No one ever really starts a house purchase thinking they won’t complete. But sometimes this will happen. Here’s how to ensure it’s the right choice and minimise any impact on your finances.
The first thing you will need to do is contact your solicitor so that they can inform the seller. But before you do this, make sure you consider the implications. If you cancel before exchanging contracts, then you will likely lose money on costs such as surveys and valuations.
If you cancel after exchanging contracts – but before completion – you could lose your deposit. See https://www.samconveyancing.co.uk/news/conveyancing/independent-legal-advice-4849 for more information.
Before Contract Exchange
The most common reasons for cancelling at this stage are that a survey has highlighted serious issues with the property or that your personal financial situation has changed. If you’re at the beginning of the process, it’s easier to avoid any financial loss.
If you were about to exchange contracts, you’ll unfortunately stand to lose any money already spent on legal fees, mortgage fees or surveys and valuations. You’ll probably still be charged for any legal and conveyancing work that your solicitor has already completed, even if you haven’t actually paid for it yet. This could include local land searches and local authority searches.
After Contract Exchange But Before Completion
On the date that you exchange contracts, you agree a set date when you will complete the transfer of house ownership. This legally binds you to purchase the property – whatever happens on your side of the deal.
There are heavy penalties for breaking this contract, so really take the time to consider if this is your only option and seek some independent legal advice. If you really can’t proceed, the penalties here are in line with any situation where a contract has been broken.
In addition to the loss of fees you would have suffered before contract exchange – surveys, legal fees, mortgages fees – legally the seller is able to keep your deposit, which can obviously be a hefty amount. They will also be able to put the property back on the market.
In summary, cancelling a house purchase is not a decision to be taken lightly, and every alternative option should be explored to enable you to proceed. Always consider your position, and what you stand to lose, very carefully before you take this step.