The Department of Communities and Local Government is looking at ways of improving the home buying and selling process in the UK. Except Scotland, where it’s different.
Well, I say Three Cheers for them for finally addressing this problem. For too long, sellers have been able to gazump and buyers to gazunder, just before Exchange of Contracts. This is incredibly stressful and costly for both the gazumpee and the gazunderee – words as ugly as the practice itself!
I believe that the solution to improving the home buying and selling process is relatively simple. At present, when contracts are exchanged, the purchaser is required to deposit up to 10% of the purchase price. Very very rarely do people withdraw after this.
The Mini Deposit – Improving the home buying and selling process
So, all we need is a Mini Exchange of Contracts when an offer in writing is made and formally accepted. This is the point at which an agent typically issues a Memorandum of Sale. At this point both buyer and seller should be required by law to deposit a relatively small sum of, let’s say £1000 in Escrow. If either party choses to withdraw, offer less or demand more then the other party could receive their £1000 as compensation.
Of course, there would be certain circumstances wherein a purchaser could legitimately withdraw without forfeiting the £1000 mini deposit. Such circumstances could include cases where legal searches uncovered poor title. Or perhaps a road passing through or close to the property in question. A surveyor’s report might have uncovered serious subsidence or dry rot. Again, if the seller accepted these findings and agreed voluntarily to reduce their price then the sale could still proceed.
However, where a purchaser, without good reason decides to offer less than the agreed amount then the deposit could be forfeited. The seller would be at liberty to receive the purchaser’s £1000 and abort the sale. Similarly if the seller suddenly changes their mind or wanted more then the purchaser could elect to receive the seller’s £1000 and abort the purchase.
Concentrating minds at the point of the Memorandum of Sale
Apart from the stress of someone suddenly withdrawing, there’s the considerable legal and surveying costs that accrue. Thus the £1000 would at least go towards defraying these costs, but more importantly would concentrate the minds of both seller and purchaser at the point when an offer is made and accepted.
And of course this change in property law would not only benefit owner occupier sales and purchases but investment ones involving landlords and buy-to-let as well.
So, I think that’s a good way of improving the home buying and selling process in the UK. What do YOU think?