How can I make sure my home buyer is serious? Our last sale fell through because the buyer didn’t have finance in place

Angel Kerr
29 January 2019

Q

Our last sale fell through when it turned out the buyer's financing was not in place. How can I ensure my estate agent only puts through offers from buyers who are in a genuine position to proceed?

A

It’s really frustrating to find out weeks after accepting an offer that your buyer is not actually in a financial position to make the purchase. This means going back to square one as you start all over again with the hunt for a new buyer and jeopardise the purchase of the home you wanted to move to.

Financial checks of potential buyers are a standard and key role of being an estate agent. Under the Property Ombudsman Code of Practice, estate agents must take reasonable steps to find out from the buyer the source and availability of their funds for buying the property and pass this information to the seller. This will cover whether the buyer needs to sell a property, requires a mortgage, claims to be a cash buyer or any combination of these.

Under this code, estate agents are also obliged to put all offers through to you even if the buyer hasn’t been financially qualified at this stage – but the agent should make that clear to you. When you accept an offer, it is then the estate agent’s job to regularly monitor the buyer’s progress in achieving the necessary funds and keep you informed.

To be on the safe side, when an offer comes through in future, ask the agent whether it has been financially qualified and what the estate agent has done to check the information it has given is true.

In order to have the best chance of a sale proceeding to completion in a fairly timely fashion, you need to sell to someone who is either a first-time buyer with an agreement in principle from their lender, a homeowner who has an agreed sale of their existing property, or a cash buyer. 

First-time buyers will need mortgage finance.  You could ask the estate agent to proceed only with buyers in this situation who have already secured a mortgage in principle from their lender.  This is not a guarantee that the buyer will actually get a mortgage - so things could still go wrong - but it is important evidence that your buyer can get finance and has been through the process of looking for a mortgage and initial credit checks.

If the potential buyer has a property to sell, the estate agent should check the status of this sale. Ideally, they would have a confirmed buyer of their property – this means a buyer who has appointed a conveyancing solicitor and is progressing the purchase (for example, the buyer has had a survey). The conveyancing solicitors could be asked to provide the estate agents with the current status of the buyer’s sale. 

A cash buyer is usually the preferred type of buyer as it reduces the chance of the sale falling through due to failing to secure lending and also avoids a lot of the conveyancing delays associated with being in a chain.

For more on the different types of buyers and what to ask before accepting an offer check out HomeOwners Alliance’s guide to types of house buyers and dealing with offers here.

Finally, if you are a seller, it’s sensible to keep on top of the transaction yourself rather than just leaving it to the estate agent to progress.

An offer is usually serious if the buyer promptly instructs their conveyancing solicitor, spends money on a survey and stays in touch. Weeks of radio silence is a bad sign, whether they have the finances in place or not.