Tweet
Homebuyers or sellers can pull out at any point before contracts are exchanged, often leaving both parties out of pocket. Is it time to change the system?
Last week I wrote off more than £700 when I pulled out of the purchase of a house. The sellers, who had accepted my offer several weeks ago, had changed their minds: they needed me to pay an extra £5,000 or they couldn't afford to move.
My offer had included a promise that after the survey was done I wouldn't go back and quibble on price – I knew work needed doing and had a building survey done so I knew which work to prioritise. (That cost me £375 on top of the £360 for the lender's mortgage valuation.) When the surveyor suggested I asked for £3,000 off to fix the roof, I carried on with the purchase at the agreed price. But when I was told the sale couldn't continue unless I stumped up another £5,000, I decided to withdraw my offer.
At several points during this whole process I have wondered why the English homebuying system works as it does. Early on, my partner asked why we couldn't have a survey done before we made an offer – the best answer I could come up with was that that isn't how it's generally done. But it would have made sense in this instance, where work obviously needed doing and we had no idea how much it would cost.
Now I'm wondering why a letter saying your offer has been accepted at a certain price is not at all legally binding. Of course, it cuts both ways and had I decided after the survey to try and renegotiate on price or walk away, I could have done so without penalty. So you could say it's fair – but the fact it can cause problems for both parties isn't a great set-up.
Government attempts to improve the system in England and Wales seem to have focussed on speeding things up, rather than adding more certainty for buyers and sellers. The short-lived home information packs did give buyers a bit more detail about the home they hoped to buy, and meant that if a sale collapsed searches were not being paid for more than once. But they didn't save buyers from commissioning and paying for surveys, and didn't seem to do much to stop chains collapsing.
According to Chris Wood, an estate agent and property consultant in Cornwall: "No system is perfect, but the American system is the best I have seen so far." One of the things that sets that system apart from the one in England and Wales is the use of binding contracts earlier in the process.
There is a group over here who are trying to introduce a kind of pre-contract contract. The E-Homebuying Forum has been looking at what we can learn from other countries, in particular Australia and France. It's chairman, Tom Parker, said: "In Australia, they use pre-contracts to gain commitment by both parties to continue exclusively with the house sale at the agreed price, subject to certain conditions, with a deposit of between 5% and 10% as surety.
"If the property proved to be suffering from subsidence or the buyer couldn't secure sufficient finance, the contract would become void."
The contracts also include a timeframe which stipulates that the buyer can't pull out past a certain date, and outlines when certain things should happen, perhaps giving them two weeks to secure finance, two weeks to carry out a survey and two-four weeks to complete necessary searches.
So if such contracts became commonplace, would you be willing to sign one? I think I would, as it would add a little more certainty to the whole process – and if the other party in the transaction refused, at least alarm bells would be ringing early on.
But the government seems to be leaving it to the industry to work on and introduce any changes. Do you think it's time it looked into fixing the problem itself? Or does the current system, mainly founded on a shared goal and good will, work well enough for you?
Hilary Osborne
guardian.co.uk © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds
More...
