Scottish property system

[Mike Mitchell]

Exactly so! Cheating, in other words.

MM

[Andy Hall]

It was a somewhat tongue in cheek remark.

His point is valid, nonetheless. Ultimately, market forces decide the price levels of transactions and the methods by which they are done. Anything else, where there are artificial controls or pseudo-altruistic principles is doomed to failure. Free markets are governed by that most basic human trait of greed. Long may it remain so.

.andy

To email, substitute .nospam with .gl

[RichardS]

I just don't get this.

You're currently marketing your house and apparently dismayed at the lack of offers, yet you would propose a system whereby a potential buyer would have to cough up £20k in ready cash at the point of making an offer?

Well, it's surely one way to eliminate time-wasters, but you're also going to eliminate an awful lot of perfectly serious and good buyers in one fell swoop.

What surity should the buyer have in case you decide to pull out of the sale (for whatever reason)? Would you be required to stump up £20k to be held in escrow until the transaction is completed?

[Andy Hall]

What a lot of nonsense.

The appropriate thing to do is to go back to the first buyer and give them the opportunity to match the other offer. That is a perfectly reasonable approach that can be done with a clear conscience.

All of this assumes that one believes that the second offer has equal or greater merit in terms of the other factors such as ability to raise the money and to complete other transactions.

.andy

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[David]

but you if you KNOW the market value then that sets your benchmark. The OO price is irrelevant.

What it does sheat you out of is either the £150 valuation survey, or if you want to go it alone the couple of quid it takes to look up the land registry so that you can find out what teh house across the street sodl fo rlast year (which from what I can work out is how the surveyor does it anyway)

While its not a wonderful system it is not as bad you make out, and a lot better than many other system. It can sound horrendous and occasionally there may indeed be a real horror story, but this is not down to the seller it is gerneally down to eth bullshit from the estate agents

ever bought anything at a nationwide type builders merchant?

Generally I prefer not to pay their over inflated list prices where possible, but if you're doing enough business with them then things are a little more reasonable. They tend to operate with an offers under sort of system. I can walk in and pay their list price or make an offer and perhaps save 40% off the original £500 order say, (but that's really a secret, you've got to be in the club and know the password to play), in the case of selling houses the estate agents and solicitors have there own wee club, but again if you know the people to talk to then you know exactly how much you should pay to within £500. My solicitor has always been happy to help out

You can make somebody an offer for anything, all they can do is refuse, the RRP is after all only a recommendation.

cheers

David

[Andy Hall]

No. I would go back to the first bidder and appraise them of the situation, inviting them to raise their bid. However, I would have made them aware that I would leave the field open to other bids until they sign the contract. This is an encouragement to the purchaser to encourage the agents and parasites (sorry solicitors) to get a move on.

Since we have a system whereby nothing is binding or with penalty until contracts are exchanged, any bid can be withdrawn up to that point.

The vendor also has to consider each bid in the light of what they understand of the bidder's ability to raise money and complete in the required timescale.

Fine. That's entirely reasonable. Their view of "close" may differ to yours of course.

.andy

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[Andy Hall]

Oh good grief.

Why don't you just give your house away.? Then you'll be able to sleep with a clear conscience.

.andy

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[David]

Hey Mike

you don't seem to take too much attention to the posts of the people who actually use the Scotish System do you.

You've now got this idea into your head and you wont let it go, try and open your mind a little and accept some good information. A seller is also a buyer and there is no desire for anyone to rip off anybody else. What OO says is -pay me the market value, whatever that may be, you don't have to trust an estate agent to set it, who I would rate as the greedy scum that you apparently envisage all Scottish vendors to be, nor is it set at an unrealistic/optimistic level by the "greedy" seller.

It strikes me that under the English system the price is set by the seller and the estate agent, both of whom have a considerable interest in getting as much as they possibley can, especially in todays market, and may very well overinflate the price initially to see if they get some mug coming along. THis number that they make up may just as easily have no relevance to the valuation whihc is put on the property by an indepent party.

Get this clear it is not the vendors who run/abuse the Scottish system, the OO price is set/suggested by those who present themselves as the "experts" ... the estate agents. Personally I strongly disagree with OO set waaaay under the true valuation, and reckon it should be within 10% of the true value otherwaise the estate agent is just incompetent.

where the Scottish system does currently fall down is that you may pay for multiple surveys, or be tempted to survey a property on at a low asking price. This has been raised many times and there have been rumblings about changing the way it works.

BUT the positive aspect is that the true valuation isn't set by the estate agent OR the seller but by what should be a relatively independent surveyor. It is this valuation that sets the benchmark, not someone trying to squeeze a few extra quid out of the buyer by putting it on the market at an already overinflated asking price. At the end of the day it only goes to a sealed bid if there are 2 or more interested parties, otherwise it is just a straight negotiation.

cheers

David

[RichardS]

Whilst I wouldn't disagree with what you'e said, David, I do think that there's degree of amnesia present in a lot of discussion about the housing market.

The housing market is just that - a market, nothing more, nothing less, save perhaps that there's a lot more emotion attached to it than other markets.

During times of a rising market then vendors have the upper hand. They can set a higher asking price because they know that another buyer will be along soon.

However, this all changes when the market is falling, when the buyer will have the upper hand - they know that they can walk away and will readily find another house. It's only a matter of 12 or so years ago that this was the case.

The one crucial difference between the English and Scottish systems appears to be that at the point of the offer being accepted then there is a binding agreement on both parties, which would probably eliminate gazumping/gazundering, but of course to enter into such a binding agreement then the buyer has to be in possession of all the facts, a source of finance, etc etc.

As for valuations, well as a seller my only care about a valuation is that it gives me an indication of what I should ask for the property. As a buyer I don't care about that valuation - I've just got to make up my own mind as to whether I'm willing to pay the price or not. The only valuation I care about is whether the finance company is willing to lend me £X against a property that they say is worth £Y.

[Janet Baraclough..]

The message from Mike Mitchell contains these words:

The article you quoted did NOT say that the OFT is concerned, and did NOT say that the OFT is getting involved.

Janet.

[Janet Baraclough..]

The message from Andy Hall contains these words:

Mike knows all about that. He's already reduced the price of his ex-council house twice down to the current level of 200K, and he still can't sell it.

Talk about "fixed" prices, avarice and greedy vendors :~}

Janet

[MBQ]

All you have described is a problem with the people, not the system per se. There will always be manipulation and rogues, whatever the system. I'm sure you could search various newspaper archives and come up with just as many reasons why the English system is bad.

I thought Gazundering wasn't possible in the Scottish system since you have a contract once a bid is accepted. There must surely be some penalty clause.

MBQ

[MBQ]

But how do you know the asking prices are fair? You look at the prices actually achieved by similar properties in the same area. Which is exactly how you determine how to bid in the Scottish system. Work out what the property is worth to you (based in part on what others have paid for similar properties and what you think it's potential future value is) and bid based upon that.

The competition is in multiple potential purchasers bidding for the same property.

We're not.

I think you are the one trying to swim against the current.

MBQ

[Pete C]

Hmmm, I thought free markets were governed by competition, if you get too greedy someone else will undercut you.

Also the law helps ensure a level playing field so that competition is fair.

cheers, Pete.

[Janet Baraclough..]

The message from "RichardS" contains these words:

They have already had any survey done and arranged their finance, before making the offer. The buyer's offer (and the seller's acceptance) are both conditional. Only after a zillion questions have been thrashed out and when both parties lawyers are satisfied, do they lock into the legally binding agreement. IME, usually within a fortnight of the verbal agreement. This is the same legal work that English solicitors sometimes spin out over many months.

The conveyance completion date, when the property will change ownership, is set some way ahead to give the buyer time to sell up his own property. If he doesn't sell up in time, he's committed to compensating the first seller with interest on the full price. In practice, gaps are very small and most just take a bridging loan. There are no property chains here, which is the other crucial advantage of the Scottish system.

Janet

[RichardS]

hmmm, the survey being carried out before making the offer would be some cause for concern if I were a buyer - I could be throwing money away on surveys for houses that I utimately do not bid successfully for. I know that in Engerland our "glorious" govt are intent on compelling vendors to have the survey carried out, but I'd then have real concerns that the motivation would be wrong - the vendor after all wants as glossy a survey as they can find...

From the sounds of it, the offer/acceptance of the bid appears to be the first (and binding) stage of exchange of contracts - does the Scottish system have a separate exchange stage?

And doesn't this both bump up the solicitor's costs of the vendor (they'll be clocking up time bashine out issues with 1 to n potential bidders' solicitors) and also lock out the purchasor from putting in bids for other properties whilst this is all going on? (though I suppose you're able to withdraw your bid right up till the point of formal acceptance?)

[MBQ]

I give up.

MBQ

[Owain]

"RichardS" wrote | hmmm, the survey being carried out before making the offer would be | some cause for concern if I were a buyer - I could be throwing money | away on surveys for houses that I utimately do not bid successfully for. | I know that in Engerland our "glorious" govt are intent on compelling | vendors to have the survey carried out, but I'd then have real concerns | that the motivation would be wrong - the vendor after all wants as | glossy a survey as they can find...

There are moves towards a single survey scheme here, I think with the survey being paid for by the 'lucky' purchaser.

| From the sounds of it, the offer/acceptance of the bid appears to be | the first (and binding) stage of exchange of contracts - does the | Scottish system have a separate exchange stage?

Not AFAIK. The conditional offer is met with a conditional acceptance, and they bounce back and forth until all the conditions are satisfied, at which stage the "missives are concluded". Usually within a couple of weeks.

| And doesn't this both bump up the solicitor's costs of the vendor | (they'll be clocking up time bashing out issues with 1 to n potential | bidders' solicitors)

No, because the seller (or his solicitor) is only dealing with one purchaser, the one whose offer the seller wants to go ahead with. (And most solicitors don't charge purchasers for a reasonable number of unsuccessful offers provided they get a conveyance out of it eventually.)

| and also lock out the purchasor from putting in bids for other | properties whilst this is all going on? (though I suppose you're | able to withdraw your bid right up till the point of formal acceptance?)

The prospective purchasor is not able to withdraw the offer because the offer will say "this offer remains open for acceptance until ...". (Obviously if it's not accepted by then, then it lapses.) Typically, if the closing date is set for noon, the seller will choose which offer to accept (it will usually be the highest after all) almost immediately, and a qualified acceptance will be back in the hands of the purchasor's solicitor later that day.

Owain

[Richard Faulkner]

In message , Mike Mitchell writes

So you start again with another buyer, who subsequently reneges on the deal aswell, (believe me, it happens time and time again), - how long do you hold fast before selling and getting on with your life?

Of course it is, and of course they would. However, there are many checks a buyer should make before committing legally, so it is rare for a buyer to be prepared to do that, thus allowing the time for mind changing, or shenanigans.

No, and yes Until someone comes up with a better way which is accepted as "how it is done", or the law changes to force the issue.

But what would be a better system?

This is what generally happens in England, and it is still far from perfect, or even good.

No I am not! You proposed the scenario which suggests that sellers should have a price which is close to the "value" of the property - I am merely asking how the "value" should be determined?

I dont really have an argument which I am trying to support - I have questions regarding an argument which you are trying to support.

Ditto

Firstly, where did I say that I had agreed to sell at £100K? I was considering the Scottish system which you find fundamentally flawed, and I had "asked" for Offers Over £90K. I then received several offers, one of which was £200K, maybe some others were near £200K. In your scenario, I shouldnt take £200K, and I shouldnt take too much over my £90K.

Secondly - You cannot tell me that if someone genuinely offered you £300,000 for your house, and it was serious, and they had the money, you would refuse? Or would you? (I know it is unlikely to happen, but imagine what you would do if it did). You havent agreed another offer in this scenario.

Any joy with your house?

[Richard Faulkner]

In message , Mike Mitchell writes

So almost everybody is a cheat??

Given my experience of the housing business, almost every seller wants to maximise their sale price, and almost every buyer wants to minimise their purchase price, and both take advantage of the system to do so.