Home reservation agreements to be trialled in new year
Buyers and sellers could be required to sign £1,000 reservation agreements as part of plans by the Government to end gazumping.
A trial of reservation agreements is set to get underway early next year where some of the money paid would be used as compensation if either buyer or seller pulls out without a good reason.
It is estimated that between a quarter and a third of residential property sales fall through and it is argued that a financial agreement at the early stage would reduce gazumping where a seller accepts one offer then goes on to accept a higher amount.
It is expected that different variations of reservation agreement will be tested. Agreements already exist, for example in the new build market and some estate agents also use them but the plan is to make them universal.
According to Guy Gittins, managing director at Chestertons, fall throughs are costly, frustrating and prevent people getting on with their lives. ‘We therefore support the move to try and reduce fall throughs and increase both buyers’ and sellers’ confidence in the process by introducing a binding reservation agreement,’ he said.
‘We’d hope that by providing this extra level of assurance people will be more inclined to enter the property market in London. With demand currently outstripping supply in the capital, Chestertons data suggests that in September the number of new properties coming to the marked dropped by 20% compared with the year before, while applicant registrations were up 18% in the same period, anything that could encourage potential sellers to the market should be welcomed,’ he explained.
‘Property transactions fall through far too frequently and this is due to a wide range of factors, including changes in personal or financial circumstances, changes of heart and disagreements over specific terms of the deal. We hope the Government takes steps to ensure that people who do have to pull out of a deal for reasons beyond their control are not penalised, although what constitutes a good fall through and a bad one will no doubt be subject to a lot of debate,’ he added.