Buying a home is a major commitment, and circumstances can change during the conveyancing process. A survey may reveal unexpected problems, mortgage funding may fall through, or the buyer may reconsider.
In England and Wales, the consequences largely depend on whether contracts have been exchanged.
Before exchange, withdrawing usually means losing money already spent. After exchange, it can lead to substantial financial liability.
Written by John Ju, Conveyancing Paralegal
Before Exchange: Generally Free to Withdraw
Before exchange of contracts, an accepted offer is usually “subject to contract”. Neither party is legally committed to completing the transaction. A buyer can generally withdraw without compensating the seller simply for changing their mind. The seller can also withdraw or accept another offer.
However, withdrawing is unlikely to be cost-free. The buyer may have already paid for searches, a survey, mortgage arrangements and legal work. Whether any fees are refundable depends on the provider’s terms and the work completed.
The seller may also incur wasted expenses and delays, particularly where the withdrawal disrupts a chain. In an ordinary transaction, these losses do not automatically become the buyer’s responsibility before exchange.
Separate agreements may change the position. A reservation or exclusivity agreement, for example, may impose payment obligations or limit refunds. Buyers should obtain legal advice before entering into such agreements and check the terms before withdrawing.
After Exchange: A Binding Commitment
Exchange of contracts creates a legally binding agreement to buy and sell the property. Both parties commit to the contract terms, including the completion date. There is generally no cooling-off period, and changing your mind does not release you from your obligations.
A buyer who withdraws without a valid legal or contractual basis risks losing their exchange deposit, commonly 10% of the purchase price. On a £400,000 purchase, this could mean £40,000. Depending on the contract conditions, paying a smaller deposit does not necessarily limit liability to the amount paid.
The financial consequences may extend beyond the deposit. The seller may claim compensation for recoverable losses caused by the breach, potentially including a
shortfall if the property is subsequently sold for less. Any claim must be supported by evidence and assessed under the contract and applicable law.
If completion is delayed, contractual interest may also become payable. The seller may serve a notice to complete, setting a final deadline for completion. Under the Standard Conditions of Sale, this is normally ten working days, excluding the day the notice is given. Failure to comply may allow the seller to terminate the contract, retain the deposit and pursue damages.
What Should a Buyer Do If a Seller Pulls Out?
Before exchange, a seller can generally withdraw without compensating the buyer for costs already incurred. If this happens, contact your conveyancer and estate agent to confirm the seller’s position and establish whether the transaction can still proceed. Your conveyancer can also check whether any separate reservation or exclusivity agreement gives you rights or remedies.
After exchange, the seller is legally bound by the contract and cannot simply withdraw because they have changed their mind. Contact your conveyancer immediately if the seller refuses or fails to complete. Depending on the circumstances and the contract terms, your options may include agreeing a revised completion date, serving a notice to complete or pursuing legal remedies.
If the seller fails to comply with a valid notice to complete, you may be entitled to terminate the contract, recover your deposit and claim damages for recoverable losses. In some cases, it may also be possible to seek a court order requiring the seller to complete the sale. Your conveyancer can advise on the appropriate steps before you agree to any cancellation or commit to another purchase.
What Should a Seller Do If a Buyer Pulls Out?
A buyer pulling out can be stressful, particularly if you are relying on the sale to fund your next purchase. Your first step should be to contact your conveyancer and establish whether contracts have been exchanged, as this determines your rights and the options available.
Before exchange, ask your estate agent to confirm why the buyer has withdrawn and whether the problem can realistically be resolved. If the purchase will not proceed, discuss putting the property back on the market and contacting other interested buyers. Tell your conveyancer promptly if the withdrawal affects a related purchase, so they can review your commitments and help you manage the impact on the chain. Although you may have incurred wasted costs, these are not ordinarily recoverable from the buyer unless a separate agreement provides otherwise.
After exchange, seek legal advice before agreeing to cancel the sale, returning any deposit or committing to sell to someone else. Your conveyancer can assess whether the buyer has a valid basis for withdrawing and advise on the appropriate response, which may include negotiating a short extension, serving a notice to complete or pursuing contractual remedies.
Keep copies of relevant correspondence and records of any additional expenses or losses. If the contract is lawfully terminated and you seek compensation, you will generally need to take reasonable steps to limit your losses, such as remarketing the property promptly. Any claim should reflect recoverable losses and account for any deposit retained.
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