To cancel a house purchase, you’ll need to notify your housing solicitor or conveyancer, who can inform the other side and take the necessary steps. But the decision should not be taken lightly. Pulling out can have serious financial implications:
- Doing so before exchanging contracts might mean losing non-refundable costs, like surveys.
- Pulling out after exchanging contracts might mean you lose your deposit.
It’s important to understand what might happen before making any rash decisions. We explain the main things you’ll need to know.
Pulling out of the sale before exchange of contracts
Perhaps the survey has revealed a serious problem with the property? Or maybe a change of circumstances means you’re no longer in a position to buy?
The good news is, you can withdraw your offer up until the exchange of contracts. What happens next depends on how far along you are in the process.
If you’re at an early stage in the process and have simply made an offer, you’re less likely to suffer any financial loss. If you’re close to exchange of contracts, you could risk losing money for work already carried out, such as searches or surveys.
For example, if you’ve already paid for the survey on the house, it’s unlikely you’ll be reimbursed for the cost, even if the survey is the reason you want to back out. The same goes for mortgage adviser fees and legal work.
If the conveyancing is already underway but not yet completed, you’ll still be expected to pay for any work that has already been carried out – such as legal searches on local land charges and authority information.
Pulling out of the sale after exchange of contracts
The exchange of contracts is when both the buyer and seller contractually agree to complete the transfer of the house on a set date. As soon as you reach this point, you’re legally bound.
If you pull out of the sale after the contracts are exchanged, you’ll be breaking a legally-binding contract and will have to foot the bill for some hefty penalties; even if you’re backing out for reasons beyond your control. You’ll also lose any money you’ve spent on surveys, advisor fees, mortgage fees and so on.
Most importantly though, withdrawing from the sale after the exchange of contracts means the seller is entitled to keep your deposit. This will be thousands of pounds. The seller is then able to re-advertise the property for sale.
The penalties for pulling out of a sale can be financially significant, so it’s worth thinking very carefully before taking such a big step.
Note: First4Lawyers offers this information as guidance, not advice. Before taking any action, you should seek professional assistance tailored to your personal circumstances and not rely on First4Lawyers’ online information alone.
Updated: February 2018