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Follow Scotland’s lead with tighter controls on purchase offers – Phillips

by: John Phillips, national account director at Just Mortgages and Spicerhaart
  • 30/09/2019
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Follow Scotland’s lead with tighter controls on purchase offers – Phillips
We know that in uncertain political and economic times people become reluctant to make big decisions — and let’s face it, buying a house is certainly up there.


So why, when buying a house is such a huge commitment, do we have a legal system that allows it to be so risky?

In England and Wales, when you make an offer on a house, it is subject to contract, which means that no-one in the chain is legally obliged to continue with the transaction until the formal contract has been signed and exchanged.

There is absolutely nothing to stop a person from offering on a house then pulling out just before the contracts are exchanged.

Apart from losing out on the money spent on surveys, solicitors and so on – and annoying everyone else in the chain – there are no consequences for doing it.

This is why some buyers, particularly first-time buyers, put in multiple offers to keep their options open. They pull out of the ones they don’t want to buy later down the line, putting the whole chain at risk of collapse.

The current system allows buyers without the finance in place to put in an offer, which could be accepted, only to be retracted later, because the funds are not there.


North of the border

In Scotland it is different.

Unlike in England, there is no one contract document signed by both the purchaser and seller. Instead, the contract is made up of a series of formal letters called missives.

The first missive is the formal offer for the property. If the sellers want to accept the offer, their solicitor will then issue an acceptance missive.

Then, if all of the terms are acceptable, the contract becomes legally binding.

Now, this makes much more sense because it ensures only those serious about buying put in offers and stops people from being able to pull out for no good reason.


Sensitive market

We are currently in a very sensitive market, where people are spooked by all sorts of things – a leaked document about the consequences of a no-deal Brexit could cause a buyer to pull out, creating a real mess for the rest of the chain.

But if England had the same legal set up as Scotland, this would not happen.

You could only put in an offer if you were serious because once it is accepted, there is no pulling out.

This would be a welcome change to our system and might encourage those sellers who are reluctant to risk a sale in the current climate to go ahead, safe in the knowledge that if they get an offer, it is there to stay.




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