were less likely to experience a failed transaction, but they were more likely to incur additional costs due to the termination.

Can You Pull Out of a Property Sale or Purchase
Buyers were less likely to experience a failed transaction, but they were more likely to incur additional costs due to the termination.

Pulling Out of a House Purchase Before Exchanging Contracts

The sale of the house isn’t legally binding yet, meaning both the buyer and seller can back out before exchanging contracts. If the deal is cancelled during the early stages, such as after an offer is made, the process will be simpler and less expensive for all involved.

However, the further along the transaction is, the more fees you’ll have to pay no matter what. This could include:

  1. Estate agent fees,
  2. Conveyancing fees,
  3. Valuation fees,
  4. The cost of the property survey.

The Seller

As a seller, if you choose to reject an offer or walk away from a property sale, you may still need to pay the estate agent fee, depending on the details of your contract. Certain estate agents will still ask for a fee if they manage to find a buyer who is ready and able to close the deal.

Even if you decide to abandon the transaction at any point, the estate agent fee may still be applicable.

To avoid any misunderstandings, make sure to read through the terms of your agreement before making a decision.

If you decide to withdraw from the sale of a leasehold property, you won’t be able to get back any payments made to landlords or managing agents for information.

The Buyer

Both the buyer and seller may have to pay certain conveyancing fees when they choose to pull out of the property before exchanging contracts. It’s best to check the terms of the retainer for more information.

Some conveyancers may charge you for their services even if you don’t reach the completion date.

You may also be expected to pay for any disbursements and checks that have been arranged, such as the Local Authority Search, depending on how far along the process you are.

If buyers decide to cancel their offer on a property after having a property survey done, they will still be expected to pay the surveyor.

This adds to their financial loss, even if the survey results were the reason they chose to withdraw. In addition, buyers will need to cover mortgage adviser fees or lender valuation fees as well.

However, they won’t need to pay the 5-10% deposit until after the exchange of contracts, making it easier for buyers to walk away from the sale before this stage.

Pulling Out of a House Purchase After Exchanging Contracts
Once the sale or purchase has been cancelled, the party who is not to blame will likely issue a ‘Notice to Complete'. This will give the recipient a 10-day grace period to finalize the sale.

Pulling Out of a House Purchase After Exchanging Contracts

Whether you are the buyer or seller, if you decide to back out of the transaction after exchanging contact information, you will violate the terms of the contract. This can lead to severe consequences for the party who is at fault.

Once the sale or purchase has been cancelled, the party who is not to blame will likely issue a ‘Notice to Complete’. This will give the recipient a 10-day grace period to finalize the sale.

The party who is at fault may also be required to pay interest that is calculated daily.

After this legal notice has been sent out, all parties should be ready and willing to finish within 10 days. If someone in the chain is not able to do so, they will remain in breach of the contract.

If the sale does not go through after 10 days, the party that pulled out could be sued for the breach. The party who is not at fault will also have the chance to claim any additional losses or may even legally demand that the sale or purchase be completed.

The Seller

If the seller backs out of the sale after contracts are exchanged, the buyer can issue a Notice to Complete, making the seller pay a daily rate of interest and return the buyer’s initial deposit.

The buyer should also send any documents received from the seller back, but the costs for this should be covered by the seller. If the seller still fails to fulfil their obligations after the ten-day grace period, the buyer can take legal action and claim any additional financial losses.

The Buyer

If the buyer is the one who fails to fulfil their end of the agreement and withdraw from the property purchase, the seller is entitled to terminate the contract.

Consequently, the buyer cannot reclaim their deposit. The seller can then put the home back on the market and seek compensation for any damages.

The seller may also have the right to pursue any financial losses they have suffered as a result, such as if the property has depreciated in value since the breach of contract occurred. In this case, the buyer could be liable for paying the difference.

The buyer will also incur a loss of any money they spent on obtaining a mortgage advisor, engaging in conveyancing, applying for a mortgage, having surveys done on the property, and more, if the transaction falls through.

When Would a Buyer Usually Withdraw Their Offer
If the survey results are not satisfactory, the buyer may decide to back out.

When Would a Buyer Usually Withdraw Their Offer?

Various reasons can cause a buyer to withdraw their offer at the beginning of the process. These can include:

  • Being unable to get a mortgage,
  • Changing their mind, or
  • Discovering another property.

Once the buyer’s offer is accepted, their conveyancer will start arranging conveyancing searches.

This will reveal information and potential issues about the property, such as the possibility of flooding, being in a conservation area, or difficulties with planning permission. All of these can lead the buyer to reconsider the transaction and not proceed with the sale.

Another stage of the process where the buyer might pull out is after the survey is conducted. The survey will indicate any physical or structural problems with the property, for instance, evidence of subsidence, dampness, hazardous plants, etc.

If the survey results are not satisfactory, the buyer may decide to back out.

For instance, if there are signs of subsidence, the repair costs could be too expensive for the buyer to continue. The seller might offer to renegotiate the house price to cover these costs, but the decision is ultimately up to the buyer.

What Can You Do to Reduce the Risk of a Sale Falling Through?

No matter the potential risks, there are a few steps you can take to reduce the chances of your property sale or purchase falling through.

  1. Firstly, make sure your mortgage has been agreed by your lender before exchanging contracts. The mortgage offer usually lasts six months, so you need to be aware of the deadline.
  1. Secondly, hire a local property surveyor. This person can identify any issues or defects such as dampness or subsidence and, being local, they will be familiar with the area and the type of properties there. If you need a reliable and experienced surveyor.
  2. Thirdly, if you are a landlord selling a property with tenants, make sure it is empty for completion. This involves evicting the tenants and giving them time to find a new home. If you struggle to do this, seek legal help.
  3. Finally, ask your conveyancer to limit the time between the exchange and the completion of the sale. This must be agreed upon by both parties and written into the contract. It is possible to exchange and complete on the same day, although this is rare.
What about auction?
If you're buying or selling a property through an estate agent, you can back out at any point before contracts are exchanged.

What About Auction?

Property auctions are very different. If you’re a buyer, you can withdraw your bid during an auction, but you won’t be able to back out if you made the highest offer.

The winning bid is a legally binding contract, and both buyer and seller must honour it, barring exceptional circumstances. When a property is declared “sold”, the contract is complete.

If you’re buying or selling a property through an estate agent, you can back out at any point before contracts are exchanged.

However, if you’re participating in an auction, you can’t withdraw your bid once it has been declared the winner, or if a final bid has been accepted by the seller on your behalf.

If you want to avoid any potential complications, it’s important to take your time when making or accepting an offer. The clearer and more certain you are, the greater the chances of a successful sale.

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