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TODAY'S OTHER NEWS

Reservation agreements back on the agenda thanks to former agent

A new company is claiming to reduce chain collapses during sales by creating a lockout agreement, also known as a reservation agreement.

Property Pledge holds a signed pledge accompanied with a refundable deposit until the transaction completes or falls through. 

The deposit is £1,000 and held in Escrow; the firm says this gives the buyer 10 weeks exclusivity. 

Property Pledge has been created by former estate agent Nick Richards, who says he devised the scheme after seeing fall throughs and wasted costs for his clients and purchasers.

He says his product - free if the deal is completed, or £199 if it still falls through - is an answer to the one-in-three property sales that fall through with reported losses averaging £2,900 in lost survey, solicitor and valuation costs. 

At the moment he is launching the ‘Single Agreement’ – where only the buyer lodges a deposit - while in January he will launch the ‘Dual Agreement’ where both buyer and seller lodge deposits.

"There is very little trust in the current house buying process, but our system offers protection against gazumping, gazundering and generally removes time wasters. In addition a pledge agreement can also strengthen a buyers offers if a seller has multiple offers to consider” claims Richards.

Earlier this year the then-Housing Secretary, Sajid Javid, suggested that he would be urging the use of voluntary reservation agreements when the government eventually outlines its plans for simplifying the house buying process. 

A year ago the influential consumer group the HomeOwners’ Alliance  told the government it wanted a standardised and legally-binding reservation agreement introduced at the point of agreeing the sale price, but before the buyer or the seller commits substantial expenditure.

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    Good idea but the problem is the sales process itself and the length of time it takes to push a sale through. Gazumping wont be stopped with a buyer only reservation so there needs to be joint commitment so Property Pledge having the dual agreement next year will 'solve' some of the problem. The issue still arises if an offer comes in much higher than the agreed price and the vendor contribution to the lock in is small in comparison. The vendor can still ditch the perspective buyer as the loss of reservation monies are offset by the greater offer. Any penalty should be equal to the benefit of the difference in higher offer for a gazzumper and similar for the gazzunderer! Or perhaps do we take a look at the system in Scotland?

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