What happens if someone pulls out of their contract?
A question that might cross your mind when buying, “Am I able to pull out after the exchange of contracts?” and the answer is yes, however, if you do pull out then be prepared to bear the costs as you will be breaching the terms of the contract.
Reasons why a buyer may pull out of the transaction:
- Unexpected redundancy
- Change of mind
- Promised funds not arriving
Exchange of contracts is a crucial part of the conveyancing process whereby the buyer and seller contractually agree to complete the transfer of the title between each other on a future date called completion.
Buyer – If you don't make the completion, you will lose your deposit and could be at risk of being sued. The vendor may serve a notice on you requiring you to complete and pay the vendor’s additional legal costs. You may also have to pay interest on the unpaid purchase price. In some cases, if the seller subsequently sells the property for a lower amount, you may be liable for the difference.
Seller – If the seller fails to complete, the buyer can revoke the agreement. The deposit will be returned to the buyer, with interest and the vendor is liable to pay for any outstanding fees from the contract.
Hopefully, you are never in a position where this happens to yourself. But we hope this has given you confidence in the process if this were to happen.
Come back next week, to read about what the mortgage process is.