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Sales falling through as mortgage underwriters toughen criteria - warning

Almost a third of property sales that collapsed during the second quarter of this year were hit by lenders toughening their criteria, research claims.

Analysis by fast-buying firm Quick Move Now found 31% of property sales fell through before completion between April and June 2022.

Of the sales that collapsed, 30% failed due to buyers being refused funds by mortgage companies.

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This suggests growing caution from lenders, Quick Move Now said.

Half of failed sales were attributed to the buyer changing their mind, pulling out in favour of another property, or pulling out after an unfavourable survey report and the remaining 20% were attributed to gazumping or changes in the buyers’ circumstances, according to the research.
 

Danny Luke, managing director of Quick Move Now, said: “It’s unusual, in this day and age for buyers to have an offer accepted on a property without having an agreement in principle in place with their mortgage lender.

“This would suggest that the 30% of failed sales attributed to difficulty securing a mortgage are due to buyers being turned down during the formal mortgage application process after initially securing an agreement in principle. 

“This indicates that underwriters are getting tougher in the level of risk they’re willing to accept, both in terms of buyer circumstances and finances, and properties they’re prepared to lend on.

“Overall, the fall through rate has remained stable throughout the first half of this year, falling just one percent between the first and second quarter, but the reasons for failed sales tell an evolving story about the challenges currently being faced by the property market. 

“Growing inflation and cost of living have made it inevitable that both lenders and buyers would start to show greater caution. 

“We have also seen delays in the conveyancing process that are resulting in an increasing number of buyers being required to apply for extensions to their mortgage offers. 

“Those that were initially offered a mortgage may find that they’re unable to secure an extension to their offer, even if their circumstances haven’t changed. With lending criteria toughening up, difficulty securing mortgage finance is an issue that I suspect we will see much more of in the coming months.

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    There is an awful lot of supposition and conjecture in this piece, and of course a company who's prime objective is to buy for cash at a discount is going to suggest that lenders are tightening their lending criteria. In my experience the statement of “This would suggest that the 30% of failed sales attributed to difficulty securing a mortgage are due to buyers being turned down during the formal mortgage application process after initially securing an agreement in principle" is incorrect - all too often we show people around properties who claim to have an AIP or MIP in place, only to find when we receive the offer that they actually don't.

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    What the 'professionals' don't do well is their due diligence on buyers mistakenly claiming to be "cash" buyers, because they don't have a property to sell,but still requiring financing by a mortgage
    This is gross misrepresentation on sellers who accept low ball offers

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