Reservation agreement could improve property buying process

Home buyers in England may soon have to sign a reservation agreement when a seller accepts their offer on a property.

In the current system, an offer can be withdrawn until contracts are exchanged. That puts transactions at risk of collapsing, which happens to a third of all sales in England and Wales every year.

Introducing a reservation agreement would end that risk. It would also put a stop to the practices of gazumping and gazundering.

In gazumping, a seller accepts a higher bid close to completion that cuts out the one who made the original offer.

Gazundering is when a buyer withdraws their original offer and offers a lower figure. Again that can happen so close to completion that a seller may feel they have no option but to accept the lower bid.

Introducing a reservation agreement would bring the English and Welsh system of buying and selling property into line with Scotland.

A verbal or written offer is binding on both sides north of the border once accepted. The Times reported that the Government is keen to introduce the system, which would help reduce the number of transactions that collapse every year.

Focus groups are testing the new plan before a potential trial with estate agents early in 2020.

Paula Higgins, chief executive of the Home Owners Alliance, said: "Reservation agreements will bring more certainty into the process.

"Buyers and sellers will have more skin in the game when an offer is accepted, and the reservation agreement should encourage them to appoint conveyancers earlier in the process."

At Homeward Legal, we know appointing a conveyancing solicitor early in the process of buying or selling is best. We work with some of the premier property law firms across England and Wales. Each delivers high-quality, low-cost conveyancing services.