Plans to end gazumping with binding agreements in house sales shake-up

[CushionHugger]

2029…

https://www.bbc.co.uk/news/articles/c6216g52p8wo

Home buyers and sellers can expect an end to "gazumping" in a major shake-up aimed at speeding up housing sales.
Legally binding sales agreements will be introduced earlier to stop buyers or sellers walking away at a late stage in the process without a legitimate reason.
In England and Wales, buyers can currently be outbid at a late stage of the sale and chains can fall apart months into the process, causing huge frustration for buyers as well as being expensive.
Previous attempts to improve the system have had limited success and few of the latest proposed changes will happen immediately.
The planned reforms, first announced in October last year, will be introduced at the end of this Parliament in 2029.

Will it stop gazundering too?

I really welcome this. 2029 seems a long way off though.

Yes, anything could happen in between.

Yes this is a good idea, it may push offers a little lower but more process stability is needed.
Why will it take so long to implement though ? Its frustrating that here in the UK we cant make policy changes in a timely manor. 3 years to tweak the system seems really inefficient.

Great but 2029?!

In other countries, however, there are penalties for pulling out of a sale once both parties have agreed to the transaction.
In Scotland, formally accepted offers are already legally binding, and sellers must provide home surveys to prospective buyers. Once the buyer's and seller's solicitors have exchanged letters, known as missives, if a party withdraws from the sale they are liable for financial losses to the other party.
What's the difference between this and the existing English/Welsh system? We have 'legally binding' agreements (exchanges) which then become completions (or there are penalties).

I think it took around 4 years to make vapes illegal for children.

This is not true about Scotland

In that between the offer being accepted and conclusion of missives either party can withdraw without penalty which is the same as in England essentially

This really isn’t that hard! Other countries already do this. In the US, basically, you make an offer, when it is accepted there are specific conditions under which you can withdraw or renegotiate and specific penalties—and sometimes the money is held in escrow during the period—for dropping the sale or not completing. I principally read these threads on mumsnet because its such a crazy shit show. Totally unnecessary.

How about they stop stamp duty too that would help us all.

Yes, people think once the offers are accepted it's binding but it can take weeks to do missives and things can still fall through

Having worked in the industry a long time I have my doubts, could be another false dawn. Who decides what is an acceptable reason to pull out? What may be trivial on a survey or title may be serious to one person but not to another. If the vendor provides a survey how can the buyer be protected against a poor survey if he has not contracted it.? Then you multiply the effect in a chain. All previous attempts to help have failed. If it was easy to solve it would have been done long ago. Won’t hold my breath. The law factories of recent years have made delays so much worse too

That would literally change our lives. Won’t happen though.

The UK has such an outdated system. We bought a house in Spain 2 years ago. We had to put down 10% and were tied into a legal contract. If we pulled out we would lose 10% but if the sellers pulled out we would have been reimbursed 20%. It makes so much sense. It took a while to get to notary but it was a complicated sale.

It should at least be shifted to the seller to pay rather than the buyer.

Having bought and sold in the US and UK I agree with @pikkumyy77 that house buying is one of the few things I much prefer there.

You submit your bid with a contract giving a timetable for removing the contingencies re validating the legal framework, the inspections, etc. Any time a problem turns up, you submit a new contingent contract (it’s a lot of paperwork; it is when this happens that a good EA proves their worth). Everything is subject to deadlines, but the buyers can also pull out without penalty any time a problem is encountered. The buyers also submit a deposit, typically at least 5%, with the initial contract, which they forfeit if they pull out without good reason or fail to get financing.

It is less daunting than it sounds because the EAs are plugged in to good networks. So if an inspector flags a problem with the roof, the EA can arrange for estimates from 3 good roofers (according to TrustPilot, BetterBusinessBureau, etc) within a couple of days, and you can revise the bid accordingly.

Meanwhile the sellers have taken the house off the market for the duration of the negotiation.

I was appalled at the low level of service provided by British EAs.

PS Of course the sellers in the scenario I outlined above can only accept a deposit after agreeing a sale, and can only hold one deposit at a time. It is held in escrow until completion.

Absolute joke that was/is too. They still haven’t banned the flavours and advertising in shops. They banned it for cigarettes and just let it get swapped over it’s pathetic.

Good idea to end both gazumping and gazundering. Both are horrible. It will mean that sellers think far more carefully before marketing their house and accepting offers and that buyers think far more carefully rather than getting carried away and offering more than they can comfortably afford.

I think this is a cultural problem as much as a legal one. Legally speaking there will always be ways to invalidate a contract. One of the first things my Scottish solicitor told me is that the binding nature of Scottish transactions is a myth and that there are always ways to pull out. What makes the English system so problematic is that making offers you aren't fully committed to or putting your house on the market speculatively without thinking through the reality of moving is an entrenched part of buying and selling culture, and I think it will take more than legislation to shift that. What could be improved with legislation is the role of estate agents, who are largely useless at checking the stories, and particularly the finances, of buyers. Also conveyancing time frames - both buyers and sellers should have limited time to act/respond at each stage of the transaction. It's not OK to make an offer and then take weeks to even instruct a solicitor, or to be sent a list of queries and take weeks to come up with answers or paperwork.

I agree to all your points. As I said above, submitting a deposit with your bid (which you forfeit if you cannot acquire financing according to the promised timings) and the time frame for every action item in the American system really keeps the process moving. EAs have much higher rates of commission there; when all is smooth it hurts to pay but when things get tricky they defo earn their money.

Even in the American system it is easy for buyers to break the contract at the inspection stage: a good inspection is bound to turn up something, which technically breaks the contract. You are free to walk. I think the sellers have fewer options but a good EA’s interpersonal skills and a bit of dosh go a long way.

They’re also proposing that EA’s have to have qualifications now as well, which would be a good thing. And also imposing penalties for pulling out of a sale / purchase. And that the KYC done can be shared across EA’s, solicitors, surveyors etc. So buyers and sellers aren’t sending the same information to various places, which would make the process smoother and quicker.
What I’ve never understoood is why the sellers don’t have to provide a basic survey. Obviously there would need to be a process to ensure it’s done fairly / not biased, but if a property was advertised with a basic survey done then it would stop people trying to buy houses that need more work than they can take on and having to pull out of a purchase after already spending a load of money on their own surveys. The sales pack should include a survey, then people can make an offer and get a more in depth survey if they want. It would speed up the entire process if it was done before the property was even marketed.

Similar was brought in before although was more onerous on the seller
heres wiki on it

’ Home Information Packs (HIPs). Introduced by the Labour government under the Housing Act 2004, these packs required sellers to provide key property information, searches, and energy certificates up-front to speed up sales.
However, HIPs were heavily criticised for placing high upfront costs on sellers and were suspended in 2010 by the incoming Conservative-Liberal Democrat coalition government, before being fully repealed ‘

I think we have to do something and this revised proposal could be a good idea

I would like to have more clarification on what constitutes a reasonable reason to withdraw
Imo only death of one party would be reasonable

I would also expect mortgage companies would need to approve any seller surveys.

Overall anything that makes the process
quicker and
less stressful
and prevents buyers from last minute price reductions
or either party pulling out
is a plus

Sellers surveys have always been a worry due to conflict of interest and mortgage companies always want their own ones done