Anyone responsible for a property purchase falling through should have to pay £1,000 to the other side if they pull out. The call has come from the HomeOwners Alliance, which says that fall-throughs are costing buyers and sellers over £500m a year. It is proposing a £1,000 reservation agreement – a legally binding bond paid by both the buyer and seller and held by their own solicitor – in answer to the Government’s latest call for evidence into the home buying and selling process. The organisation is also calling for estate agents to publish fuller particulars of sale for a property at the time it is listed. The organisation claims that providing the TA6 particulars of sale form earlier, as well as introducing a reservation agreement, would iron out any problems earlier and speed up the process. The HOA said: “Sellers will have to fill out TA6, the standard property information form which includes all material information such as length of lease and ground rent if leasehold, before the reservation agreement. “This is simply good practice, and there is no reason they cannot do this before putting their house on the market and the estate agent can provide it to the buyer, and the estate agent can then provide those details to the seller before they make an offer.” If a prospective buyer then decides to make an offer, a refundable reservation agreement would need to be paid by both sides to their respective solicitor. Here is how the HOA proposes a reservation agreement would work: – Before the reservation agreement, the buyer will need proof of funds such as a mortgage in principle. In the reservation agreement, the buyer’s solicitor will confirm to the seller’s solicitor that the buyer has sufficient funds. – Both sides agree to pay the other side £1,000 if they pull out of the transaction for any reason. – Both pay their conveyancer/solicitor a repayable £1,000 bond to cover the payment if they do pull out. – If any previously undeclared material issues emerge during the surveys and searches that potentially affect the value of the property by more than 1%, then either side has the right to renegotiate. If they can’t agree a change of price, then the side that is detrimentally impacted will have the right to pull out without losing their £1,000 bond. – If either side breaches their commitment to being a “genuine” seller or buyer – such as by putting the property back on the market, accepting a higher offer from another buyer, or the buyer putting in a lower offer after the sale price agreed, then they will be deemed to have pulled out of the transaction, and are liable to pay the other side the £1,000. If either side pulls out over matters that are financially less than 1% of the value of the property (eg over whether a cooker is included) they will be liable to pay the other side £1,000. – If either side is worried about being able to afford the £1,000, they can take out home buyers/sellers insurance. – There would need to be a backstop date for completion of the purchase, say three months after the reservation letter. If both sides want to continue with the transaction, they can agree to extend the deadline, but if one side has failed to meet their requirements, then they will be deemed to have pulled out, and have to pay the other side £1,000. – Interpretation of a fall-through and any disputes should be covered by standard industry guidance, or failing agreement between the conveyancers, by the Property Ombudsman or the small claims court. – Only those that cause the collapse of the chain will have to pay and will pay £2,000 if they are both buying and selling and pull out of both transactions at the same time. The consumer group estimates consumers waste £500m a year on failed attempts to buy and sell properties. It come to this figure using the Government’s call for evidence on the home buying process that claimed – without a source – that failed transactions cost on average between £695 and £744 for buyers, and £582 and £740 for sellers. There were 1.24m property transactions last year according to the ONS, which the analysis then multiplies by 28%, which is the estimate of fall throughs by property buyer Quick Move Now. This comes to 344,000. It then adds the £744 and £740 figure to give a cost of £1,484 for both sides of a sale. This figure is then multiplied by the £344,000 to give an estimated sum of £511m wasted per year. Paula Higgins, chief executive of the HOA, said: “This is the true cost of the UK’s not-fit-for-purpose home selling and buying system – home owners losing more than £500m down the drain every year. “It is no surprise that some parts of the property industry have too often resisted previous government attempts at reform – this is extra business for them.”
A pressure group has proposed a £1,000 ($1,328) penalty for any party that pulls out of a home-buying deal, saying it would help reduce transaction collapses that cost consumers $500m a year. The HomeOwners Alliance, which aims to represent the interests of domestic property owners and aspiring buyers, issued the proposal in response to a government review of the homebuying process. Under current rules, if you buy your home from an agent or mortgage broker, then sell it, you can only recover up to £2,500 ($3,000) of the original deposit – but this is capped at