In England and Wales the number of house sales falling through before completion reached 30% in 2018. The final quarter of 2018 house sales falling through reached almost 50%. Sobering statistics if you’re in the market for a new home.
Political uncertainty is clearly having an underlying impact on the property market as a whole. However, when taking a closer look at the reasons for transactions falling through 30% cited the buyer changed their mind whilst another 19% failed due to the seller accepting a higher offer after the sale was agreed.
Other failures included a survey issue causing a buyer to pull out of the sale (16%), difficulty securing a mortgage (13%), either party felt that the sale was not progressing (10%), chain collapsing (9%) and the 3% due to the buyer wanting to reduce their offer after the sale had been agreed.
The government is looking at proposals for residential reservation agreements. This is a legal statement of intent which lock the buyer and seller to the agreed purchase and sale of the property. This solution would go some way to reduce the number of property transactions falling through each year. It would work the following way if a chain collapses, the transaction would be placed on pause until both parties are again in a position to proceed.
This is the model of property purchase and sale Scotland has in place. Their market is significantly different to England and Wales. There are 6 key differences:
Sellers accepting higher offers after a sale has been agreed is virtually non-existent
This is a key difference in the model between Scotland and the rest of the UK. Solicitors are responsible for the sale of the property (most have an estate agency department). If they accept a higher offer from a buyer after one has been agreed they must then no longer act for the seller. Whereas, in England and Wales estate agents work on behalf of the seller and usually are paid a % commission of the sales fee. If a higher offer comes in there is nothing to stop a seller accepting it.
The bidding process is much simpler and transparent – think of an eBay model rather than an auction house
Homes are put up for sale with offers ‘over’ a specified price, or at a fixed price. If the home is a fixed price, it is a ‘first passed the post’ system whereby the first offer to meet the price is the winner, very similar to the eBay ‘Buy it Now’ system. If the property is at ‘over’ a given price, possible buyers will give sealed bids (their highest offer and proposed purchase timescales). The highest bidder will win and will be informed on the same day. Which is similar to the eBay ‘Best Offer’ system.
Sellers must provide up front information to potential buyers – Home Information Packs
The Scottish property pack includes a survey, an energy performance assessment and a detailed property questionnaire completed from the seller which includes information only they will likely know.
The survey is normally the equivalent to a Home Buyers Report in England and Wales cover the structure, bricks and mortar with a traffic light system to detail issues. The Energy Performance Report is similar to the EPC in England and Wales. The detailed property questionnaire covers:
- council tax banding
- any issues, like fire or storm damage or asbestos
- any alterations or extensions
- details of any specialist works or guarantees
- details of any notices that might affect the home
The Government attempted to add the Home Information Packs to the England and Wales housing market which was poorly implemented and was repealed in 2012.
The Road to Reform
The Government acknowledge the England and Wales property buying process is flawed and needs to change. So, what do we think at Housecheckr? We believe the market needs to change and needs to change significantly, no one solution will quite fit the bill, this has been proven by the previous attempt of implementing Home Information Packs in isolation.
Seller Home Information Packs need to make a comeback. They also need to include a RICS survey, EPC and a Housecheckr Home Fixtures Survey. This way, a buyer will be well informed about the property they are purchasing.
The government will need to deter sellers from accepting higher offers once one has been accepted. They could add a regulated process of fixed or sealed bidding which works in Scotland. With similar repercussions for estate agents if they bring a higher offer to a sellers attention after one has been accepted such as no longer being able to act for the seller. With a new regulated selling approach buyers would only be able to bid or offer on a property once a mortgage has been approved.
The reservation agreement legally committing the buyers to the sellers can now be put in place ensuring fairness and transparency to both parties. Which would eliminate the number of property transactions falling through in England and Wales.
See more about Housecheckr. You can invest in peace of mind by having us on your side during the purchase process.