According to recent data, almost half of all sales agreed in the fourth quarter of 2018 fell through in the UK. Now the Ministry of Housing, Communities and Local Government is putting forward a two-page ‘reservation agreement’.
The agreement, which has already been drafted by lawyers, is aimed at slashing fall-throughs and speeding up transactions.
Matt Prior, of the Ministry of Housing, told the Council for Licensed Conveyancers the government is considering the parameters of the agreements including “how much money should be put down” and what circumstances (e.g. bereavement or loss of a job) would allow buyers to pull out without penalty.
Vicky Bibiris of Location Location said: “Asking buyers to sign up to a more binding agreement with vendors is something we’ve been pushing in-house for a long time. We employ dedicated sales-progressors and have created systems & processes, designed to protect our buyers & sellers from the risk of sales falling through.
“I’ve always thought it crazy that a promise as monumental as buying or selling a house should be made on goodwill and a handshake, when a sale falling through can be so stressful and so expensive for both parties and for those further along the sales chain. Having a more formal government-approved agreement in place that better commits buyers and sellers will be a welcome step.
In Hackney, 33 -37% of agreed sales ‘fall through’ during the buying process. Over the last two years, Location Location’s average fall through rate was just 14% - that’s 90% below the National average. Effective processes ensured 86% of our sales completed first time. I believe that agents can positively or negatively affect the outcome of the sale. Rushing to get the deal agreed and not having thorough processes in place for agreeing on a sale and progressing it through to completion, will likely result in a 33% + of sales falling through, and very upset buyers & sellers. Communication, support and due diligence is everything.”
Over the coming months, the government has pledged to work with estate agents and conveyancers to iron out any practical issues with operating such an agreement and to consider modifications. A formal announcement on the introduction of reservation agreements is expected later this year.
According to a survey by the Department for Business, Innovation and Skills, 50% of buyers an 70% of sellers say they’re happy to enter a reservation agreement.
The Council for Licensed Conveyancers’ who met in January also heard how estate agents’ referral fees will soon be the subject of new Trading Standards Guidelines and part of new code from the Property Ombudsman, aimed at making the sales process more transparent and accountable.
new legal agreement between vendors and buyers
Posted 4th February 2019