A London agency has told Estate Agent Today that it makes some of its buyers pay upwards of £5,000 in Reservation Agreements - well ahead of the likely introduction of a similar scheme by the government.
In recent weeks the Ministry of Housing, Communities and Local Government has become increasingly vocal about the Reservation Agreement concept, suggesting that a trial in the New Year could see some buyers in two pilot regions of the country being obliged to pay £500 to £1,000 in the form of a non-returnable deposit.
This would be to see if fall-throughs for these properties dropped significantly from the current 25 to 35 per cent level discovered by MHCLG research.
However, now Chris Osmond - sales director of the London agency JOHNS&CO - has told EAT that for sales of some properties the company follows the example of developers and require a reservation agreement as standard.
“For properties under £1m, we require a £2,000 reservation agreement deposit and £5,000 and upwards for properties of £1m and upwards” he says.
“The benefits of Reservation Agreements are lower fall-through rates. On average fall through rates in the market sit around 30 per cent. For us, they are a lot lower. In Q2 this year, they were 18 per cent” he adds.
“Fall throughs cost all parties money - around £2,000 and higher for leasehold properties where there is even more paperwork and therefore higher charges. We use a Reservation Agreements to reduce fall throughs. Our vendors also like it as it ensures a committed buyer who has skin in the game” explains Osmond.
“We also believe our RAs mean the transaction moves more quickly too - our average is a nine week turnaround from agreeing sale to exchange of contracts in Q2 this year. This is even more impressive because all the properties we deal with are leasehold which come with lots of extra paperwork and typically take 50 to 60 per cent longer than a freehold sale” he continues.
“Reservation Agreements are not a guarantee of a sale going through but they definitely help. We are strong advocates that they help to keep the client journey smooth and transparent. If you are buying something and committing to it where large costs are involved, it stands to reason that there are rules of engagement” he concludes.
Last week the MHCLG revealed that the New Year trial would be in two regions of the country which have so far not been identified, and would involve selected agencies and conveyancers.
They may be asked to trial different forms of agreement to gauge their impact on consumers, on fall-throughs, and the speed of the deal. The MHCLG says the government aims to reduce the typical time between a property first being marketed and a buyer moving in from its existing 20 weeks to between six and eight weeks.