Could the days of gazumping and gazundering in England’s property market be numbered?
That’s the Government plan with the introduction of a trial on home reservation agreements.
These would be legally binding agreements that would commit both buyer and seller to going through with a transaction.
Could end gazumping for good
The introduction of reservation agreements would potentially end the practices of gazumping and gazundering, both of which contribute to the estimated third of all property transactions that collapse in England and Wales every year.
Gazumping happens when a seller accepts a higher offer before contracts have been exchanged. That leaves the buyer who made the original offer high and dry.
Gazundering occurs when a buyer, again before those legally binding contracts have been exchanged, lowers their offer. And that puts the seller in the position of either losing a sale completely or having to accept less money.
Buyer and seller must commit
To put an end to those practices, the Government is to introduce the home reservation agreement trial in several areas of England early next year.
Both buyer and seller must commit to the deal by signing the agreement and also placing a deposit, between £500 and £1,000, in an escrow account held by their conveyancing solicitors.
If either then changes their mind about the deal – and the other consider their reasons unacceptable – they may lose that money.
End to sales collapsing
The introduction of reservation agreements would bring England’s property buying system more into line with what happens in Scotland. An offer, even a verbal one, is binding on both parties north of the border once it’s been accepted.
Ideally, the new system would end the uncertainty that haunts many property transactions in England and Wales. It should also stop both buyers and sellers ending up out of pocket for various expenses when a sale collapses.