Gazumping: The Guardian on the plan to end it (nonsense) + difference between England and Scotland

Tom99

The aborted Home Information Pack was an attempt at moving closer to the Scottish way of doing things but failed.
Like some posts above I cannot see a deposit system fairing any better particularly with chain sales. Say you have a chain of 5 sales each purchaser puts up a £1,000 deposit, then the 1st in the chain pulls out and everyone loses their deposit.
The only two people better/worse off is the 1st time buyer £1,000 worse off and the final seller £1,000 better off. The other 4 people in the chain will still have to pay their own abortive costs.

seven-day-weekend

This is how it works in Spain. You can pay the deposit right at the start and then if either party pulls out 'just because', the either the seller gets to keep the deposit or the buyer gets it paid back double.

I know someone who was selling their house because they could not afford the mortgage, the buyer pulled out just because they had changed their mind. The vendors got to keep the deposit, which was enough to pay the mortgage off. So they kept their house.

When we were selling ours, the process was so complicated because of out-of-date paperwork, that we did not accept a deposit until it was far enough along in the process that we did not have to cancel the sale through anything to do with the paperwork and we were not in danger of having to pay the buyer.

Cakeguts

Tom99 wrote: »

The aborted Home Information Pack was an attempt at moving closer to the Scottish way of doing things but failed.
Like some posts above I cannot see a deposit system fairing any better particularly with chain sales. Say you have a chain of 5 sales each purchaser puts up a £1,000 deposit, then the 1st in the chain pulls out and everyone loses their deposit.
The only two people better/worse off is the 1st time buyer £1,000 worse off and the final seller £1,000 better off. The other 4 people in the chain will still have to pay their own abortive costs.

The home pack thing failed for three main reasons.


1 It got progressively more and more expensive for sellers to buy the pack.



2 Lenders would not rely on information provided by a seller because of the conflict of interest and so buyers had to do all the searches again anyway so all the information in the pack had to be done twice.


3 In areas where the market was slow some sellers had to get more than one pack because they went out of date after about 6 months.



It was a stupid system and anyone who had bought a house could see what was going to go wrong before it was ever introduced. The only people who got any benefit from it were the people being paid to put the packs together and the estate agents selling the packs. It made no difference to people buying a house and it didn't stop gazumping or gazundering.



This new silly idea won't stop gazumping or gazundering either.



There is now a ban on lettings fees for tenants and some journalist has come up with a way to introduce non refundable fees for buyers instead. Why? Haven't they got anything better to do with their time than think up ways for estate agents to increase their income?

SouthLondonUser

About Spain : at what stage does the buyer pay the deposit? Paying it before all your due diligence is complete brings us back to the same problem: who determines what is a valid and what is an invalid reason to pull out? What if there's a dispute?

seven-day-weekend

SouthLondonUser wrote: »

About Spain : at what stage does the buyer pay the deposit? Paying it before all your due diligence is complete brings us back to the same problem: who determines what is a valid and what is an invalid reason to pull out? What if there's a dispute?

I am not sure of the legalities but we told our solicitor that we did not want to accept a deposit until our paperwork was all done and we were not in danger of having to pull out because of it.

Also ur buyer did not want to pay a deposit until he was sure he had his mortgage. So it suited both of us to do it this way. We were both British as well, so not a problem for us to do it this way; it may have been if our buyers were Spanish.

At the same time, most house sales I am aware of, the deposit was paid right at the beginning once the sale had been agreed, and then it became legally binding.

So in other words, it seems as though it was flexible as to WHEN it was paid, but once it was paid, the transaction became legally binding. It was usual to pay it right at the beginning to show your commitment to the purchase.

http://www.properties-in-europe.com/info_spain_buy.htm

https://tenerifepropertygroup.com/non-refundable-10-deposit-law-spain-unfair

davidmcn

Cakeguts wrote: »

2 Lenders would not rely on information provided by a seller because of the conflict of interest and so buyers had to do all the searches again anyway so all the information in the pack had to be done twice.

I didn't pay much attention to the detail of HIPs in England at the time, but it would seem odd for lenders to consider this a fundamental problem when the same lenders are fine with it in Scotland (where it's always been the case that sellers provide the searches anyway).

3 In areas where the market was slow some sellers had to get more than one pack because they went out of date after about 6 months.

In Scotland, Home Reports only get updated (if necessary) once an offer's accepted, they don't need to get updated during a long marketing period (though they do if you've taken it off the market and put it back on). Updates are relatively cheap - just a brief visit by the surveyor to confirm nothing significant has changed and that the market hasn't crashed. They don't include searches, so those are only ordered during the conveyancing process - but as I said above, getting searches is less of an ordeal than seems to be the case in England.

Cakeguts

I think what did for the sellers packs in the end was the cost. When they were introduced people were told that they wouldn't cost more than around £500. Then they discovered that there were not enough surveyors trained to put them together so there were a lot of training courses introduced to train the people to put the packs together and then of course the cost went up so that the £500 rapidly became £1000 plus. They didn't do anything to reduce the risk of gazumping or to speed up the house buying process because they didn't address the problems of chains collapsing. The whole pack had to be updated if it was something like more than 6 months old so if you didn't get an offer on your house within 6 months you could find yourself buying two or more sellers packs at £1000 plus for the sale of your house.


It turned into a "it seemed like a good idea at the time" situation.