Mortgage brokers - talk to me about deals collapsing

Journalist: John Fitzsimons, Freelance

ended 22. March 2022

There have apparently been 50,000 property deals ‘fall through’ since the start of the year, according to data from TwentyEA and Gazeals. So I'd like to hear your experiences. Are you seeing greater numbers of deals collapsing than usual? What's behind it? And does it influence the advice process, if there's a greater risk of things coming to a head?

 

 

9 responses from the Newspage community

"There has been a noticeable increase in fall-throughs recently. A lot of this is because home values are overinflated by greedy estate agents and sellers that have been sold the dream of getting more for their property and then get brought down to earth with a bang by a surveyor. Secondly, there’s far too many people making assumptions about being accepted for a mortgage and then find out they’ve been declined. Then we have estate agents not knowing about a property construction type, which a lender then declines. Finally we have the timeframe that things are currently taking with the general conveyancing process. 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."
Star Quote
"I've had more fallers than than the five classics combined. If only I had a thousand guineas each time. Buyers have pulled out after the vendor's solicitor has been unable to answer enquiries for months on end with no reply, and a common one when it comes to flats at the moment is management companies being unable, or painfully slow, at providing fire safety paperwork. 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. On the flip side, a few of my first-time buyer clients have benefited from fall throughs. 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. Sadly the worst fall through I had was the client dying, age just 42, the week his mortgage offer was issued. Fall throughs are an inevitability in this game but I do wonder if they'd be reduced if buyers and sellers had a little more skin in the game nearer the start of the process."
"I think the terms deals collapsing is a little dramatic. The deals we tend to see that don't go through to completion are usually caused by lack of preparation. 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?" is the phrase we all dread. Thankfully we can help most people who do this, however there are always some who will either fail on affordability, credit or lender criteria. This is why it is so important to see a broker first, find out what you can actually get before you start looking at homes. This will save time and disappointment in the future."
"More through luck than any special tricks or skill, I have been fortunate enough to avoid any noticeable increase in deals collapsing. Two notable exceptions have been a seller that, just prior to exchange of contracts, decided to up the sale price by £20000. My clients were not happy, to say the least, and didn't bow to the seller's demand. Quite rightly they withdraw from the transaction and bought something else. The second was a flat being purchased in a high rise block near the coast, the buildings management company had received a fire safety report two years earlier notifying them of a cladding issue, but they had chosen not to get a EWS1 report and just remove the small area of cladding in question. 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. 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."
"I almost had a deal fall through recently because the vendors, who'd inherited the property, didn't know that their parents were on the mains water and waste supply, but hadn't ever bothered telling the water company. It looked like a septic tank was being used and got very complicated with amended offers, then reinstated offers, and general confusion all round. There does need to be a faster, less archaic way of buying and selling property, and one that reveals any issues much earlier in the process."
"The biggest reason for property deals falling through in the current climate is greed. 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. mPurchases that don't move ahead quickly enough are at a higher risk of being gazumped. Buyers need to make sure they have their ducks in a row. This includes making sure they are mortgage ready via a competent mortgage adviser and also having a proactive solicitor. Slow legal work has been the demise of many a property deal."
"We have experienced more property deals fall through and more deals taking far longer than usual to complete. There could be a number of factors contributing to this but I believe a significant cause is the nature of the market and the way buyers are forced into making quick decisions due to fierce competition. 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."
"The biggest reason I’m seeing deals fall through is due to the lack of stock available for sellers to purchase and move into so vendors are then put in a position of either moving to renting where stock levels are also sparse or stay where they are. Most people then decide to sit tight, which has a knock-on effect for everyone else. The lack of stock is hurting everyone so incentives need to be offered to sellers to hopefully bring more housing stock to the market."
"Dealing primarily in the investment property space, there are always transactions falling through and there are some common causes for this. Since the start of the year, we have worked on 52 Transactions, of which 22 have cancelled. The live transactions amount to £38m in gross loan value, versus the 22 cancelled which amount to around £13m in gross loan value. Looking through our CRM, I can see that: One case was cancelled due to a client failing to pay our fees. Three cases were cancelled due to a client using their existing broker for convenience rather than have to collate the required documentation afresh, even though we were saving them money. One decided to buy in cash instead of using finance. One we recommended the client to back out as they couldn't afford the transaction. Those are the outliers, of course. In the other 5 cases they were cancelled due to down valuations and the remaining 11 were auction cases where the client got outbid. Now with the outliers there is not much we can do, but with regards to cases that didn't get through auction, we warn clients that the market is hot and they can expect to be stunned at the final prices. We also let them know about the stringent purchase rules around auctions to ensure they are committed and can afford the purchase. With down valuations for certain properties, we've started recommending that clients get their own valuations in advance with an approved panel valuer so that if it doesn't 'stack up' they can drop out without incurring fees from us or the lender. Ultimately we want to save our customers money not cause them to incur costs for nothing. "So for us it's mostly business as usual. Now with the rate rises I do expect to see more cases fall through in the term lending space, especially with the cost of living crisis and clients failing to meet affordability checks. "Fortunately now, we are in the 'Spring Bounce' when there are unusually high levels of transactions, so the more clients we talk to the more cases we have that succeed, even accounting for those that drop away."