The move to stop property sales falling through in England and Wales is gaining momentum with a trial of home reservation agreements planned.
These agreements would be legally binding, potentially putting an end to the third of all property sales that collapse every year.
Several areas across England will be chosen to pilot the scheme early in the new year.
Commit both sides to deal
The reservation agreement system would help bring England’s property market into line with the way sales operate in Scotland. Both parties in Scotland are committed to a sale once an offer, even a verbal one, has been accepted.
In the trial, both buyer and seller would commit to the sale going through by signing a reservation agreement and putting a certain amount of money in an escrow account held by their conveyancing solicitors.
Uncertainty in current system
In the current system, either side can withdraw from the transaction right up until the point that contracts are exchanged.
That adds to uncertainty and also allows the practices of gazumping and gazundering to flourish. Sellers can gazump a buyer by accepting a higher offer at the last minute. Buyers can gazunder a seller by lowering their own offer at the last minute.
The reservation agreement trial will run for several months next year. If successful, it’s expected that it will be rolled out around the rest of England and Wales.