What to watch out for when choosing a buyer for your house

Imagine you're selling your house and you're in the enviable position of having several potential buyers. With more than one offer on the table - and potentially a mix of cash buyers, mortgage offers and chain free purchasers - you need to decide which of these prospective buyers to choose.

A lot can happen during the selling process before the exchange of contracts. The young couple who are first-time buyers and seem keen on your property can break up or have their hopes dashed by reluctant mortgage lenders. The lovely old couple who appeared reliable and said their house was all set for a quick sale might not be in quite as secure a position as they first thought.

The reason why some sales don't make it to completion 

Property chain problems can throw off the plans of even the most committed buyers. And choosing the wrong buyer can lead to unexpected extra costs. On average, 51% of property sale failures cost house sellers £2,700, and 12% caused costs of more than £5,000.

Sometimes, it isn't the amount offered but the financial position of the person making the offer that counts. Nearly two in five homeowners experience at least one transaction failure during the selling process.

Buyers cause 69% of property transaction breakdowns. You may be surprised to hear but only 1 in 5 transactions fail for chain related reasons, yet 2 in 5 fail simply because the buyer changed their mind.

What causes lack of buyer commitment? 

Lack of buyer commitment is partly caused by the laws of property transactions. Even if a potential buyer makes an offer while house hunting, they have no legal commitment to follow through. They can pull out at any time before contracts are exchanged.

Even though 80% of UK adults would like to see buyers compelled to show proof of funds before being able to put in an offer, and 65% support the idea of reservation agreements or a structure that requires both parties to put down a non-refundable deposit, at present there is no current legal obligation on a buyer to follow through on an offer.

Typically, the time between offer and exchange is 8-12 weeks. To ensure you are popping champagne corks rather than headache pills, it is wise to minimise the risk of your house sale falling through by carefully assessing a buyer’s financing, commitment and motivation.

What is the buyer's financial situation?

This is crucial. An all-cash offer is ideal, as much less can go wrong, with fewer dependencies on other parties like banks. But you'll find these are not as common as mortgage offers.

If your buyer needs a loan from a mortgage provider, ask if they have a mortgage agreement in principle (AIP). Although official mortgage approval won’t be granted until after an offer, a lack of AIP increases the risk that the mortgage provider won’t offer the buyer the necessary funds. You could also find out the loan to value ratio (LTV); the better this is, the less cautious a bank will be. 

With cash offers, ask the estate agent to check bank statements to discover if the funds are coming directly from the purchaser or if they are relying on others for the money. A well-meaning family member who promised to help might change their mind when the time comes to part with their cash. There are also potential legal implications, which could mean the mortgage provider won’t lend the money until the funds are contractually declared as a gift.

What is their time scale?

What is the buyer's time scale, and does it match yours? A few clever questions on your part now can save you time later and put you in a stronger position when weighing up an offer. Ask whether the buyer needs to sell their property before they can move and if they are in a chain. If you can, discover how far along they are in the transaction process and, to the extent that it’s relevant, the size of the chain.

The average time from offer to completion in England and Wales is 12 to 14 weeks with a quarter of all home buying transactions failing. If the chain is long, there is a high chance that one link will experience a problem in the conveyancing process, breach of contract or completion delay.