Tag Archives: conveyancing

Improving the home buying and selling process

Improving the home buying and selling process. Image of various estate agents' sold and to let signs

Dept of Communities and Local Government wants to improve the process of home buying and selling.

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?

 

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Improving the English Conveyancing Process

They say that moving home is one of life’s most stressful activities, along with bereavement and divorce etc and particularly so if you are actually buying and selling.  If so, why doesn’t the Government try to improve it and make it less stressful? I believe that it can be improved – after a brief outline of the way it is now I suggest how this might be achieved.

The fact is that the English Conveyancing System is as they say ‘Not Fit For Purpose’ and it’s a testament to the dismal quality of both civil servants and particularly legislators.

1930s_houses

Buying and Selling basics

You find your ideal home, make an offer and if it’s accepted, both parties pass relevant details to their solicitors and then the whole rigmarole starts. The buyer’s solicitor requests endless documents, mortgage companies are alerted, removals companies contacted, a survey is commissioned and so on. At some point contracts are exchanged with an agreed completion date. The whole tortuous process can take up to three months…if you’re lucky!

Of course, the point at which both parties can reasonably relax is Exchange of Contracts, when the buyer contracts to buy and the seller contracts to sell, both being liable to lose a large amount of money if they renege on the deal.

Subject to Contract

But as we all know, at any point right up to exchange of contracts either party can withdraw, or simply demand a higher sale price (gazumping) or demand a lower sale price (gazundering). And unless agreement can be reached, the whole process collapses, the buying chain is broken..along with the hopes and dreams of all the rest of the people in that relevant chain. Also huge amounts of money, on solicitors, surveys, reports etc are wasted by the would-be purchaser. Then the whole tedious process starts again.

This absolutely ludicrous, because the whole English Conveyancing System is  not so much based on ‘subject to contract’ but subject to a nod and a wink!

Putting your money where your mouth is

What I suggest, is that once an offer to buy is formally accepted and a survey completed, an Initial Deposit be placed in escrow by both parties. This deposit will then be forfeited to the aggrieved party in the event that the other party seeks to change the agreed sale price or withdraws from the process before actual Exchange of Contracts.

Of course the devil is in the detail, as they say. There will have to be very carefully specified reasons for a buyer to withdraw, such as a search revealing that a motorway or similar is planned to go through the sitting room or at least within hearing distance of the property in question and that was not revealed in the initial Property Details. Precise grounds for parties to withdraw from the commitment to buy and sell will need to be established but the current system is ridiculous and badly needs reform.

But how much should the Initial Deposit be? I would suggest 0.5% of the agreed sale price but obviously others would have a view on that. But it has to be sufficient to ensure that both parties are serious about the transaction and really ARE willing and able to proceed. It will also at least go towards compensating the aggrieved party for wasted survey and legal costs.

Who benefits?

Serious purchasers will benefit, serious vendors will benefit…even estate agents will benefit! The only people who won’t benefit are mortgage companies, surveyors and of course…solicitors – but that’s not a bad thing is it!

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