Buyers and sellers alike will be all too aware that until the keys are handed over there’s a chance of the property transaction falling through. Peter Joseph explains what protection is available for buyers in case the worst happens
Over the last year, we have seen property prices soar following a surge in demand from buyers.
While the market remains uncertain amid speculation on what will happen to prices moving forward, it is more important than ever to protect yourself in your transaction.
A recent Which? study revealed approximately 30% of home purchases fall through. This can happen due to a variety of different reasons, which can cost both time and money to the parties involved.
The good news is there are products available that are designed to give home-movers extra protection should things go awry. Although they cannot make up for any lost time, they can offer financial protection for some of the upfront costs accounted for before the transaction fell through.
What causes property transactions to fall through?
While many movers may think their transactions are set in stone after the offer is accepted, the reality can be very different.
Property transactions fall through for many reasons, but they generally fit into two categories: the decision of the buyer or the decision of the vendor.
Some of the more common causes are:
- The buyer being gazumped
- The vendor withdrawing the property from the market
- The mortgage lender withdrawing their offer
- The valuation conducted by the mortgage lender is lower
- Repair works identified in the survey
- Either party changes their mind
What are the risks to my housing transaction in the current market?
With more properties coming to the market, more choices are being created for prospective movers.
Having more choices available is great but it can also cause people to change their minds, even after an offer is accepted. This creates an uncertain market.
While house prices continue to rise, a seller can back out of a transaction with a view of getting a higher price.
As a buyer without protection in place, the financial implications can be severe. Would they have to save up again to cover the new legal fees? Can they afford to buy at a higher price due to a time-lapse where prices can increase?
What insurance is available to movers?
There are several products available in the market to help protect movers during their transactions.
Experienced buyers may already be familiar with some of these, but some are less commonly known.
High street conveyancers may offer some products at a premium fee, but online conveyancing networks often provide more detailed packages at a competitive rate.
Home buyers protection insurance
This is commonly offered by many conveyancing practitioners. It offers protection for some of the fees incurred by the buyer should the seller choose to pull out, including conveyancing, survey, and lender fees.
All providers will have a limit on the amount that can be claimed back but this protection can be invaluable to buyers whose transactions have fallen through.
Search insurance
Some companies offer search insurance to help buyers if they have already ordered and paid for searches if the purchase falls through due to specific reasons.
If the vendor is not entitled to sell the property or if they accept a significantly higher offer from another buyer, search insurance often covers this.
Some providers will also provide cover for some circumstances where the buyer changes their mind, so research is key.
Chancel insurance
Many buyers will be purchasing a property with a church in the local area. If the church was built before 1536 and the property falls within the parish boundaries, the buyer may be obligated to contribute financially to repairs.
This can be expensive, and the information is not always recorded on the title deeds. To avoid any surprises, it is advisory for buyers to take out this insurance before any searches are ordered. Cover will not be granted if the searches have already revealed an obligation for the buyer to contribute.
File storage
For those who are not highly organised, electronic file storage can be a great way of keeping your title documents safe and accessible after your transaction completes.
Many conveyancing providers offer this as part of the transaction for a set number of years, to give you peace of mind.
Peter Joseph is CEO of Home Legal Direct
