Early searches act as a reservation agreement
Negotiator Nigel Lewis 19/04/23
Nigel Lewis’s excellent article – Negotiator magazine April 2023, tinged with personal experience, Not fit for purpose looks longingly at the French property sales system where a 5% deposit is paid when an offer is accepted.
Sadly, that system relies on property information declared before the sale and we are a long way from that. The HBSG [Home Buying and Selling Group] he refers to have already spent some three years looking at a reservation agreement.
Despite the drafting of one by a highly-regarded King’s Council, Philip Freeman, a standard form that would be acceptable to all parties has not been found. The main difficultly being where blame lies if a deal falls through.
The point I do not agree with Nigel is his comment “I am aware that James Munro from Trading Standards is toying with a £500 offer deposit, but it’s just not enough to prevent silliness, in my view”.
PALTRY
I agree as a percentage of the sale price £500 is paltry, but I have always found people, however rich, are very careful about spending their money.
This view is fully supported by some telling research completed by Phil Priest at Four Corners Property Ltd. In a sample of over 200 property sales, the estate agent asked buyers to pay for searches at the point of sale.
If no payment, then the property does not go under offer. Some paid others did not. Those who did not pay took on average 120+ days to completion with a fall through rate of 42%. Those who payed averaged 79 days (41 days quicker) to completion at a fall through rate of ZERO. Which is staggering.
These figures can be debated and zero fall through rate is too low to be maintained, but no one can claim this is not a significant difference.
Getting buyers to put a little ‘skin in the game’, allied to a decent starting position with Searches, seems to work.”
Is this a big change for buyers? No. When a buyer has an offer accepted and receives a Memo of Sale, they are agreeing to appoint a solicitor and put them in funds for the searches.
The fact is some solicitors report a two-week wait to start, with some having a policy of not applying for searches until a mortgage offer is received – with little instruction sought from the client in the meantime. On average solicitors order searches eight weeks after the sale is agreed.
There is always some kick-back from solicitors wanting to order their own searches. This does not seem helpful and where searches have been purchased earlier, buyers should instruct their solicitors to accept them. If your solicitor won’t work in this way – there are plenty out there who will.
The Four Corners trial proves there is a way forward – and it’s simple.
Author: Tim Main CEO at PIP Ltd who offer funded searches so the above can be achieved, www.piphome.co.uk