When I first started investing in the UK, I was shocked at the archaic system whereby an agreement to transact on a house was based on a "gentleman's agreement". In between I must have spent over GBP4k of survey and solicitor fees, only for vendors, even developers to pull out at the last minute on a rising market.
Except for the solicitors, surveyors who got paid, and the greedy sellers, everyone else loses; from the agents to the mortgage advisers to home buyers.
It is a very primitive system that costs homebuyers millions in pounds of fruitless transaction costs and lost profits (including I). Adopting transaction processes in line with continental Europe, and developed Asia will welcomed by majority of population.
Imagine for a moment, that you finally saved enough for a deposit. You applied for a mortgage in principle. after two months of endless home viewings, you found your dream home that you can afford. Seller accepts your offer after much haggling. You engage your solicitor. After a month, the seller's solicitor falls silent. Seller's agent frantically calls seller, only to find out that s/he is approached by a cash buyer who can settle in four weeks. You are asked to up your price by GBP30k. You decided not to, but the solicitor charges you GBP1k for searches. Agent could not get s/her commission because seller found a cash buyer directly. You repeatedly get gazumped for the entire year because the market is heading up, and you are still without a dream home.
The tables are turned in a down market. You are a seller desperate to encase your castle. Buyer offers a price that gives you a small profit after paying off your mortgage. You engage a solicitor. Meanwhile, you look for a home further from the city. As you lock in your next home, buyer suddenly finds fault with your home and demands that you drop your price by GBP50k, thereby wiping out your profit and leaves you with insufficient money for your next deposit. You pull out of the sale. You are still saddled with a huge mortgage and your job is not secure.
Time for change!
"Mark Hayward, managing director at the National Association of Estate Agents, said: "The English system for buying and selling property dates back to the 1920s and has not been updated for nearly 100 years. It is an archaic system which doesn't allow for modern technology. It needs updating to allow for as much work to be done before the point of offer as possible."
David Hollingworth, a spokesman at London and Country, a mortgage broker, said: "Bringing more security to the buying process through more upfront information would give welcome clarity to potential buyers while also retaining flexibility. Of course, that will raise the questions of who pays for the upfront costs like surveys and legal fees, and that could put some homeowners off marketing their property altogether."
