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Can You Pull Out of a Property Sale or Purchase?

Zenyx Griffiths

Written by

16th Mar 2021 (Last updated on 26th Aug 2021) 12 minute read

After the exchange of contracts, all parties involved are legally bound to the contract and must adhere to its terms. Pulling out of a property sale or purchase after this stage could result in serious legal or financial penalties.

When you sign and exchange contracts, you are legally committing to the transaction. You can pull out of a house sale or purchase at any point before this stage in England and Wales. In Scotland, however, you are only able to pull out of a property sale before the conclusion of missives.

To ensure we provide users with accurate and helpful articles, Compare My Move works alongside a number of property and finance experts who regularly review our content. In this article, we will explain when it is possible to pull out of a property sale or purchase and how to do so successfully.

This article will cover the following:
  1. How To Pull Out of a House Sale or Purchase in the UK
  2. What is the Exchange of Contracts?
  3. Pulling Out of a House Purchase Before Exchanging Contracts
  4. Pulling Out of a House Purchase After Exchanging Contracts
  5. Pulling Out of a House Sale in Scotland
  6. When Would a Buyer Usually Withdraw Their Offer?
  7. Can Anything Happen on Completion That Could Affect the Purchase?
  8. What Can You Do to Reduce the Risk of a Sale Falling Through?
  9. Learn More About Conveyancing

How To Pull Out of a House Sale or Purchase in the UK

If you decide to pull out of a house sale or purchase, you will have to notify your conveyancing solicitor who will then notify the other parties involved. They will also advise you on the next steps to ensure the transaction is successfully terminated.

However, anyone considering withdrawing must first carefully consider the potential consequences, especially if it’s after the exchange of contracts. If you pull out of the sale early on in the process, terminating the transaction should be rather simple. The further along you are in the process, the more difficult and costly it can become.

Some of the financial implications that come with pulling out of a house sale or purchase include:

  • The buyer losing their deposit
  • Both parties losing non-refundable costs, such as conveyancing costs
  • The party at fault being taken to court to cover losses

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What is the Exchange of Contracts?

The exchange of contracts will typically occur during week 8 of the buying process. Once the buyer’s conveyancer has carried out all the vital checks and all parties are happy with the contract, they can sign the documents and begin the exchange. This acts as a contractual agreement to the completion of the transfer of ownership. On average, this will occur 7-28 days before the completion date.

During this stage of the process, the buyer and seller must both sign the contract, ensuring the transaction becomes legally binding. Both the seller and buyer must agree to the final contract and all the terms outlined in the draft. The agreed completion date must also be determined at this stage. The solicitors representing each party will then take possession of the final contracts and exchange them accordingly.

Before the exchange of contracts, either party is allowed to pull out of the sale in England and Wales. However, if either party breaches the contract after the point of exchange, then they risk incurring severe penalties.

In 2017, the Department for Business, Energy and Industrial Strategy published research on buying and selling homes in the UK. They revealed that around 4 in 10 buyers and sellers believed their transaction was delayed even after the exchange of contracts. They also discovered that sellers were more likely to experience failed transactions, with 21% experiencing their sales falling through after accepting an offer. Whilst buyers were less likely to experience a failed transaction, they were most likely to incur added costs because of the termination.

Pulling Out of a House Purchase Before Exchanging Contracts

As the transaction is not yet legally binding, it is possible for both the buyer and seller to pull out of the house sale before exchanging contracts. If the sale is cancelled during the early stages of the process, such as after an offer is made, the process will be much simpler and less costly for all parties involved.

However, the further you are into the transaction, the more fees you will have to pay regardless of the cancellation. For example, these costs could include:

  • Estate agent fees
  • Conveyancing fees
  • Valuation fees
  • Cost of the property survey

The Seller

As the seller, if you reject an offer or walk away from the property sale, you may still have to pay the estate agent fee depending on what is stated in your contract. Some estate agents will still require you to pay a fee should they successfully find a buyer who is able and willing to complete. If you then decide to walk away from the transaction at some point, the estate agent fee could still be expected. Check the terms of your agreement before you make a decision.

If you’re selling a leasehold property and pull out of the sale, you won’t be able to recover any payments made to landlords or managing agents for information.

The Buyer

Both the buyer and seller will likely have to pay certain conveyancing fees when pulling out of the property before the exchange of contracts. You should check the terms of your retainer for clarification.

Some conveyancers will charge you by the hour even if you don’t reach the completion date. You will also have to pay for any disbursements and checks arranged, such as the Local Authority Search, depending on how far into the process you are.

If the buyer decides to cancel their offer on a property after carrying out a property survey, they will still be expected to pay the surveyor, adding to the financial loss. Even if the survey results are the reason you decide to withdraw, you will still be expected to pay. As a buyer, you will also be expected to cover the usual mortgage adviser fees or lender valuation fees. However, you will not be expected to pay the 5-10% deposit until after the exchange of contracts so walking away from the sale before this stage is much simpler for many buyers.

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Pulling Out of a House Purchase After Exchanging Contracts

Whether you’re the buyer or seller, if you decide to withdraw from the transaction after exchanging contacts, you will be legally breaching the terms of the contract. This can result in severe penalties for the party at fault.

Once the sale or purchase has been cancelled, the party not at fault will likely issue a ‘Notice to Complete’. This will provide the recipient with a 10-day grace period to complete the sale. The party at fault may also be liable to pay interest that is calculated on a daily basis. Once this legal notice has been issued, all parties will be expected to be ready and willing to complete within 10 days. If someone within the chain is unable to do this, they will continue to be in breach of the contract.

If the sale does not go ahead after the 10-day period, the party withdrawing could be sued for the breach. The party not at fault will also have the opportunity to claim for any additional losses or may even legally insist that the sale or purchase continues.

The Seller

If the seller pulls out of the property sale after the exchange of contracts, then the buyer could issue the Notice to Complete, ensuring the seller is liable to pay a daily rate of interest. They will also have to return the buyer’s original deposit.

If the seller withdraws from the sale, the buyer will be expected to send any and all documents received back to the seller, but at the seller’s expense. If, after the 10-day grace period, the seller still fails to complete, the buyer could take them to court and claim for any extra financial losses.

The Buyer

If the buyer is the one who fails to complete and pulls out of the property purchase, the seller will be entitled to end the contract. This means the buyer can not claim back their original deposit. The seller can then begin to re-sell the home and claim for any damages.

The seller may also be entitled to claim for any financial losses they’ve incurred, such as the possibility of market depreciation. If the value of the home has decreased since the date of the breach of contract, the buyer could be expected to pay the difference.

As the buyer, they will also lose any money spent on mortgage advisers, conveyancing, applying for a mortgage, property surveys and more, should the transaction be cancelled.

Pulling Out of a House Sale in Scotland

The process of buying a house in Scotland is quite different compared to that in England and Wales. Whilst the exchange of contracts is typically the deadline to withdraw from a property sale in England and Wales, in Scotland, you must pull out of the sale before the conclusion of missives. Once the missives have been concluded, neither party can withdraw from the transaction.

During the conveyancing process in Scotland, instead of exchanging contracts, the solicitors representing the seller and buyer must exchange a series of letters known as ‘missives.’ In these letters, all parties involved must have agreed to a number of terms and conditions and the seller must formally accept the buyer’s offer. The letters or missives will exchange hands a number of times until all parties involved come to a qualified acceptance. This stage is called ‘the conclusion of missives.’

Whilst negotiations are underway and the missives are still exchanging hands, both the buyer and seller are able to pull out of the property sale. However, once missives are concluded, neither can withdraw and the sale is legally binding.

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When Would a Buyer Usually Withdraw Their Offer?

There are a number of reasons why a buyer would withdraw their offer at the start of the process. These can include:

  • Being unable to get a mortgage
  • Changing their mind
  • Finding another property

If the buyer continues the process once having their offer accepted, their conveyancer will then begin arranging the conveyancing searches. These searches will uncover information and potential problems with the property, highlighting details that could lead to the buyer pulling out of the purchase. If it’s uncovered that the home has a high risk of flooding, is located in a conservation area or has issues with planning permission, the buyer could begin doubting the transaction and terminate the sale.

Another stage of the process where buyers may pull out of the property purchase is after the survey is conducted. A property survey will highlight any physical or structural problems with the home, such as signs of subsidence, damp, dangerous plants and more. If the results of the survey are poor, the buyer may again decide to back out. For example, if there are signs of subsidence in the property, the repair work may be too expensive for the buyer to continue. Sellers can offer to renegotiate the house price to cover future costs, but the decision ultimately lies with the buyer.

Can Anything Happen on Completion That Could Affect the Purchase?

Although it’s rare for someone to pull out of a house sale during completion, there are other types of complications that could arise that may delay the process. It could be a simple issue that only delays the time you can move in or it could halt the transaction altogether.

When you reach your completion date, there are 3 main elements that could affect the speed of the transaction. These include:

  1. The mortgage lender giving money to the buyer’s conveyancer
  2. The buyer’s solicitor transferring the money to the seller
  3. The seller or estate agent handing over the keys

Any issues during each step listed above could result in the process being delayed. Whilst it would typically only be pushed back a day or two, larger issues could result in the sale falling through.

If either party intends to pull out of the sale at this stage, a notice to complete will be sent due to the breach in contract. If the completion date is then delayed, it may be possible for the party not at fault to claim for any financial loss and for the buyer to receive their deposit back, should they be the one to issue the notice. The costs that could be claimed include:

  • Accommodation
  • Mortgage interest
  • Storage
  • Lost income (if renting)
  • Conveyancing
  • Property survey
  • Building insurance

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What Can You Do to Reduce the Risk of a Sale Falling Through?

A lot of the potential problems that could arise will very likely be out of your hands. However, there are a few things you can do to help reduce the risk of your property sale or purchase falling through.

Get Your Mortgage Agreed Before Exchanging

Whether you’re the buyer getting prepared or the selling that’s involved in another property chain, it’s advised you ensure your mortgage has been agreed by your lender before you exchange contracts. A mortgage offer typically lasts 6 months so it’s also essential you are aware of the deadline.

Hire a Local Property Surveyor

A property survey will highlight any issues or defects within the property, such as damp or signs of subsidence. By finding a local surveyor to carry out the task, you will limit the time it takes to search for a reliable and experienced professional. They will also be familiar with the local area and the types of properties currently there. The results of this survey could help you negotiate the price later down the line.

If you’re looking for an experienced, RICS registered property surveyor in your local area, then Compare My Move can greatly help with this step. Simply complete our online surveying form to be connected with the best in the business.

Evict Tenants Before Exchanging Contracts

If you’re a landlord selling a property with sitting tenants, then it’s vital you ensure the home is empty by completion. This means evicting the current tenants and allowing them time to find alternative accommodation and move out. If you’re unable to evict your tenants, it’s advised you seek legal help.

Reduce the Time Between the Exchange and Completion

Whilst exchanging contracts means all parties involved are legally bound to the sale, there are still chances for someone to try ending the transaction. To help reduce the risk of this happening, it would be worth asking your conveyancer to limit the time between exchange and completion. This will have to be agreed upon by both parties and must also be written into the contract. It is also possible to exchange and complete on the same day although this is quite rare.

Learn More About Conveyancing

This is part of our conveyancing guide. In our next article, we take a look at selling a probate property and the importance of instructing a conveyancer. To learn more, read Selling a Probate Property.

Zenyx Griffiths

Before Compare My Move, Zenyx once wrote lifestyle and entertainment articles for the online magazine, Society19 as well as news articles for Ffotogallery.

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