A proptech company that offers binding reservation agreements has been endorsed by Phil Spencer.
Gazeal, which is led by property lawyer Duncan Samuel, will now be available for users of Spencer’s home-mover’s site Move iQ and across the market.
Samuel says that even when the market is slow, at least 33% of transactions fall through costing buyers and sellers in the region of £270m a year. With a Gazeal contract in place between buyer and seller which is signed after an offer has been agreed, he claims it completely eliminates fall throughs.
Spencer said: “Whatever the market conditions, the real culprit is the legal blind spot in the way homes are bought and sold in England and Wales. A legal system that allows buyers or sellers to abandon a sale a day before the exchange has always been a point of contention.
“That’s why we have teamed up with Gazeal, who offer a legally enforceable contract at the very start of the process. Allowing sellers and buyers to agree a deal that has legal force right from the start can spare weeks of uncertainty and prevent frustration and expense.
“Not only that but it’s also good for the traditional estate agent who can often be left with no fee despite committing huge amounts of time and effort on behalf of their client.”
Samuel said: “We have designed a system that’s cost effective for the buyer and seller and will save them the agony of fall throughs.
“This is an agent friendly system, already embraced by several large estate agent chains. The contract gives both buyer and seller certainty, so you question that if a party doesn’t sign a Gazeal agreement are they serious or just toe-dippers?”
Comments (24)
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Richard Copus, I don’t remember reading anything in the article that suggests that they claim that lock in agreements are ‘their baby’. Their platform is ‘their baby’. As an agent for over 30 years why can we not embrace new ways of thinking in this industry. Bringing the security of buying a new home into the second hand market should not just belong to brand new purchases and auction buyers. Give the customers a choice of proving commitment early. No doubt we may well see a few buyers not willing to commit which should raise some interesting questions for the agent and seller. Totally agree that conveyancers need to understand and embrace the ‘lock in’ concept lets hope that many do.
RedRebel
“Bringing the security of buying a new home into the second hand market should not just belong to brand new purchases…”
Sorry – but a New Homes Reservation Agreement is NOT “security”.
It simply gives the buyer a defined timescale (usually 4 weeks) in which to exchange Contracts before the decveloper can re-offer the property for sale to another buyer.
The potential buyer can cancel a Reservation Agreement at any time – without giving reason.
But importantly if they do they don’t get all of that fee back if they are passed a certain point in the purchase.
ARC The Reservation Fee you refer to is usually no more than £1000.
With regard to builder retention of part of the Fee, From The Consumer Code for New Homes:
“The Reservation fee must be reimbursed if the Reservation agreement is cancelled. The Home Buyer must be told of any deductions that may be made.”
So they can and do make deductions, whilst this is not going to effect the fall through rate in certain circumstances ie: redundancy it does whittle out the flaky ones who aren’t quite sure but go ahead regardless and change their mind 4 weeks in citing ‘a change of personal circumstances’
Not new. Lock-in/lock-out exclusivity agreements have been around for around 15 years since The Law Society moved that such agreements were not separate contracts which could fall foul of the single contract rule in the LPA, but are collateral to the main contract. We have done two in the last 12 months, but you have to have solicitors who are not afraid of advising their clients to enter into them and they need very careful drafting. Gazeal and Phil – stop making out that this is your baby!
I know the team at Gazeal and have been very impressed with the product. It’s not brand new, agents have been using it for a couple of years I believe (Duncan correct me if I’m wrong) and the results have been extremely postive. It may not be full proof but if it focuses the minds of sellers & buyers and gets everyone to the finish line surely agents AND conveyancers should embrace it, lets not forget no one gets a penny until completion.
I have said for years that what is needed is a mini deposit to be paid into escrow at the point that a firm offer to buy is formerly accepted by the seller. It could be as low as £1000 but it would at least concentrate people’s minds. Obviously if it could be shown that the seller deliberately lied or hid major things from the purchaser then the deposit would not be forfeited.
Good idea in theory. Unworkable in practice. Can you imagine the field day the lawyers would have over trying to prove or disprove a seller lied or hid things?!
House builders have been doing it for years with no hassle just with hold a proportion depending on the point of withdrawal and refund the difference.
But it doesn’t stop ‘fall-throughs’, ARC.
Buyers can still withdraw for any reason – and the developer can re-sell if the buyer fails to exchange Contracts within the agreed timescale.
“…he claims it completely eliminates fall throughs.”
But what about “problems”, Mr Samuel? Does this “Agreement” completely eliminate them?
Redundancy? Have had dozens of sales fall through over the years with this unforseen and unfortunate problem.
Illness? Not as many – but a few SSTCs haven’t resulted in the expected legal completion.
Death? – and yes – I’ve had one of those. 1983 if I remember rightly – and it still haunts me.
On the face of it, an FTB may well be ‘influenced’ into signing such an “Agreement”. UNLESS family/friends convince them not to.
But what about who they are buying from? What if they do not have a property chosen to buy on? What if they have a property chosen that does not have the same “Agreement” in place and therefore the alleged 33% ‘risk’ of their purchase falling through** – thereby rendering them homeless? And onward and up the chain the questions, issues and reluctancies go.
Every link in a chain adds to the risk of something going Pete.
Therefore I would suggest that every link in a chain reduces the likelihood of this “Agreement” being put in place.
The first time one of these “Agreements” fails due to unforseen circumstances such as the above – or even buyers/sellers just being what they are… human beings with human emotions – then the wheel will come off in the same way as it can under normal sale conditions.
Happy to be proven wrong…
** is there ANYONE out there who can honestly say their fall-through rate is 33%?
Not even close, somewhere between 5% and 10% I reckon depending on whether the gods are with us or against us, it also depends on how you define a fall through, if we sell something and it dips ( for whatever reason ) so we sell it again and it completes is that classed as a fall through statistically?
if we sell something and it dips, we sell it again and it completes is that classed as a fall through statistically?
So the sale did fall through the first time! so Yes
If you have to “sell” something twice, then the “sale” that didn’t go through was a fall-through.
So like Schrödinger’s cat the property exists in my figures in two separate states, fall through and completed sale, back to the original point though I think one in three fall through is way too high……..
htsnom79
“So like Schrödinger’s cat the property exists in my figures in two separate states, fall through and completed sale”
Actually, it’s THREE separate states:
Sale Agreed
Fall-Through
Completed Sale
OH! chuff… no – make that FOUR! It was “Sale Agreed” TWICE – wasn’t it!
Lol, I can live with fall throughs as long as we can resell them, its vendors withdrawing that yanksmy chain
AMEN to that, Brother htsnom.
Or is it ‘Sister’…
(insert thinky emoticon)
Like Phil Spencer, we absolutely endorse anything that reduces fall throughs.
But. ( And it’s a REALLY big but).
As someone on the front line who deals with frustrated buyers, sellers and agents everyday due to people in the chain pulling out for no good reason, I am struggling with the concept of penalising the victims of this collateral damage.
Why should any buyer and seller who “commit” financially under such an approach have to pay even higher penalties due to events totally beyond their control.
Like all these ideas without a legal mandate, they will not be universally adopted and hence will fail.
Sorry Phil.
Anything that helps to make the whole process more certain and provides better peace of mind for home-movers at such a stressful time in their lives has got to be a good thing
Agents need to look at all the tools that might be available to them in order to improve their clients experience of the transaction.
If this system also makes the agents fee more certain then what’s not to like?
Oh well then, must be good if Dr Phil says so……..for goodness sake