Scottish property system

[Janet Baraclough..]

The message from Mike Mitchell contains these words:

Please explain why vendors in Scotland largely pursue this

If it was unfair to buyers, or distorted property prices, mortgage lenders wouldn't risk making loans on such purchases.

If buyers are expected to get a valuation, what is wrong with the

He does.

I'll tell you

Most buyers have a mortgage. Mortgagors value property before they decide how much they will lend on it. That simple economic restriction prevents properties from being sold for "more than they are worth". If your misguided notion was correct, then half Scotland's property owners would be in negative equity (owing more on the mortgage, than their house would fetch if it was sold). Unlike England, negative equity is almost unknown in Scotland.

Also, the system must be

Fixed-price on a 2nd hand property in Scotland is usually a sign that the owner is desperate because either, the property is hard to sell, or, he can't pay the mortgage and the lender is about to foreclose. Or, the owner has already defaulted on the mortgage and it's being sold by the lender at a fixed rate just to recover the loan.

Greed would be asking more for a house than buyers want to pay for it. That appears to be your problem. Sooner or later, you'll understand that buyers, not vendors, dictate property prices.

Janet.

[Mike Mitchell]

Well, I fundamentrally disagree with all of that, but don't just take my word for it, look at what The Scotsman reported only a couple of weeks ago:

"SCOTLAND?S system of buying houses - once greatly envied - is in serious crisis as a result of the property boom of the last few years. With demand high and supply relatively tight in the main urban markets, the gentlemanly sealed-bid system, policed by scrupulous solicitors? agents, has gone by the board. Widespread accusations that solicitors and estate agents are deliberately marketing properties far below their true market value - to entice potential customers and thus artificially generate competition - has prompted an investigation by the independent watchdog, the Advertising Standards Agency (ASA). Such false advertising wastes buyers? time and money. Nor do sellers always gain: the incidence of "gazundering" (where a successful buyer reneges on the original offer price) is on the increase."

"One solution is certainly for the ASA and the Law Society of Scotland to police rogue solicitors and estate agents who deliberately quote misleading low prices. While the ASA lacks the power to fine, the Law Society could certainly discipline its wayward members and should certainly take steps to indicate the present public disquiet to the legal profession. A little self-regulation might go a long way in this instance. Ultimately, of course, the Office of Fair Trading could step in and take legal action against miscreants."

action? I'd like to see a large draught blown up their kilts by rabid, ravenous dogs! That way they'd realise perhaps how they are ripping off the buying public to assuage their greed.

MM

[Mike Mitchell]

Change the law. And, duh, I'm employing the local rat catcher to act on my behalf! Doesn't everybody?

I refuse it, simple as that. You obviously have no concept of an Englishman's word is his bond. Avarice is a deadly sin, you know.

MM

[Mike Mitchell]

Er, that's what "cash only" is usually inferred to mean!

My property is advertised everywhere where there is access to the internet. Scots are always welcome, too!

Here's a hair. See if you can split this one, too!

MM

[Mike Mitchell]

See the response I gave to Andy earlier, with a quote from The Scotsman. It looks like even the Office of Fair Trading is concerned, so you might just pause for a moment and ask why they are getting involved if the system is as fair as you imply.

Look, if properties in England and Wales are priced at a fixed asking price, as they largely are, then buyers have the choice of choosing to go for this or that property purely from comparing the particulars. That is competition working. Where is the competition in Scotland? If we're all agreed that Scottish OO figures are just playing silly buggers with the true valuation, it's as if everyone is driving blind down a foggy motorway in the wrong direction.

MM

[Mike Mitchell]

Yawn.

MM

[Andy Hall]

semi-quality press) says about things like this. They are simply looking for a story and an angle. The article is phrased in terms of "could" and "might" - no figures are given.

There is nothing fundamentally wrong with greed - it's human nature. Everybody has that attribute to some degree, or they are lying to themselves and others.

To quote two well known examples:

Ivan Boesky at the University of California's commencement ceremony in

1986.

In his speech, Boesky said "Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself."

Gordon Gecko (Wall St):

"The point is, ladies and gentlemen, greed is good. Greed works, greed is right. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed in all its forms, greed for life, money, love, knowledge, has marked the upward surge of mankind -- and greed, mark my words -- will save not only Teldar Paper but that other malfunctioning corporation called the USA" .andy

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[Richard Faulkner]

In message , Mike Mitchell writes

What are you going to do when your buyer comes back somewhat late in the deal and revises his/her offer downwards?

It is all very well taking the moral high road in relation to sellers "ripping off" buyers but, in my time as an agent, I saw many many more buyers trying to rip off sellers than the other way round.

It is just a function of the way we sell houses in this country.

In Scotland, nobody is forced to bid for a house, and they only have to bid what they want - one mans meat and all that.

In your various posts, are you suggesting that there is one particular value for any particular house? If so, who polices it?

Or are you saying that there is a price band for every house - if so, who decides, and where do you draw the line?

Lets say I genuinely believe, (perhaps naively), that my house is worth £100,000, and I set a price of Offers Over £90,000. If someone offers me £200,000, am I to refuse it and tell them that I cannot take more than say, £110,000?

[Andy Hall]

Nobody actually said that you you had *accepted* the first offer. Had you done so, then I agree, it is important to be of your word. If you hadn't, and wanted to wait for other offers, it would be completely reasonable to do so, even if they are above your asking price.

If you feel otherwise then I would stay out of the property market, or include a note in the details that you will take the first close offer. People will be amazed by your naivete and it might help you make a sale.

.andy

To email, substitute .nospam with .gl

[Andy Hall]

But they aren't at a fixed asking price. The vendor can move that up and down on a whim.

Both are perfectly reasonable forms of competition.

It's completely normal to have instances in buying and selling when you know what the competitors are offering and other instances where you do not. Both are fair competitive situations and you have the choice to bid or not.

You must have led a very sheltered life.

.andy

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[MBQ]

It's not unfair on anyone. The rules are written down and everyone has the same chance to bid.

When you buy a second hand car do you trust the vendors asking price? Or do you go and get your own valuation from Parkers Guide or by looking at the prices of similar models? It's no different when buying a house where the vendor has set a price. You still have to get your own "valuation" to determine if it's a reasonable price. You then make an offer based on your judgement. The only difference in the Scottish system is that you only get one bite of the cherry and do not know if you are successful until the day all the other offers are opened. I would argue that the English system is flawed in that people will ask for more that the property is "worth" in the anticipation that opening offers will be 10% below the asking price.

Buyers will bid what they think the property is worth to them in their particular circumstances. Someone who is desperate to live round the corner from Granny or a good school may assign a financial worth to such convenience. If another buyer can afford to make, or deems the property worth, a higher bid than yours and you lose out then that's just tough. You would probably have been outbid whatever the sales method.

A property is only worth what someone is prepared to pay for it. That's why we have fluctuations in property prices as the economy (and peoples financial situation) changes.

Where is the scam? Everyone is entitled to make the best price they can for whatever they are selling. In a rising market, sealed bids may tend to maximise the selling price since buyers know they have to make a high bid to be in with a chance but where is the evidence that people regularly bid *far more* as you put it?

The vendor is taking advantage of the system to maximise his sale price. The laws of supply and demand work just as well to determine the price as in any other system.

MBQ

[David]

That punishes the seller, who is not directly responsible for setting the OOp price, which is what you pay an estate agent to do. It is the EA that need to be discouraged from grossly undervaluing the property. Many will operate with a sliding scale of commission,e.g. 1% for 5% over, 1,25 for 10% over and 1.5% for greater, so they put it on at way under to 1. stimulate interst and 2. ensure eth largest commission. SCUM

cheers

David

[David]

what you tend to ignore, or are perhaps not aware of is that the price that properties actually sell for is very close to what they are valued at. If you get a valuation done and pay way over the oddds then you are fully aware of what you are doing, there is no direct rip off.

Of the two properties I bought one was for £500 less than the market valuation, where there were no other interested parties, and one for £1000 more where there were about 5 bids. Now if it had been an open bidding situation I'm pretty sure that I woudl have had to pay some more in the second case to secure the property, as it was I won by about £100. Nobody in their right mind is going to apay way over eth market valuation, and this is generally reflected by the bids people place.

Now the occasional problem arises when a buyer not familiar with the system is taken in by the estate agents marketing and then pays 10% over the valuation price, which I've know to happen. This isn't a problem with the system but a case of people not being advised properly or seeking out decent advice from a good solicitor who would generally be familiar with the market.

cheers

David

[Owain]

"Mike Mitchell" wrote | And it is simply not fair for the system to allow the kind of | practice to go on where the buyer simply does not know beforehand | what the vendor is willing to accept.

But the buyer knows exactly what the vendor will accept. The vendor will accept OFFERS OVER £XXX.

If there is more than one offer at closing date then it is probable the vendor will accept the highest, but not always certain.

Far clearer than the English "shall we offer below asking price and see what happens" guff.

Even if the system disadvantages the buyer in some way, most buyers will be sellers next time around. The system does not have such effect on first time buyers as most of those are buyign smaller properties or new build, which are more likely to be offered at fixed price.

Owain

[Owain]

"Mike Mitchell" wrote | Well, I fundamentrally disagree with all of that, but don't just take | my word for it, look at what The Scotsman reported only a couple of | weeks ago: | "SCOTLAND'S system of buying houses - once greatly envied - is in | serious crisis as a result of the property boom of the last few | years. With demand high and supply relatively tight in the main | urban markets, the gentlemanly sealed-bid system, policed by | scrupulous solicitors' agents, has gone by the board. ... Nor do | sellers always gain: the incidence of "gazundering" (where a | successful buyer reneges on the original offer price) is on the | increase."

Also known as "nasty English habits coming north" (and I think I can write that, having worked in an estate agency and being English born myself).

When was the English property system /ever/ described as "gentlemanly" or "scrupulous"?

Owain

[Mike Mitchell]

Isn't that the same Ivan Boesky of insider trading infamy who served a year or two in gaol, was fined a 100 million bucks and banned for life? If you're using such people as your yardstick, it explains a lot!

MM

[Owain]

"Mike Mitchell" wrote | It's so the vendor can quote some ridiculously low price, | thereby seducing buyers into his web, banking on the fact | that buyers will put in silly (i.e. exaggerated) offers so | that the chance of getting *far more* than the property is | actually worth is greatly increased.

But if a buyer is prepared to put in a "silly" offer, then that IS what the property is worth.

| I am seeing secondhand properties advertised at a fixed price, | so obviously some people must agree with how I see it.

There has always been a case for fixed price marketing, usually when the vendor does not want to hang around for a closing date to be set, or when the value of the property can be fairly clearly ascertained and there is not expected to be a great deal of interest in it. No point in going to closing date if only one buyer is interested and everyone knows that all the houses in that street go for £x +/1 £1k anyway.

Owain

[Mike Mitchell]

Then the buyer is the one who has reneged on the deal, not me. They have effectively terminated their offer, thus permitting me to open up the market again.

Maybe that is because there is no formal legal agreement until exchange. If the buyer had to find 10% deposit at the time of the offer, then buyers would be a lot more circumspect and the time wasters would stay home.

So? Are we supposed to live with the system like it is for the rest of time?

Of course, no one is forced to do anything, but I maintain that one should know the price the vendor is willing to accept so that the buyer knows where he stands and can fairly compare similar properties

Of course I am not! You're now trying to invent scenarios in order to bolster your argument, which must therefore be pretty weak.

Ditto.

If you have already agreed with another buyer to accept his offer nearer your £100K valuation, then yes, you should refuse it if you want to sleep at night with a clear conscience. That first buyer who is willing to pay YOUR price, not someone else's valuation, was doing so in the spirit of fair play and a level playing field, and if you renege on the deal, ask yourself, who has the moral high ground.

MM

[Mike Mitchell]

But if I had accepted the first offer, then you agree with me that it is wrong to then accept a higher offer, yes?

People are already aware that I am willing to take a close offer, because that's what I tell 'em!

MM

[Mike Mitchell]

Maybe, but they let me out occasionally.

MM