Buyer premium

JenKKR

I had a verbal offer accepted on a property but it came with a buyer premium. I paid the premium and now after having a MIP my application has been declined. 

I am now out £3600 premium and the house will have to go back on the market as I can't get a mortgage for it currently. Should the premium be refunded or am I being stupid to think estate agents should have morals when it comes to such things? 

Im a FTB with no clue about most of the ins and outs of buying and what's normal or not. So annoyed at myself for not realising I may lose all that money if the mortgage didn't go through. 

Is there anything I can do?

eddddy

JenKKR said:

Is there anything I can do?

I'm assuming that when you say "Buyer's Premium", it's some kind of pre-contract deposit or reservation fee.

As you probably realise, most estate agents don't ask for a "Buyer's Premium" / deposit / reservation fee.

Why was your mortgage refused? Was it a problem with your financial situation, or was it a problem with the property?

Maybe there are 2 angles to investigate...



Firstly, the contract angle...

• Were you given a written terms of the "Buyer's Premium" agreement / contract, before you paid the money?  Or were you directed towards some terms on a website, or similar?

• (In general, it's not sensible to pay £3600 to anyone unless you have something in writing explaining in detail what it's for.)

• If you were given written terms, what do they say about this situation? (Being refused a mortgage?)

• If you were not given written terms, what were you told verbally (before you paid the money) about the situations where you would lose the "Buyer's Premium", or when it would be refunded?

• Whatever you were told (in writing or verbally) before you paid the money would be terms of the contract, and they should apply now

Secondly, the Property Ombudsman Scheme...

• Is the estate agent a member of the Property Ombudsman Scheme? Most are.

• Hopefully, the Property Ombudsman would regard the "Buyer's Premium" as a deposit, and the Property Ombudsman's "rules" about deposits are:

• 

• Link: https://www.tpos.co.uk/images/codes-of-practice/TPOE27-8_Code_of_Practice_for_Residential_Estate_Agents_A4_FINAL.pdf

• So if the estate agent is member of the Property Ombudsman scheme, and they didn't follow those rules - you can initially complain to the estate agent, and then to the Ombudsman.

• The Ombudsman has the power to tell the estate agent to refund the £3600, if the estate agent didn't follow those rules. (But it's not guaranteed that would happen, it's up to the Ombudsman to decide.)

grumpy_codger

https://www.google.com/search?client=firefox-b-d&q="Buyer's+Premium"

It says that "Buyer's Premium" can be required for auction purchases

_Penny_Dreadful

JenKKR said:

I had a verbal offer accepted on a property but it came with a buyer premium. I paid the premium and now after having a MIP my application has been declined. 

I am now out £3600 premium and the house will have to go back on the market as I can't get a mortgage for it currently. Should the premium be refunded or am I being stupid to think estate agents should have morals when it comes to such things? 

Im a FTB with no clue about most of the ins and outs of buying and what's normal or not. So annoyed at myself for not realising I may lose all that money if the mortgage didn't go through. 

Is there anything I can do?

This sounds like a property being sold using the Modern Auction Method which is a hybrid of traditional auctions and private sales, worst of both worlds.  Typically, the winning bidder (you) pays a non-refundable reservation fee and has x number of days to exchange contracts and complete the purchase.

You need to read the contract you signed when you paid the £3,600 to find out if it's refundable.  My guess is that it's not.  One might consider the morally correct thing to do is to abide by the contract one signed.

In future, avoid properties being sold by the Modern Auction Method.  The majority of properties sold in the UK are not sold using the Modern Auction Method.

soolin

Apart from the modern auction scenario mentioned above I've never heard of a buyers premium, could it be something to do with the fact OP is in Scotland? 

First time buyer, low income - Page 2 — MoneySavingExpert Forum

WIAWSNB

Jen, to whom did you pay this 'Buyer's Premium'? And who will end up with it?

user1977

soolin said:

Apart from the modern auction scenario mentioned above I've never heard of a buyers premium, could it be something to do with the fact OP is in Scotland? 

First time buyer, low income - Page 2 — MoneySavingExpert Forum

No, it isn't a particularly Scottish thing. I have seen it mentioned in listings for non "modern auction" sales but don't know what conditions are attached.

Obviously it would make sense to get legal advice before handing over a four figure sum (and in Scotland everyone tends to be lawyered-up from the start).

strawb_shortcake

I've seen a few houses that have been on the market for awhile become modern auctions, this is all England.

The buyers premium is non refundable and is paid in addition to the sale price.  I've added the wording from a local one below. I can't see how this can really work for anyone in a chain, the risk is just too great. As its included in SDLT calculation I'd assume it went to the vendor, but I'm not convinced it would. This is on with a traditional high street agent too. 

The wording below I'd assume would give a get out of not refunding if your mortgage lender declines


Modern Method of Auction, means the buyer and seller are to Complete within 56 days (the "Reservation Period"). Interested parties personal data will be shared with the Auctioneer (iamsold). If considering buying with a mortgage, inspect and consider the property carefully with your lender before bidding. A Buyer Information Pack is provided which you must view before bidding. The buyer signs a Reservation Agreement and makes payment of a non-refundable Reservation Fee of 4.5% of the purchase price including VAT, subject to a minimum of £6,600.00 including VAT. This is paid to reserve the property to the buyer during the Reservation Period and is paid in addition to the purchase price. This is considered within calculations for Stamp Duty Land Tax.
Services may be recommended by the Agent or Auctioneer in which they will receive payment from the service provider if the service is taken. Payment varies but will be no more than £960.00. These services are optional.

eddddy

soolin said:

Apart from the modern auction scenario mentioned above I've never heard of a buyers premium, could it be something to do with the fact OP is in Scotland? 

Estate Agents will often use "fancy words" to describe things.

For example, some agents might think that "Pre-contract deposit" or "reservation fee" or doesn't give off the right vibe, so they might say "Buyer's Premium" instead.

FWIW, here's a random example of a Scottish Estate Agent who uses the term "Buyer's Premium":
https://www.mcewanfraserlegal.co.uk/properties/1a-philip-square-ayr-ka8-8el/mfl0245621
https://www.mcewanfraserlegal.co.uk/selling/buyers-premium 


That particular agent doesn't seem to explain the terms of their "Buyer's Premium" on their website - e.g. When it is payable, when it is refundable etc. Hopefully, they make the terms clear before buyers make any offers.



(Obviously, I don't know anything about the estate agent in the link above, so I can't comment on why they chose to use the term "Buyer's Premium" instead of the terms "Deposit", "Pre-Contract Deposit", "Reservation Fee" or similar, which tend to be used by other estate agents.)

_Penny_Dreadful

A buyer’s premium is not something one would pay in Scotland when purchasing a property in the traditional, non-auction way. This sounds very much like a Scottish version of the modern auction method. When buying in Scotland using a non-auction method, offers are made via your solicitor. I’d recommend that @JenKKR finds herself a solicitor on her lender’s panel of solicitors before attempting to make any more offers. 

This is a good starter for ten. 

https://www.mygov.scot/buying-a-home

SidJ

Assuming it's written into the auction house description then a buyers premium is pretty standard when buying anything in an auction selling any type of goods. It's a non-negotiable payment to be made on top of the price once a bid has been won. I doubt very much you will get anything back