Pre-exchange deposit VS seller to take good faith?

LAD917

I don't view the risk as symmetrical.   Buyers can have a friend inquire about whether the seller is still showing the property, but sellers have no way to know if their buyer is out looking at other things.  Searches, solicitor fees, surveys, etc. are not very expensive in the context of a property purchase.

When selling, I generally will not agree to list the property as SSTC or take it off the market prior to contract exchange.  I tell the buyer sincerely that I will give them every chance to complete, and I will not accept another offer at any price as long as they show progress and commitment.  That said, I instruct the agent to continue to show the property to anyone who wants to see it - with full disclosure that it's under offer and I intend to proceed with the buyer as long as they don't back out. 

Taking your property off the market goes beyond showing good faith to me - it's giving away all of your leverage and getting very little back.  Buyers want to be able to back out for any reason, but for sellers to commit to their offer.  Doesn't work that way for me.  Won't do it when selling, and don't expect it when buying.  Don't want to get gazumped - get to contract exchange quickly!  The same rule applies to me if I don't want to get gazundered.

I would happily agree to a deposit, refundable under certain conditions, as many other countries have done.  Seller is bound; buyer can back out or renegotiate based on a prescribed set of conditions within a set time period.  That said, I've never experienced this in London.

princeofpounds

LAD917 said:

Taking your property off the market goes beyond showing good faith to me - it's giving away all of your leverage and getting very little back.  Buyers want to be able to back out for any reason, but for sellers to commit to their offer.  Doesn't work that way for me.  Won't do it when selling, and don't expect it when buying.  Don't want to get gazumped - get to contract exchange quickly!  The same rule applies to me if I don't want to get gazundered.

Well, it's an opinion, and whilst you may be right in some respects, you are going to find that some buyers just won't accept being in that situation. That comes at a cost, even if it's not an explicit cost.

In addition, you are not correct that you give up any leverage. That might be true if taking a property of the market is an irreversible step, but that's just not the case. You can always choose to remarket (or use the threat of it) at any time up to exchange.

Indeed, removing a property from marketing is not really at all dissimilar to your stated strategy, of absolutely assuring the potential buyer that their offer will be given a fair chance to proceed. It's just that they can see a visible commitment to it rather than relying on your (doubtless unimpeachable) assurances as a vendor.

AnotherJoe

LAD917 said:

I don't view the risk as symmetrical.   Buyers can have a friend inquire about whether the seller is still showing the property, but sellers have no way to know if their buyer is out looking at other things.  Searches, solicitor fees, surveys, etc. are not very expensive in the context of a property purchase.

When selling, I generally will not agree to list the property as SSTC or take it off the market prior to contract exchange.  I tell the buyer sincerely that I will give them every chance to complete, and I will not accept another offer at any price as long as they show progress and commitment.  That said, I instruct the agent to continue to show the property to anyone who wants to see it - with full disclosure that it's under offer and I intend to proceed with the buyer as long as they don't back out. 

Taking your property off the market goes beyond showing good faith to me - it's giving away all of your leverage and getting very little back.  Buyers want to be able to back out for any reason, but for sellers to commit to their offer.  Doesn't work that way for me.  Won't do it when selling, and don't expect it when buying.  Don't want to get gazumped - get to contract exchange quickly!  The same rule applies to me if I don't want to get gazundered.

I would happily agree to a deposit, refundable under certain conditions, as many other countries have done.  Seller is bound; buyer can back out or renegotiate based on a prescribed set of conditions within a set time period.  That said, I've never experienced this in London.

Do you get many viewers (assuming they know the house is under offer and the owner wont accept any bids unless it falls through?). I take it they are informed of this?

NQManchester

I got asked to pay a deposit when buying a house because of how much interest there was in it apparently (yet we were the only offer...)
I asked for a contract to sign detailing under which exact circumstances it would or wouldn’t be returned and they quickly back tracked and didn’t need it anymore. 

davidmcn

LAD917 said:

I would happily agree to a deposit, refundable under certain conditions, as many other countries have done.  Seller is bound; buyer can back out or renegotiate based on a prescribed set of conditions within a set time period.  That said, I've never experienced this in London.

There is no prescribed or even vaguely normal "set of conditions" though. I expect the agents who are asking for this would be doing so on terms very much weighted towards the vendor. The parties could be getting on with more useful things than negotiating a meaningful pre-contract contract.

Out of interest, which countries do it this way, as opposed to just shifting the whole "proper" contract to an earlier stage in the process?

LAD917

I'd argue conditional contracts benefit buyers, at least for the first couple of weeks. The seller is normally locked in on day zero, while surveys / inspections give buyers a window of at least a week or two to back out for almost any reason.  Gazumping is near-impossible.

Plenty of places, including U.S. states, have standard contract forms that spell out the conditions under which buyers are entitled to return of their deposit. Given that buyers can make whatever demands they want of the sellers following the surveys / inspections, no agent or solicitor would advise sellers to try to keep a deposit from a buyer who decided to back out during the conditional period.

I have done one conditional contract in England, where the sale was dependent on resolution of a planning issue.  I locked in the property and paid a deposit - the sellers had to sell it to me, and I had to buy it upon resolution of the planning issue.  If the issue was not resolved by a date in the future, I had a unilateral right to withdraw, with full refund of my deposit.  All other diligence had been done by that point, and the transaction was chain-free on both ends.  In this instance, where it came down to one issue that was going to take months to resolve, both the sellers and I were happy to have something beyond each other's word.

htcclub

AdrianC said:

htcclub said:

I had read several articles about pre-exchange deposits on non new builds, mostly occuring in London (shock).

Care to link to any?

https://www.theguardian.com/money/2017/feb/04/estate-agents-ask-homebuyers-pay-up-pre-contract-deposit

https://hoa.org.uk/2017/02/pay-pre-contract-deposit/

https://www.samconveyancing.co.uk/news/conveyancing/non-refundable-deposit-for-property-buyers-3392

princeofpounds said:

Sometimes sellers will try to keep them on rightmove but will not permit viewings, to raise a list of potential interest in case your offer falls through - that's a bit of a grey area, but cheating is relatively uncommon because it can easily be tested by getting a friend to try to book a viewing.

Thanks, I'll have to try this friend trick!

AdrianC

htcclub said:

AdrianC said:

htcclub said:

I had read several articles about pre-exchange deposits on non new builds, mostly occuring in London (shock).

Care to link to any?

https://www.theguardian.com/money/2017/feb/04/estate-agents-ask-homebuyers-pay-up-pre-contract-deposit

https://hoa.org.uk/2017/02/pay-pre-contract-deposit/

https://www.samconveyancing.co.uk/news/conveyancing/non-refundable-deposit-for-property-buyers-3392

Apart from that being four-year-old coverage of something that sounds pretty much theoretical, it's a different logic entirely.
It's the EA charging buyers on submission of offer to "prove their intent", to prevent frivolous offers that then get withdrawn.

ele_91

I don’t think it’s worth worrying about, in 99% of cases the estate agent will mark as sold STC and not allow further viewings. They might require your proof of funds and ID before they do this but that’s standard. We have recently viewed around 30 properties in a fast moving market; we requested to view a few more not marked SSTC on rightmove but all agents were quick to tell us when these were under offer waiting this info and wouldn’t allow us to view.  Its is difficult enough as a seller to find a solid, proceedable buyer; for most vendors (me included) this is worth more than an extra £5k or so from another buyer trying to gazump. You need to ask the question, if your seller would do this, are they actually the kind of people you want to be dealing with?

In my opinion the best way to avoid being gazumped is to offer a fair price, avoid negotiations on non-issues after the survey (IMO anything that could be easily seen on viewing/prior to making offer is non negotiable), and show you are committed by trying to move things along.