Buying or selling a home is said to be one of the most stressful things you can do.
Little wonder when you consider that your home is probably the most valuable thing you will ever own. Add to that the fact that reports suggest up to 30 per cent of all property transactions fail for one reason or another, and you can already feel the blood pressure rising.
In a bid to tackle the number of sales that fall through and to find ways to speed up transactions, the government has announced that reservation agreements will be trialled later this year.
Michael Steele, residential property solicitor at Atherton Godfrey, commented: “Reservation agreements are contracts that buyers and sellers both enter in to when an offer is accepted. These agreements are already commonly used in new build property sales, where there is a need for them, but they have been tried previously in residential property transactions with limited success.
Having to find even more money at the outset could be seen as yet another obstacle to first time buyers getting on the property ladder. However, having a sale or purchase fall through is stressful and can involve a substantial financial loss. The prospect of losing the deposit would encourage both parties to be properly prepared before making or accepting an offer, but that said, often where a transaction fails neither party is at fault so I am keen to see how the government proposes to deal with that particular situation.”
The government is studying a 2 page ‘model’ reservation agreement that has been drawn up by law firm, Mischon de Reya. It will then look at details such as how much should be put down as a deposit and in what circumstances (bereavement or loss of job for example) the seller/buyer would be allowed to pull out without penalty.
The HomeOwners Alliance has proposed that each party deposit £1,000 with their conveyancer. If the sale completes the fee can be used towards costs or refunded. However, if the sale falls through, the fee would be paid to the other party as compensation.
According to a survey by the Department for Business, Innovation and Skills, 50 per cent of buyers and 70 per cent of sellers would be happy to enter into reservation agreements to reduce the risk of a sale falling through.