An industry provider of reservation agreements says its services can “entirely eliminate” fall throughs and reduce failed transactions “to almost zero.”
PropTech firm Gazeal says a recent survey showing that one in six transactions currently fall through - with almost a quarter of them down to buyers failing to raise the funds they require for their chosen new home - reveals the need for greater transparency.
Gazeal, which says it devised the first commercially available reservation agreement, contends that those who sign up to the system are legally bound to complete and so fall throughs are eliminated.
And it says that under its system the buyer must have a mortgage decision in principal and then within seven days must submit lender details to its online platform.
"Our digital legal pack is created when the property is first listed for sale and includes the Law Society protocol forms - completed on-line via our platform by the seller” Duncan Samuel, managing director of Gazeal has told EAT.
"Having sight of the information much earlier in the process provides a much higher degree of transparency as the buyer knows exactly what's included in the sale. This greatly reduces the opportunity of the buyer pulling out at a later stage” he continues.
Gazeal is one of several trade organisations and companies on the government's Home Buying and Selling Group, which is expected to announce a pilot reservation agreement exercise in the near future.
Earlier this year Matt Prior, the lead officer at the Ministry of Housing, Communities and Local Government working on ways of improving the sales process, told conveyancers at an event that the government was at an advanced stage considering how much money should be put down in a reservation agreement and under what circumstances - such as bereavement or loss of a job – it could be negated.
"We recognise that a reservation agreement such as ours is not for every buyer and seller but if both parties want to be sure that a transaction goes through to completion it's the only way to legally secure this” adds Duncan Samuel.
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For speeding up the process, which is really the only way to secure sales - the figures for fall throughs go through the roof the longer a deal takes - the entire end to end process and paperwork needs to be available online. Some kind of block chain secured repository for all info ideally? Companies like Sprift are pulling together property specific data that can be seen upfront by buyers, and if conveyancers can lobby to get data all held electronically [Turkeys/Christmas comes to mind?] then provided there is still some mechanism for a buyer to pull out if the survey isn't satisfactory then we're there. 'There' still looks a long way off, and my experience for now is that negotiating what constitutes a get out from any pre sale agreement takes as long as negotiating the sale itself.
'Entirely eliminates to ALMOST zero'? Doesn't make sense does it? It either entirely eliminates them or it doesn't!!
Anything that reduces fall throughs is great.
But, sales fall through due to; - death of vendor or buyer, lack of ability to raise finance vendor/buyer, chain breaking above or below, vendor deciding not to move, vendor deciding not to move, the list goes on.
So, tying parties to exchange will never overcome quite a large list of reasons why sales go South. In my books the average time that a sale takes is a big factor, 18 weeks - from sold subject to contract to moving in, that is also a massive stumbling block.
Thoughts anyone?
Sales that have exchanged don't fall through because exchange defines a day of commitment on both sides. The main reason why sales fall through is because there is a wide window of opportunity for people to change their mind. We are the only country in the world as far as I know that does not require commitment on offer, although many of the sales I have agreed in the past 30 years have involved some form of binding offer/acceptance, so my fall-through rate was negligible. It's also worth getting your sellers to sort their legals out at time of instruction. My understanding is that Gazeal covers all these bases - pretty slick.
Hi Ed,
Thanks for your comments. The Gazeal process does indeed take into consideration title of the property, condition of the property and mortgage offer, so we do believe that our process and platform ensure that the reservation agreement is extremely effective, whilst also affording protection to both the buyer and seller.
Best wishes,
Steve Dawkins
This is all for the protection of the seller. There is nothing for the protection of the buyer. I have had to pay a deposit before via my estate agent that the seller gets if the buyer pulls out, but not the other way around. Having had two offers recently fall through due to the buyer pulling out, there needs to be something that works for both parties. Bring the Scottish system to England is the easy answer!
Hi,
Actually the Gazeal product protects both the seller and buyer. The seller isn't permitted to accept a higher offer (gazump), when the Gazeal reservation agreement is used.
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