Scottish property system

wrote:

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
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On 2 Sep 2004 08:55:32 -0700, snipped-for-privacy@hotmail.com (MBQ) wrote:

That's a lottery, not competition.

Yes, we are. Even The Scotsman said so. Here is another quote from that article: "One solution would be to adopt the English system of open bidding, which at least has the advantage of every potential buyer seeing the market price they have to beat."
See? Other people see it the way I do.

Salmon do it all the time.
MM
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On Fri, 03 Sep 2004 16:20:53 +0100, Mike Mitchell

... and look what happens to them in the end when they get there.
.andy
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wrote:

Don't they have sex?
MM
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On Sat, 04 Sep 2004 00:07:41 +0100, Mike Mitchell

Not really. The fish preparing to spawn swim up river. The female lays eggs in depressions she digs in the gravel and the male comes along and fertilises them. Then the female covers them. That's as close to sex as it gets.
Then 95% of the spawning fish die and decompose.
.andy
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wrote:

Anything that close would be fine by me!

Yes, but what a way to go! Don't tell me you've never envisaged that Goldie Hawn scene?
MM
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wrote:

Now we're getting to the root of the problem ;-)
MBQ
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That figures. Sid's not alone in detecting a fishy whiff.
Janet.
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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.
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On Wed, 1 Sep 2004 21:51:32 +0100, Janet Baraclough..

Yawn.
MM
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contains these words:

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
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wrote:

<snip>
in
it.
that
open
the
surveyor.
squeeze
already
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.
--
Richard Sampson

mail me at
  Click to see the full signature.
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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
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contains these words:

appears
binding
agreement
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?)
--
Richard Sampson

mail me at
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"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
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Yes, that can be a problem. As things stand, though, it's the only way (unless you are a cash purchasor and sufficently knowledgeable/confident in the building, to bid without a survey).
I know

There are moves afoot here to do the same, with the same reservations. Another, is that here, different purchasers choose between three different levels of survey at three different price levels (the bottom one is basic, just a valuation). The "one survey for all" would obviously have to be the most thorough and expensive one; so if the purchaser was paying for it, some purchasers would still end up paying more for the one survey than they would have done if they'd bought their own in the first place.

Yes, the day the money, ownership and keys change hands.

No, because after the simultaneous opening of the blind bids, the vendor only proceeds with one of them, the chosen buyer. Good lawyers don't charge their clients for failed bids.
and also lock out the purchasor from putting in bids for other

No, you're pretty tied in (unless your lawyer finds some dire fault in the property title.) Bidding for another property or casually pulling out during the exchange of missives, is the equivalent of simultaneously proposing to two fiancees, or failing to turn up at the altar :~}
Janet.
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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
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On 2 Sep 2004 04:43:13 -0700, snipped-for-privacy@hotmail.com (MBQ) wrote:

Exactly so! Cheating, in other words.
MM
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On Thu, 02 Sep 2004 14:08:49 +0100, Mike Mitchell

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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wrote:

Here is the dictionary meaning of cheat, cheating, etc:
1. To deceive by trickery; swindle: cheated customers by overcharging them for purchases. 2. To deprive by trickery; defraud: cheated them of their land. 3. To mislead; fool: illusions that cheat the eye.
Tell me which bit you don't understand and I'll try to explain it.
MM
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