What to do if your sale is at risk of falling through as mortgage lenders downgrade prices

Date Published 17 November 2020

Though the market continues to be strong and people will still be able to move home under the newest government measures, there's always the risk a house sale will fall through. People back out of house purchases for a whole range of reasons - a quarter of prospective sales fell through in 2019.

The current economic situation means that, for many homeowners, the sale process needs to work efficiently to avoid financial losses so having a better understanding of how to avoid the chain falling through will be essential.

Encountering complications within the sale chain can be immensely stressful and disruptive for all involved, which is why it's important to work with the people around you to ensure everybody can reach a satisfactory conclusion as quickly as possible.

The UK has re-entered lockdown and, although the housing market remains open and strong, the re-introduction of furlough could mean that more workers are set to receive only 80% of their wages. This, as well as other challenges from the rising rates of coronavirus, could mean sellers are at risk from sales falling through.

A financial advisor's practical tips to recover quickly when a house sale falls through

Don't rush - Holding out for a buyer for a little longer is usually much more beneficial than immediately dropping your property below the value. Increased time pressure shouldn't result in monetary losses.

Ask for proof of finances early - Before accepting an offer, make sure to ask for proof of finances, for example, bank statements or an agreement in principle to avoid sales falling off.

Ensure regular communication - Keeping a hold on prospective buyers and their solicitors could mean spotting the signs of a collapsed sale earlier so you can set up plans before it happens.

Communicate with your chain - Keeping your chain informed will be just as important as staying informed yourself. Close contact with all other parties will keep the process stable until you can find another buyer.

Ask for a non-refundable deposit from future buyers - Some sellers may be able to secure a small deposit to act as a holding fee to insure against another fall-through. This would only need to be around £100.

Review pricing - While it's not always necessary to reduce your asking price immediately, with house prices rising, there's an increased risk of overvaluation which could lead to collapsed sales after further surveys.

Search for more than one potential buyer - If you're eager to move on from your property, keeping your house available for further viewings even after finding a new potential buyer gives you added insurance in the event of a fall-through and can incentivise prospective buyers.

Complete your own survey - Some buyers pull out after issues revealed in the survey so carrying out your own survey before finding a buyer can add confidence to anybody considering your property and help speed up the process for you.

Common reasons for mortgage rejections and how to avoid them

The lender doesn't predict profitability - paying off debt too early can actually negatively affect your credit score as lenders can see this as a sign that their expected profit won't be as high when lending to you. Spacing out your payments evenly can help keep your credit score balanced.

The income you have submitted isn't acceptable - some lenders have different requirements if you're self-employed or include commission as part of your income, so make sure the lender you're applying to is accepting of your methods of income.

Down valuation - Your lender will do their own valuation of the property and might value it lower than the amount you're applying for, leading to rejection. Aside from doing your research to make sure the offer is suitable for the property, check the valuation report if you have been rejected to see what problems the lender found to see if they can be more easily resolved.

Your lender doesn't see you as a suitable candidate - sometimes, mortgage rejections aren't necessarily a reflection of your financial situation but more to do with the lender's objectives. In this case, doing further research into the best lender for your specific demographic could help reduce the chances of rejection.

[Source: www.propertyreporter.co.uk]