A senior estate agency figure has questioned whether there is any answer to gazumping and gazundering, saying that buyers find it easy to find the ‘wriggle room’ to get out of deals.
Trevor Abrahmsohm, of Glentree in London, said that from time immemorial, both gazumping and gazundering have been the “scourge of the property market”.
He said of the latest Call for Evidence into home buying and selling: “The problem lies in the protracted time taken between agreement of terms, the obtaining of a mortgage offer and a structural survey which leads to the consolidation, by way of an exchange of binding contracts, where a non-refundable deposit is paid.
“Both the USA and Scotland claim to have the perfect solution whereby, supposedly, you can exchange an immediate contract for purchase, pay a deposit, and this is designed to deny the opportunity of either buyer or seller reneging from the agreement. This system looks ideal save for the fact, that the devil is in the detail, i.e. they are subject to mortgage finance and structural survey and therein lies the difficulty.
“As a seasoned veteran in the UK residential property market for the last 40 years I know all the tricks of the trade.
“I can tell you that even with these quickie exchanges a canny purchaser can wriggle out of these agreements if they want to.
“By way of illustration, all the purchaser needs to do is to is to deliberately frustrate their own ability to obtain a mortgage or overstate the surveyor’s concerns about the structure or services of a property and Bob’s your uncle you have ‘wriggle’ room to renege.
“This is a little lop sided’ since it is more difficult for the seller to get out of the contract than the buyer which, you could say, seems inequitable.”
Abrahmsohn went on: “There is no perfect solution here but a half way houseversion could be that the buyer and sellers solicitors agree to exchange an immediate ‘lock out’ agreement which gives the buyer time to organise their survey and obtain mortgage finance whilst the terms are fixed under this agreement.
“This, technically, could be signed within hours or days of an agreement in principal and is designed to prevent the parties being able to renege from the agreement. Unless a non-returnable deposit is lodged by the purchaser they could still prevaricate if they found a cheaper property elsewhere and thereby undermine the agreement if they wanted, so nothing is perfect.”
Abrahmsohn pointed out that gazumping is a feature of a rising or bull market, whereas gazundering is a feature of the opposite.
He said: “In my travels I have known a seller who had previously ‘given his word’ to sell a property to a buyer and then ‘bought his word back’ for a sum of money (with the purchaser’s agreement) in order to sell to another buyer at a better price. All three parties were delighted with the result and this is what we call ethical gazumping, which is far more morally fragrant.
“In the absence of this simple measure, I’m afraid that in bull markets gazumping will be rife and in bear markets so will gazundering. So life goes on!”
In Abrahmsohn’s equally, and decidedly, un-PC views on the Green Belt, he described this as a stranglehold preventing the annual delivery of new homes.
He said ecologists are clinging on to the Green Belt for ‘dear life’, and criticised local petty politics and Nymbism. Abrahmsohn added: “Permitted Development Rights, which enables office buildings to be converted into residential, were an act of genius and we need more quick fixes’like this to shake up the system.”
This is standard industry obfuscation in the face of proposed regulatory change. The issue is not whether other models are perfect but whether they are superior to what we have in place now. Relative rates of failed purchases suggest England & Wales’ system is comparatively deficient. This represents a dead-weight loss to our economy with all expenditure lost being an unproductive use of capital.
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Failed purchase numbers have hardly changed in 100 years. The system is not broken or falling apart. If you really want to speed it up you need the complete co-operation of the lenders as they would need to accept others valuations and reports. As things stand that is a very, very long way from happening.
Anyone remember the last perfect solution?
HIPS!!
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The rate in the US as I understand is around 4%. In the UK it is between 25% and 33% dependent on source. This level may not have changed much in England over time but that doesn’t make our performance acceptable.
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Like Trevor I have almost 40 years in the job and the nearest I have seen the industry come to an answer was with HIPS. The government got cold feet in the end, listening to the “naysayers” with vested interests and caving in before we had a chance to prove that the system would work.
There is no “quick fix” no perfect solution, but HIPS came the closest.
An opportunity lost…..
Thank God I am retiring soon……
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I have known many good negotiators in my time. And this young lad for many years. I would have no hesitation in saying he is the best negotiator in our industry bar none! There few homes in the Bishop’s Avenue, that Trevor has not sold and not by cutting his commission rates either..
Read and think about his approach carefully – quite simply, it works. Legal contracts are obviously the end game but the firm personal commitment up front is what really matters. Shake on it! That’s the key.
On the point of HIPS – these were largely my idea and I know that what killed them off was estate agents who did not like any extra work or responsibility.
Hopefully we will get them back some day soon. Incidentally, I believe this type of property report is still used in Scotland but, of course, the solicitors are far more involved in the housing market with the SPCs as their shop windows.
Regards to all,
BTB
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