Upfront deposit - the only way to test a buyer's bona fides?

merlinthehappypig

eco-friendly wrote: »

Quote:


Is it ? lets run through it,

1.' Couple' view a property, they want to proceed and inform the EA

O.k. no problem with this one

2. EA requests that the 'couple' contact their solicitor, to make a ' note of interest' on the property. Meanwhile the couple will obtain a survey for the property, the EA will still market the property until there is at least one other interested party. The EA will now contact the 'couple's' solicitors and any others, and inform them that a ' closing date ' has now been set for offers.

No, you are wrong, sorry. A note of interest is simply to stop the property being sold without the person who noted interest being told. We had 5 notes of interest on our last house, none of whom eventually bought the house or even made an offer. You do not get a survey done at the note of interest stage, unless you have been told that the property is going to a closing date and want to bid.

3. The 'couple' will now instruct their solicitors to make an offer based on the survey report, etc, usually around 20% more than the ' offers over ' price.

Following the closing date and acceptance of their offer, our buyers, your 'couple', then instructed a surveyor and arranged their mortgage, not before

4. The 'couple's' bid has been successful , they will now organize a mortgage for their purchase, within days they will meet with their solicitor and go over ' the offer ' and fine tune any extras, conditions etc,

O.K.

5. The 'couple's' entry date is 3 months away, 6 weeks is common, sometimes 28 days, The solicitor will now carry out all necessary searches, reports as req; solicitors will now be in regular contact with the couple/broker enquiring about any forthcoming mortgage offer.

O.K., but searches are usually done after the bargain is concluded

6. Once the offer is in place the solicitor will issue a ' qualified acceptance '
the 'bargain is conluded'. LEGALLY BINDING.

It's legally binding on the seller, there are still a number of ways that buyers can pull out, without penalty. The searches will not have been done and if there is any problem the buyer can pull out, no problem. Friends of ours pulled out from their purchase after the bargain was concluded, following searches. Their solicitor said it was no problem at all pulling out of the deal after the bargain was concluded as he could always find a way out.

quote]

Gazundering is unlikely, as is late gazumping. However, nothing is set in stone at the offer stage, despite what the media would usually have us believe. We had a closing date and accepted the highest offer. The next morning we had another offer, £6000 over the price we had accepted. Whilst we thought that was tough on us, our solicitor advised us that we could, in fact, accept the offer, but we would have to use a different solicitor as it was against 'custom and practice', though perfectly legal.

I'm not disputing that sometimes the sale & purchase might work out as you suggest, but the Scottish system isn't perfect, anymore than the English one is completely flawed. they both have their good and bad points.

As for my comment that the system in Scotland offers slightly better security for the buyer. Our buyer knew in January that the bargain was concluded and that we couldn't pull out so he could plan with confidence. It's usual for buyer's solicitors to do last minute checks on the searches in case anything has changed, so we didn't know for certain right up until we received the money that the sale was definitely going to go ahead. We had to plan in the knowledge that things could still go wrong.

The absence of any deposit in Scotland meant that, if the buyer had pulled out at the last minute, our only recourse would be through the courts which would be fun when trying to sell the house again and cope with all the other problems. The 10% deposit that the buyer would forgo in England would have been much nicer than court proceedings with no guarantee of success.

jonewer

Jolanta_Nowak wrote: »

And it is precisely the 'sod off', careless tendency who are the greatest whingers when the market changes.. blah blah waffle waffle

Theres nothing careless about refusing to be charged just to look around someone's sordid, smelly house before spending a not-so-small fortunte on it.

You are welcome to try this for yourself though.

Go on.
I dare you.
But you wont.

Because you know it a farcical idea, something Alan Partridge would come up with if he was an estate agent.

lynzpower

I just couldnt understand the mechanics of how exactly one would charge them. would the poor estate agent whos trying to flog it, say oh sure you can go and look, but the vendor wants 2.50 for you to see it. Or would it be a collector on the door? the vendor perhps with a book of raffle tickets on the door waiting for the masses to descend.

YEah right. vendor looks stupid!

HugoSP

Lavendyr wrote: »

How do you define 'substantive'? What about buyers who have an agreed mortgage in principle but then find that the offer has been withdrawn (getting more common these days)? What about completely external issues such as sickness, redundancy, relocation by work, all of which I would see as genuine reasons for wanting to pull out of a purchase or sale?

Hi Lavendyr

What I am trying to hit at with the use of the word "substantive" is the distinction between a genuine reason attached to the house to pull out of the purchase/sale, as opposed to one that my in laws' buyers raised when they pulled out of the purchase.

We here a number of stories about people who just decide that they don't really like the house after all, or have no means to go ahead with the purchase, despite committing to it. If there is a chance that they could lose money then they may decide to dress it up on some pretext, such as an issue with the survey or serches.

That's not to say that the discovery of rampent dry rot in the timbers shouldn't justifyably cause the buyer to think twice, but using some minor point in the survey (such as lack of loft insulation or a failed double glazing unit) to back out of a survey to back out of a sale would be scruitinised, especially when the seller offers to adjust the price to pay for the work and said offer is turned down.

To strengthen the arguement we really need proper condition reports on properties before they are marketed, something the HIPS was meant to do but got fudged so much that it is no use to anyone.

To answer your second point, there are several reasons that a mortgage offer can be widthdrawn.

Firstly lenders have done this a few too many times recently. This needs to be stopped. If the applicant has given correct information then the lender should stick to their side of the bargain. To my mind the lender responsible would owe the buyer the £1k that he had to forfeit.

Secondly, the mortgage offer could expire, this happened to us when we were trying to buy the place we have now. Offer to completion took 2 years - the longest that my IFA had ever known or heard of! We had to wait until it looked like we were close to exchange then apply again with a different lender. With my scheme, if this occurred due to a slow solicitor on the sellers side, then the seller would forfeit his £1k. If however it occurred due to a buyer problem then the buyer would forfeit. However both seller and buyer could agree to keep going, and therefore neither would have to forfeit.

The other issues you raise (sickness, relocation and redundancy) could just as easily happen after exchange but before completion. Currently, both parties lose out if the buyer has to pull out before exchange. My scheme isn't meant to be a blame scheme but one that tries to compensate the person who has been financially inconvenienced because the other party has pulled out.

OK, in the event of someone being made redundant before they come to exchange they stand to lose £1k in addition to their own costs. However currently the same loss is spread between both parties. Anyway, I'm sure that insurance companies would jump on the bandwagon and sell policies to protect people against losses due to specific circumstances.

I would never claim any scheme is perfect but, currently we have losses arising out of failed transactions. In all cases both parties lose out to a certain degree, even if only because they have wasted time following this transaction through whilst other opportunities have been and gone.

However, a failed transaction is usually down to the actions of one, not both parties, so why should the other person suffer?

HugoSP

When we sold my mums house after she passed away I very much suspect that some people were looking just for a nose.

She was quite a local character and a lot of people were intreagued by her. Also, the house always drew a lot of casual interest anyway, due to its location and design. I suppose it is only natural for some to want to find out more about what was her home. I even had one cheeky begger asking if he could have something to remember her by. He did not get a reply as, despite several attempts I couldn't write one that was polite enough.

Debt_Free_Chick

HugoSP wrote: »

Hi Lavendyr

What I am trying to hit at with the use of the word "substantive" is the distinction between a genuine reason attached to the house to pull out of the purchase/sale, as opposed to one that my in laws' buyers raised when they pulled out of the purchase.

So I could change my mind .... so long as I blame something in the survey or searches? :rolleyes:

Problem is that (I believe) 99 times out of 100 people (buyers or sellers) never tell you the real reason why they've pulled out.

eco-friendly_2

quote] chriseast
The absence of any deposit in Scotland meant that, if the buyer had pulled out at the last minute, our only recourse would be through the courts which would be fun when trying to sell the house again and cope with all the other problems. The 10% deposit that the buyer would forgo in England would have been much nicer than court proceedings with no guarantee of success.
[/quote]


Hmmm, This 10% deposit is sometimes payed as little as 7 days before completion if I'm correct, giving the seller little comfort but the final stage of the process. Going by what I have read on this forum it appears that most property purchases collapse well before a deposit is paid , causing untold stress and misery to buyers and sellers ,,,,,, south of the border.

seven-day-weekend

In Spain there is no time limit afaik to placing your deposit, but once you have done so and it has been accepted,it is legally binding on both parties and neither can pull out without recompense to the other. You then have six months to complete the sale.

So....you could spend as long as you like looking round, getting surveys etc....but once you have decided to proceed and placed your deposit, that is that.

Seems like a reasonable system to me.

IveSeenTheLight

Nenen wrote: »

Having said that, Scotland has a system whereby once a price is agreed then there are legal and financial consequnces if you don't proceed and that has produced a system whereby you often have to go to sealed bids (having paid upfront for your survey and searches etc). I've heard that this often means buyers lose their survey fees several times before they get lucky!

Actually the best practice in Scotland is to offer subject to survey.
This way you only get a survey after you have a winning bid.

Sometimes, it is worth paying for a survey or other bidders will and you can get for 80% of the cost to re-print before deciding on a figure to bid, but nowadays there are many ways to find out the market rate before bidding

I've placed bids on four properties in Scotland and won three of them.
Each time I won within a few hundred pounds of the second bidder.
Some say it's luck, I believe it's down to assessing the market place correctly.

The one I failed with, I put in a low offer as there were some area of concern.
If I won at that offer it would have been worth it, but actually there were 5 bidders and I was the fourth.
This was a bid of we'll try and see that didn't work. All the ones I wanted I got.

Whatever you do, when you make a bid, check out the market value and market trend for similar properties in the immediate area and base your decision on this

HugoSP

Debt_Free_Chick wrote: »

So I could change my mind .... so long as I blame something in the survey or searches? :rolleyes:

Problem is that (I believe) 99 times out of 100 people (buyers or sellers) never tell you the real reason why they've pulled out.

This is the problem, no system could claim to be perfect but the seller would have the right to challenge the claim via the intermedery.

As I said, this scheme would have to be linked in with a detailed up front survey that the HIPs tries to be.

So if my condition report said "no" for dry rot, because I had commissioned it, then you, the buyer said that you could not buy because the property has, or may have dry rot, I would then be best advised to refer the case to the intermediery who would arbitrate on the basis of a professional opinion. If the house was found to have dry rot then you could either walk and not forfeit your £1k, or try to negotiate a discount on the price with me to take into account the work that needed doing.

If the third party inspection backed up my condition report then you would be warned that pulling out means an automatic forfeit of your £1k.

If you then bought the place and found that it did have significant dry rot after all you would then be able to claim off the individual who did my condition report.