A new product launches today, designed to end gazumping and gazundering by locking in buyers and sellers once a sale has been agreed.
The product, called Gazeal, has been designed by a group of solicitors and provides a lock-out agreement backed by title insurance.
It is aimed at preventing fall-throughs initially in transactions where there are no chains – for example, first-time buyers and buy-to-let purchasers. It is also targeting developers in a market where ‘sales’ can prove to be no such thing.
The process provides an escrow service, with each party paying £250 to “seal the deal”, with the Title of the property held in trust by Gazeal until the legal process is completed, at which time exchange happens automatically.
Duncan Samuel, Gazeal founder, said: “In Australia, the USA and in Scotland here in the UK, as well as many other countries around the world, once a house sale and price are agreed verbally it is binding in law, subject to survey and title search.
“This is not the case in the rest of the UK, where deals can break down near completion for a number of reasons such as the vendor demanding a higher price than originally agreed, an alternative purchaser offering more, or a purchaser wanting to pay less than agreed or they will refuse to complete the purchase.
“Gazeal gives buyers and sellers certainty, by securing the sale at the outset of the transaction. This gives comfort to buyers and sellers, and also helps free up estate agents who spend much of their time going back and forward between vendors and buyers.
“This is a simple, straightforward and cost effective way of making sure that once a sale is agreed to the satisfaction of both parties it goes through. It means both vendor and purchaser can plan with confidence and the estate agent has a guaranteed sale on the books.”
Mark Hayward, managing director of the NAEA, said that his organisation was not officially endorsing Gazeal, but will be watching with interest to see how it is received by the industry, especially it if can reduce abortive work and speed up transactions.
Hayward said: “With an average fee on each house sale of £2,950, the fee amount lost or deferred adds up to over £715m. Factor in over 1.2m wasted house viewings as a result of sales falling through and this makes it a real issue for the industry.”
Bill McClintock, of The Property Ombudsman scheme, echoed the sentiments.
He said: “One of the things that adds to the cost of sales for residential estate agents is that they only sell a proportion of the properties on which they are instructed. If they were able to count on selling a greater percentage their cost per property would reduce significantly.
“Furthermore, after the sale has been agreed between the seller and buyer, there is normally quite a long period of uncertainty whilst the buyer and their solicitors are checking the title documents and arranging finance. If this period could be shortened by a third party title insurance it would reduce the number of sales that fall through and fail to complete.
“If buyers and sellers enter into the Gazeal agreement this will reduce the risk and make the sale more certain to complete. This must be in the consumer’s interest and as such I would welcome such a move.”
The website – which is aimed at home movers, developers and conveyancers as well as agents – is here
Comments (11)
Here are a few comments to be going on with:
1 Gazumping and gazundering only happen in times of rapid price change. A business model based on fairly rare events is fundamentally flawed.
2 Most failures occur at the beginning of a transaction and Gazeal will not deal with this problem, which in any event is not serious, just frustrating.
3 For all its faults the existing system works for most buyers and sellers who do not want to be committed at an early stage. A buyer withdrawing due to a change of circumstances or a bad survey is bad news for the seller but good news for the buyer.
4 It does not deal with the problem of lenders selling a repossessed property who are obliged to consider higher offers at any time up to the point of exchange.
5 “Conflicting interests” do not exist. Both agent and conveyancer want the transaction to proceed to completion.
6 Why is it necessary to provide title insurance if the title is OK? Is this about commission?
7 Correspondence between Gazeal and the conveyancer will increase the conveyancing workload and hence costs and the time it takes to reach exchange of contracts. It also places an additional burden of responsibility on the conveyancer to conform to Gazeal that the title is “good and marketable” and “meets the standards set in the all risks policy….” and confirmation that “this advice to us in the form of a Conditions Precedent Letter”. The details will need to be carefully examined and conveyancers will not take on additional responsibility without increasing their costs. Will the conveyancer be liable for any errors or omissions? Will indemnity insurance premiums increase?
8 The website states: “The Title is held in Escrow by Gazeal Limited. We manage the legal process (in association with the parties’ solicitors and our specialist insurance partners)”. This contradicts the claim elsewhere that the conveyancing process can proceed as usual. The word “manage” is vague and rather worrying.
9 Talk of automatic exchange of contracts is nonsense. Conveyancers have a duty to contact the client before exchange in the event of a last minute problem (death, redundancy, etc.)
10 Lock out agreements have long since been written off by the profession as the terms and conditions are difficult to define and hence impossible to enforce. There must be provision for the buyer to withdraw if they get a poor survey or an incorrect mortgage offer. Who is to decide what a poor survey is? If there is a damp problem, how bad does it have to be?
11 As stated it will not work if there is a chain which rules it out for most transactions. The big problem with gazumping is when the client is in a chain and they lose a related sale or purchase. The disruption to a single transaction is upsetting but not usually serious.
12 How will the Title Escrow Service work? It will inevitably mean extra work for the conveyancer, and complicate the conveyancing process. Have the Land Registry approved this scheme?
13 The website states “Gazeal Limited has an unrivalled track record in creating and delivering bespoke Title services for the property sector, legal profession and insurance underwriters”. Really? How come I’ve never heard of them?
“Gazeal” is a strange name, rivalled only by “Veyo”. I cannot see either product succeeding. The whole conveyancing process is a mess. It’s too complicated and is getting worse. It needs a complete overhaul, but as long as lenders and conveyancers regard each other as enemies it cannot happen.
Wasn’t this what HIPs were meant to do? Provide a “legal pack” so that the buyers/their lawyers had all the required info before proceeding? Granted, they were eventually watered down and became worthless in the end…
Also, is £250 seriously going to stop anyone from pulling out of a purchase/sale?
Who would cap letting agent fees but endorse Gazeal charging each party £250 for this service? You cannot ‘seal the deal’ until exchange of contracts when sale/purchase binds both parties and Gazeal cannot hold the title to your property in trust? The only people benefiting from this will be title insurers.
From the homepage – “NAEA and TPO express interest in scheme designed to end gazumping and gazundering”
They can be as “interested” as they want – THE LAW states that all offers must be forwarded for the vendors’ consideration… and that any sale agreed is strictly Subject to Contract and that either party can withdraw from that transaction at any point up to exchange of Contracts- for whatever reason.
Last time I checked, Legislation trumped sentiment.
Couldn’t agree more Smile Please, that’s why our fall through rate last year was a 11% (still too high), even though we outsold all other agents in our area according to RM, whereas the agent with the largest inventory had a 40% fall through rate. It also helps to be realistic on valuation so it is easier to get the lenders to concur.
It might work with new builds, it might work with very short chains and it seems similar to the system in Scotland (which has its pros and cons), but will it work in England and Wales for the majority of transactions? The devil will be in the detail.
· Do most people really want to be tied in so quickly?
· I would like to see a copy of the lock-out agreement and Title Insurance policy.
It’s about time! I don’t think there will be many people that wouldn’t pay £250 to end the uncertainty.
It will also help us out hugely I think, all the reasons in the original OP, that we often get the bed rep for, would go away.
I’m all for it
It seems to me that adding £500 costs to guarentee a sale only benefits the solicitors who get £500 extra, I cant see a buyer being delighted to lock in a buyers market and vice versa in a sellers market.
The main reason chains fall through is too many negs / agents push through the process without checking facts and obtaining correct details. Proof of funds need to be viewed, every link of chain checked, timescales spoken about and agreed upon, solicitors instructed with money on account. At that point it is an acceptable offer. If this was done 100% of the time on every sale you would see fall through rates tumble.
Won’t work, move on – Jonnie
Interesting….I would very much like to see how this progresses, anything that cuts the fall through rate and speeds up the process can only be a good thing. I imagine the difficulty will be in persuading both parties to pay £250.