There may be moves afoot to introduce something called preliminary contracts. So what’s this about?
There has been quite a lot of debate within the industry about this subject recently. The basic idea is that some form of preliminary contract would bring greater certainty to the house buying process at a much earlier stage – thereby helping to reduce the number of transactions that fall through as a result of things like gazumping and gazundering.
How would the idea work? Basically, sellers and buyers would be required to commit to a transaction at the agreed price, subject to certain conditions agreed at the outset. This legally binding agreement, probably involving the payment of a fairly substantial deposit by the buyer, would be entered into once an offer had been accepted.
So far, so good, you might say – after all, there is much to recommend anything that genuinely brings more speed and certainty into our somewhat antiquated house buying process. Indeed, many within the industry welcome the idea of buyers’ deposits as a highly effective way of deterring blatant time-wasters.
On the other hand, there is also considerable concern that such a measure could actually end up being counter-productive, particularly on the grounds that the need to put down a sizeable upfront deposit – over and above any required by a lender – could effectively deter the many people who start out “just looking” but ultimately turn into serious buyers.
One thing is certain, however. To be acceptable to both parties – not to mention their respective solicitors – any preliminary contracts, entered into at the point of agreeing to buy, would have to be hedged about with so many caveats as to render them practically worthless.
Ironically, of course, the industry and the housebuying public have already been presented with an opportunity to go down this route and simplify the whole house-buying process, through the medium of Home Information Packs. Were they still required, complete with a survey, then all the information needed for the conveyance would already be in place, and a formal contract could be entered into more or less straight away. In cases where the buyer needed to arrange finance or preferred his own survey, appropriate time limited conditions could simply be added to the contract.
But, HIPs, of course, were rejected. It remains to be seen whether preliminary contracts fare any better!