Home buyers and sellers could soon have the opportunity to sign a legally binding pre-contract when making an offer on a property as part of an industry-led move to speed up the sales process.
A group of estate agents, solicitors and conveyancers agreed last week at a private round-table event to push forward with plans to introduce contracts at the point of offer, to secure financial commitment from buyers and sellers ahead of the normal exchange of contracts.
Currently in England and Wales, once an offer is accepted on a property, the buyer or seller can still pull out at any time until the exchange of contracts.
About one in three property transactions falls through as a result through practices such as gazumping – when the seller accepts a higher offer from another buyer, and gazundering, when the buyer reduces the offer price at the last moment.
Pre-contracts are already used in most other countries, including Australia, the US, New Zealand and Canada, to gain commitment by both parties to continue exclusively with the house sale at the agreed price, subject to certain conditions.
Buyers are typically required to put down a deposit of between 5 and 10 per cent as surety.
David Adams, residential director at Chesterton Humberts, said the current system meant it could take months to buy a property.
“We’re operating on the 17th century method of the handshake with the agent down the pub and we’ll all be honourable gentlemen,” said Mr Adams.
The campaign is headed by Sir Bryan Carsberg, president of the E-Homebuying Forum, an industry group formed in 2008 to improve the home-buying and -selling process, and former director-general of the Office of Fair Trading.
In 2008, Sir Bryan undertook a review of the residential property market, which looked at ways the buying process could be improved.
The E-Homebuying Forum has now gathered the support of a number of the large estate agencies and law firms to press ahead with reform.
Sir Bryan said the next move would be to enter into wider discussion with the industry and come up with a standard form of contract by researching other countries’ models.
But he said the group would not need to seek government involvement. “The government has made it clear it is not interested in regulating this market,” said Sir Bryan. Pre-contracts would instead be an option, but not required by statutory law.