Sales are all about paperwork. Your solicitors need to provide it to the buyers' solicitors. They need to read it and approve it. It all takes time. You can shave days or weeks off the transaction time by making sure you have everything you need up-front.
This is what you need to hand to your solicitors so they can start the sale process as soon as you have a prospective buyer:
Where are your 'title deeds' – particularly your lease? These are the usual places.
For certificates and other paperwork after you purchased, you probably have it all in a file at home.
If you can't find anything, there is usually a practical solution.
Or, if you should have obtained a consent of some kind in the past, but didn't, you can often negotiate with your buyer to accept a simple and cheap indemnity policy instead.
So don’t despair, even if your paperwork isn’t 100% in order!
If you can make enough extra money to pay for a few years’ lavish foreign holidays, just by taking a few simple steps, surely it's worth it?
My main message is this: Buyers have no imagination. You can’t expect buyers to see past stained carpets, bad smells, and cluttered bedrooms. They just don’t. You have to make the flat beautiful and desirable, so that they fall in love with it, and agree your price.
You have to bear in mind that when a potential buyer stands in your living room doorway, he or she is thinking ‘Could I live here?’
Most people are not imaginative interior designers, so your task is to make it as easy as possible for the unimaginative majority to see themselves happily living in your home. That means playing the percentages and making the flat look as appealing as possible to the large middle ground of buyers - which you may personally feel is boring and awful, but it's what is most likely to sell your flat.
Some of the essential things to do aren't even costly, or all that disruptive. You'll laugh when I say this, but the estate agents tell me with complete seriousness that having vases of fresh cut flowers improves your chances of selling.
Psychologically, what buyers see first when they step through the front door is often very important in making their decision. It seems that it takes very little to switch a viewer from open-mindedness to ‘definitely not’.
The hall should seem as spacious and light and airy as possible. So anything you normally park there (especially a bicycle) should be removed.
Put a brighter than usual light bulb in the hall light and replace the lampshade with an attractive new one. Consider putting up a mirror to make the corridor seem wider than it is.
The whole point is to convince people that they are getting a lot of property for their money. So they have to feel that rooms are large and spacious.
Tie back curtains and take down blinds to make rooms brighter.
Doors must open fully. If potential buyers open a door and it only opens three-quarters of the way because there is a settee squeezed in behind it, they get the impression that the flat is pokey.
Make sure no one has to walk round the back of a large chair to get into a room. Get rid of any furniture you can do without.
The first thing your potential buyers will want to do when they reach the living room is to go out onto the balcony, whether it's winter or summer.
You must provide free access to the sliding door. People often leave TV stands and plants in the way. This makes it difficult for the visitor. You must make sure they can slide all the way back.
You should clear the balconies so they seem as large and uncluttered as possible.
Bedrooms should seem as large as possible. The important thing is to avoid a room looking like a box room; it must convince as a bedroom. Buyers can figure out what to do about their storage when they move in.
Net curtains make a room seem claustrophobic so you should take any net curtains down. Tie back other curtains to make the room as bright as possible.
Furniture crammed into rooms so that they look impossibly small should be removed.
Unless you are selling to a bachelor market, a more feminine style to a bedroom will be most appealing to most buyers. If you want a bedroom to look chic, merely investing in a co-ordinated set of bed linen can do the trick.
A teenager's bedroom painted black or dark red should be repainted white.
The kitchen is the one area in the flat where a bit of clutter can be a good thing. A few attractive jars, and cooking paraphernalia will make it look like a friendly, inviting kitchen, not just an empty room.
There is little point putting in a new kitchen to attract buyers. It won’t make enough difference in price to be worth it. Just concentrate on maximising what you have.
Arrange for a tradesman to re-balance drawers and cupboards which don't work smoothly.
Everything needs to be gleaming. Nothing puts buyers off so much as gungy bathrooms and WCs.
There are tradesmen who polish baths. A bath can come up like new. In worse cases, you can have the bath re-enamelled completely.
Repaint the ceiling if the paint is peeling due to years of moisture.
Putting a mirror on one wall can have a dramatically enlarging effect. Some pundits say you should put some new white fluffy towels in the bathroom before a viewing.
Run taps before viewings. Make sure there is a good clean flow. Some taps in baths, if not turned on for a while, can run brown initially, which is off-putting to buyers.
If you have got carpeted floors, it is definitely worth getting them steam cleaned. It totally lifts the flat. If the buyers see a tired messy carpet, they can’t distinguish it from the flat itself in their minds. Usually it is not worthwhile re-carpeting a flat, because it's a huge expense.
If the carpet looks so awful that it seriously detracts from the property, you might consider putting down some cheap carpeting in a neutral colour. The difference between cheap and expensive carpeting is how long it will last, but since you only need it to look fabulous for the viewing period, cheap should do fine.
You will, when you think about it, realize that you are putting up with a number of little defects in your home which you have become accustomed to – the toilet cistern which needs a special knack to flush, kitchen drawers which don't quite shut, a dripping tap perhaps. These are all things you must put right. Anyone coming round the flat won’t be doing a detailed survey for major defects, but they will open and shut most cupboard doors and drawers, possibly flush the loo, and if they don’t work properly they will think the flat hasn’t been maintained properly and that there must be much more serious problems they haven’t spotted.
People seem to get by with some bulbs not working, particularly in the bathrooms. You should replace all burnt-out bulbs.
Repainting your flat before you put it on the market is a relatively cheap way of making your flat look as close to new as possible.
Another reason for redecorating – sorry to say – is to get rid of your personal tastes! It's not because your personal tastes are bad, it’s simply that most buyers lack imagination. Buyers need to imagine themselves and their furniture in your flat. If everything looks clean, white, and generally neutral in tone, they can probably do that. If you have heavily patterned wallpaper or bedrooms with dark red walls and stars on the ceiling, your buyers may step back in shock instead of seeing the potential for their own equally individual scheme.
You are probably saying to yourself, ‘The buyers will repaint anyway, so what's the point?’ The point is that you must get them to sign the contract first, and that is usually achieved by presenting them with an attractive but blank canvas.
The ventilation system can leave black marks on the ceiling or even cause the paint to flake. So it's definitely worth spending half an hour to rub or wash it down. If the buyers see a stained or flaking ceiling, they will assume something worse behind it. Ventilation grilles always get full of fluff and dust. You probably never give them a second glance, but buyers will get right up close and have a look at them, so it's worth hoovering them to get rid of any dirt, and polishing them.
It is worthwhile cleaning all cupboards. Buyers open cupboards and drawers. It's human nature. If someone opens the cupboard and lots of brushes and rubbish fall out, it gives a bad impression. Viewings are all about impression.
All the precious things that make your flat your home - mementos from a holiday, presents from your aunt, your collection of tea pots – these are what estate agents call ‘clutter’.
The same considerations apply as with painting and decorating: you need potential buyers to see past your presence to how they would live in the flat.
You mustn't totally depersonalise the place or it won't seem inviting at all, but you should look at it from an outsider's point of view, and get everything which would detract from a sale out of the way.
Bedrooms should be cleared of rubbish. You would be amazed how many people leave buyers to clamber over the exercise bicycle and the T-shirts hanging off the clothes horse. All they see is an ugly box room. There is no need to do any major works in the bedrooms. But … this is so obvious that I'm almost embarrassed to say … but you should make the bed. (Lots of sellers don't.)
Large furniture makes rooms seems smaller than they are. If you have shoe-horned a double bed into a small bedroom, put the double bed into store and replace it with a single bed which makes the bedroom seem much better proportioned. If there’s a huge dark wood wardrobe, treasured by your grand mother, put that into storage as well.
Good smells are going to encourage buyers to think well of your flat. There are lots of suggestions traditionally put forward for enticing buyers with attractive smells: fresh bread or fresh coffee, for instance. But it's a little difficult always to be producing fresh bread in the oven whenever a potential buyer arrives, and it looks a little contrived. Coffee is a bit more practical.
Flowers are probably the best bet for an understated effect which doesn't look like it's been done purely for the purpose of the viewing. Obviously, you have to keep on replacing them. Vases of dead flowers aren't going to improve your chances.
You definitely shouldn't use any of the commercial plug-in ‘scents’ always being promoted on the television. I can only imagine people use them because their homes are smelly and poorly ventilated, and I would expect any buyer to think the same thing.
I apologise in advance if you find a lot of this is stating the obvious.
These are a few suggestions:
Let the estate agent show people round, if at all possible, rather than doing it yourself. There are a number of advantages.
The potential buyers can be honest with the estate agent about anything they don't like. Since many off-putting features will be obvious from the start, the estate agents can volunteer helpful suggestions.
They can emphasise the benefits of the estate. If you do it, you may oversell or undersell. If this is your first outing as a salesman, you may be more flamboyant and gushing than you should be. If you try to counter that, you may come across as unhappy with your own property.
Estate agents will be more credible when it comes to confirming what can be done with your type of flat. They can refer to other flats they know about. So their repertoire of weapons in the battle of sales is greater than yours. Despite their supposed bad press, most people do believe what estate agents tell them.
It is not all about the money. You need buyers who can perform. Normally this means that they must be able to proceed quickly and without too much complication. But it might mean that you need a buyer who is prepared to allow you to stay on in the flat for longer than the normal one month between exchange of contracts and completion.
Getting the right kind of buyer is often almost as important as getting the right kind of price. If you end up with a nightmare buyer, who hasn't arranged finance and, in reality, can't afford the flat on his income, you won't find that out for weeks, and then you will have to start again, and possibly lose the property you are buying in the process. You should usually insist on seeing evidence that the buyer has a mortgage approved in principle before accepting an offer.
A cash buyer is particularly attractive as a buyer. A cash buyer is someone who doesn't need to sell a property and doesn't need to raise finance on mortgage to buy your flat.
If someone claims to be a cash buyer, check that they really mean they don't need a mortgage. In fact, ask for some evidence from their bank that they have the funds ready and waiting. Some people seem to think that they are cash buyers because they will be providing money (mortgage money) at completion - as if everybody else paid in cows!
A buyer who is not in a chain is potentially attractive as a buyer. Most people are selling a property to buy another property and they have to tie both transactions together. This means that there will be several linked buyers and sellers and no one can exchange contracts until everyone is ready.
So you only have to have one buyer pull out somewhere in the chain and everyone is delayed.
If you find a buyer who does not have to sell a property, you remove that risk. (Of course, you still have the potential problem for transactions upstream from the property you are buying).
A buyer who is a first-time buyer is really just the same, so far as you are concerned, as a buyer who does not have a property to sell. The potential problem with the first-time buyer is that he or she is often raising a high proportion of the property price on mortgage.
Raising the mortgage finance may take slightly longer than would be the case for a buyer using funds from a previous sale. The mortgage market is not as easy for first time buyers as it was in the past. Nonetheless, a first-time buyer can be an attractive proposition compared with someone with a property to buy who also has to raise mortgage finance..
Buy-to-let landlords are desirable buyers, because they are simply buying for investment without needing to sell another property. So that also helps to avoid a chain.
A buyer with a mortgage arranged in principle is to be preferred over one who has not yet arranged a mortgage. It is a sensible step for a buyer to take to get prior approval from a chosen lender for the proposed loan even before settling on a particular property to buy. Unless he does that, he won't know exactly what value property he can afford to buy.
If a buyer tells you he does not yet have mortgage finance arranged in principle, that should set off alarm bells.
This is all the more important in the current market, because lenders are becoming much more conservative about the loans they are prepared to make. You need to be certain that your buyers aren’t just assuming they can get the necessary loan, when in reality they won’t be able to.
(An offer in principle is not the end of the story. The lender is only saying that, based on the buyer’s references and income, that sort of loan would be given. If you do a deal, the buyers still have to obtain a formal mortgage offer, and for that the lenders have to consider the value and mortgageability of your flat before offering the loan.)
The best strategy for buying and selling is usually to get your own property under offer before looking for a property to buy.
Buyers who have their existing property under offer are a more attractive proposition as buyers than someone who has yet to put their own property on the market.
If they already have their property under offer, that means the conveyancing process has got under way and it shouldn't then hold up your transaction.
If prospective buyers say that they have not yet put their property on the market, you should normally prefer buyers who already have, assuming you have the luxury of competing buyers.
Most people aren't going to offer you the price you are asking - even if they are actually willing to pay it - because they will hope to get something off the asking price by negotiating.
Unless you are used to negotiating as part of your business life, or even if you are, it's best to do the negotiating through the estate agents. It's easy to get polarised. After all, it's your home - and, by implication, you - that the buyers are insulting by offering less than your asking price.
Buyers handling their negotiation personally are liable to get aggressive in the same way we British typically mishandle negotiations over carpets in foreign bazaars. If both sides exchange messages via the estate agents, it takes all the shoulder-squaring and eyeballing out of the process. It also gives you time to think. If you are dealing with a buyer face-to-face, snap decisions have to be made, and that's when you find you make concessions that you later regret - such as throwing in all the furniture, or agreeing to a delayed completion period.
There's a good chance that the buyers will have confided in the estate agents to some extent - buyers often come to regard the estate agents as their allies, a feeling which estate agents naturally want to foster. Buyers don't seem to take it fully on board that estate agents act for you, not for them.
Buyers would never dream of telling you that they could go up another £10,000 if they really have to, but they might impart this information trustingly to the estate agent. The estate agent will then tell you. You can then instruct them to go back with a suitable counter offer.
But equally, it is a good idea to keep your cards close to your chest if you can. The estate agents will negotiate according to whatever instructions you give. But the nature of the job is to achieve deals, and the estate agent will be trying to get you and the buyers to arrive at a consensus. So it's best not to tell your estate agents what your bottom price is, or they will almost subconsciously be drawn towards finding a consensus between the buyers’ highest price and your lowest price.
What you really want is that the buyers should be pushed up as far as possible, without you having to move down to meet them. Unscrupulous agents might reveal your bottom line to the buyers to get the deal done.
The absolutely worst thing you can do is to have a handshake deal with the buyer direct. That tends to turn what is in fact a commercial deal into something to do with personal honour and your word, and you will be accused of all kinds of moral wrongdoing if you later need to alter the terms at all.
Do not rush to accept the first offer you get. If it is a lot less than your offering price, wait for a few days to see what other viewings bring. (However, if it is definitely a ‘buyer’s market’, and if you have waited for a long time even for that first offer, then discuss it with the estate agents and accept it if they can demonstrate that it is a fair offer, taking other recent deals into account.)
If you immediately get an offer at the asking price, or if the prospective buyers make a lower offer that is easily pushed up to the asking price, you must consider whether you have under-priced the flat.
Prices can be quite volatile and you may have priced your flat too low. Don't feel you have to accept an offer just because it's the price you are asking. See what a few viewings brings in. If it is clear that several people are prepared to pay the asking price, then you should seriously consider increasing the price.
You are not doing anything wrong if you don't accept the offer and instead re-advertise the flat at a higher price. ‘Gazumping’ only occurs if you accept an offer and later pull out and go for a higher price. (And even that is not illegal, just ethically dubious.)
If you receive an offer less than the asking price, don't simply refuse it, or even necessarily go back with a counter offer. Ask the buyers to explain how they arrived at their figure. The chances are they have just plucked a figure out of the air because they believe that bartering is the correct thing to do. Asking the buyers for reasons puts them on the defensive. At worst they come back with an explanation that a similar flat is on the market at a lower price which is at least an argument you can consider.
Don't negotiate direct with a buyers. If you do that you are losing out on one of the main benefits of employing an estate agent in the first place. Using an estate agent to negotiate gives you an opportunity to consider your response before going back.
If you receive an offer well below your asking price, you could simply refuse, if you are confident of your price. But if you are willing to make concessions, one useful tactic is to go back with a counter offer which is only a very small amount below your original asking price. Negotiators expect parties to start splitting the difference. If a buyer puts in an offer £20,000 lower than the asking price, it is tempting to go back at £10,000 less, then the buyers counter at £15,000 and then you split the difference and do a deal at £12,500 off the price.
But that is allowing the buyer to set the parameters. If you go back offering, say, £2,000 off the price you set a more restricted playing field for the negotiating game and make it clear that any reduction is going to be minimal. There is a good chance that the buyer will accept your bluff as evidence of your confidence in your price and settle for £3,000 off the price.
If you have to compromise during negotiations, try to give something up which does not actually cost you money. These are some examples.
Offer to throw in some fixtures and fittings. If they are not mentioned as included in the sales particulars, you can offer to include the white goods in the kitchen, or the curtains or carpets. This probably won't cost you any money in reality, because you are probably not planning to take them with you to your new property anyway. Fixtures and fittings always give some margin for negotiations.
Offer to take the flat off the market. A sensible buyer should insist that you take the flat off the market as soon as the offer is accepted, but you can make it seem like a concession you are offering. It removes the anxiety from the buyer’s mind that a better offer might come along. (In reality, although the agents stop pushing the property, if they do receive a higher offer they are legally obliged to pass it on to you. You are legally entitled to switch to the new buyers, if you choose.)
If you are very fortunate, you may receive a number of offers from buyers desperate for the type of flat you have, and all competing for a small pool of such properties.
If you feel that you may be able to squeeze more money out of the transaction, you can institute a ‘bidding war’ in which you invite the competing buyers to make higher offers. This is anathema to buyers, of course, because they keep being pushed up.
Sometimes they just pull out of the transaction altogether and look elsewhere. One fairly civilised way of dealing with competing bids is to have ‘sealed bids’.
How this works is that the competing buyers are asked to give the estate agents their highest price. At a specified time, the estate agent will open all the bids and tell you the results. You can then choose the highest bid. (Strictly speaking, you are not bound by this arrangement at all, and you can still choose a lower bid if you think the buyer is more likely to perform, or you can carry on trying to push the price up.)
Another way of reacting is to have a contract race. Under this arrangement, you accept offers from two or more buyers, and turn it into a race as to who gets to the point of exchanging contracts first. This would only be of interest to you if your priority is to exchange contracts quickly. This can simply put buyers off because they have to incur legal expenses which they may lose.
This is how some transactions go. Terms are agreed, and the sellers take their property off the market. Maybe there is talk at the start – perhaps even recorded in the memorandum of sale – about exchange of contracts within two weeks.
The transactions drags on. Two weeks pass. Then a month. The sellers get restless. They instruct the estate agents to tell the buyers that they will have to consider putting the property back on the market.
The buyers go ballistic. It is not their fault that the transaction is being delayed, they say.
In fact, they protest that their solicitors are not happy about the building regulation approvals; the sellers’ solicitors have been slow sending answers; and the sellers are showing bad faith by threatening them. The sellers are chastened, even a little guilty, and let things carry on as they are. Another month later, the buyers’ solicitor is still agonising about approvals. Everyone is furious. But still no sign of exchange.
Psychologically it is a big step for kindly sellers to go from friendly acquiescence to putting the property back on the market. People don’t like confrontation. And putting the property back on the market is second only to pulling out of the deal altogether in the aggressive confrontation stakes.
But there are better strategies you can consider, which I set out next.
As just described, if you reach a point where you have to threaten to put the property back on the market, that is a hostile stance to take and in fact it is a big step. The better way is to agree right at the outset that you will take the property off the market now, but aflter an agreed period, such as two weeks, four weeks or whatever is reasonable, the estate agents will automatically start marketing again.
This has several significant benefits.
I am quite keen on this strategy. Buyers often make promises about how fast they will exchange contracts, which sellers naturally rely on, and some buyers seem to feel this imposes absolutely no commitment on them at all. They take their time organising their mortgage, and they fall back on blaming their solicitors or their lenders when the promised date passes. If the sellers then talk about putting the property back on the market, they are outraged, protest that the sellers are acting unreasonably, and threaten to pull out. Agree it at the outset, and not only can they not complain when it happens, but they will realise from the start they can't just mess around. As a result, you are much more likely to get the deal done by the agreed date, because you are relying on buyers’ self-interest, which is usually a reliable motivator.
Sellers may like the idea of a non-refundable deposit. The buyers put up a chunk of money – enough to make it painful to lose – and they forfeit it to the sellers if they do not exchange contracts within an agreed period … unless there is some very good reason, such as a defect in title or something bad revealed by the local search which can’t be easily put right.
In my experience this rarely works out for sellers for these reasons:.
This is a strategy which appeals to buyers . A ‘lockout agreement’ prohibits the sellers from negotiating with any third parties for a certain period of time. This can be a valid contract, and in a buyer’s market maybe sellers would be willing to enter into it. But I think it is a waste of time for the following reasons.
It’s feeble protection. If sellers break a lockout agreement and actually do negotiate with someone else during the agreed lockout period, the buyers normally can’t sue for the loss of the property or the loss of the bargain they hoped to obtain. They can usually only claim for the expenses they have incurred in the transaction. So lockout agreements don't really give buyers much protection – certainly not enough to justify all the wasted time and fees setting it up.
This gives no legal protection at all. Yet it may be the best available solution. Heads of terms often contain a final paragraph which is half aspiration and half plaintive plea: ‘Exchange of contracts within fourteen days of receipt of a full pack from the sellers’ solicitors’. No one on the buyers’ side really takes that very seriously. If the buyers actually agreed to it at all, it was with their fingers crossed behind their backs.
Much better, in my opinion, is to tie the buyers down to specifics in the pre-deal discussions, and make them positively agree to them – not in a legal sense, but in a moral sense.
It really does make a difference two weeks down the line if the sellers can say, ‘You agreed you would not link exchange with exchange on your sale’ or ‘You agreed to rely on a personal local search’, etc.
Agreeing a date for exchange at the start is essential. It should be recorded in the heads of terms. It works even better if you do a letter and the buyers write back agreeing. Most people want to keep their word. Solicitors then have to focus on being ready by that date. Without a date, there is no pressure on them. But you do need efficient solicitors on both sides to make it happen.
Sending out a second contract is a weird thing for sellers to do. It means they are unhappy with their first buyers, but not all that unhappy or they would simply switch to the second buyers. They expect their second buyers to do all the things a buyer has to do, but with the sword hanging over their heads that someone else is weeks ahead of them – Not exactly a reasonable proposition.
Sending out a second contract means that the property has been back on the market for a while and the sellers have been trawling for buyers, or even gone back to previously dismissed applicants. Surely, if the first buyers have been mucking about or are disorganised, the threat of putting the property back on the market is what would have galvanised them, if anything would. If it has come to the second contract being sent out, then there is no real effect on the first buyers. They obviously have some problem they have to contend with, like a slow lender, and all they can do is plod onwards. So, in our opinion, sending out a second contract doesn’t work as a way of inciting the first sellers to sudden action.
It takes time to buy a property: searches, surveys, mortgage applications, etc. all have to be done. So, for the second buyers to know that they have to embark on that process with the threat hanging over them that, however speedy they are, the first buyers are way ahead and may yet limp over the finishing line ahead of them is hardly motivational. If the sellers are still sticking to the first buyers, they and their advisers must think that the first buyers still have a fair chance of getting to exchange.
Worse than that, the second buyers don’t even have the assurance that it is a fair race. If the sellers are still sticking with the first buyers, then they must still want them to be the ones to buy the property. Perhaps (the second buyers may think) they are just being used as stalking horses to encourage the first buyers to a final spurt to the finishing line.
Sellers sometimes want to send out a second contract without telling the first buyers, for fear they will pull out in protest.
But that is not possible. Solicitors’ professional rules forbid solicitors from being involved in draft contracts being sent out to more than one buyer at a time, unless both sets of buyers knew what is going on. This is how the rules work:
Sending out a second contract is usually a mindless thing to do. If the aim is to galvanise a nonchalant buyer into action, then the threat of putting the property back on the market may do it. But if that hasn’t worked, then sending out a second contract probably won’t work either. It means the buyer either isn’t really interested – in which case, ditch him – or he has a problem to overcome – in which case assess the problem.
Suppose the problem is that the lenders’ valuer has been slow sending in his report, or the solicitors are trying to get an answer from the planning department at the council about whether replacement windows installed by a previous owner required listed building consent. You can work out how long it will reasonably take to get the result. It makes more sense to impose a deadline than to send out a second contract. It is better to work with the existing buyers to get them to exchange.Suppose the problem is that the buyers had a property to sell and it has fallen through, so now they have to find a new buyer. In this situation, it is perfectly reasonable to put the property back on the market. When you come up with a suitable buyer, the decision which has to be made is which set of buyers to go forward with, not how to juggle both sets.
Conditional contracts are a way to exchange contracts when there are still things holding up the transaction. Contracts are exchanged in the usual way, but there’s a conditional clause saying that if whatever it is doesn’t come through by a particular date, then the buyers (and sometimes the sellers) can cancel the contract, the buyers get their deposit back, and everyone walks away.
That all sounds like it is depressingly concentrated on getting out of a contract. But the point to hold onto is that there is now a contract to get out of. Once the conditional contract is exchanged, then instead of the usual pre-exchange period when anyone can walk away for any reason, the scope for walking away has been drastically limited. The conditional exchange of contracts means that the buyers can only back out if the particular feared problem is not cleared.
The fact is that the feared problem vary rarely happens. It’s really all about the solicitors being able to stop panicking that there’s a 1 in 1,000 risk there may be a claim on their indemnity insurance. In the real world, the conditional contract is exchanged and then 999 times out of 1,000, the deal is final.
In that ‘one time’ situation, then the parties can go back a step and the solicitors haven’t taken any risks. It’s called ‘rescinding the contract’. The deposit is returned to the buyers, and basically it’s as if the contract had never been entered into in the first place.
These are some typical problems which are handled this way.
You can’t use them in chains. A conditional contract should definitely not be used if there is a chain. Suppose you contract unconditionally to buy your new property, but you enter into a conditional contract with your buyers which allows the buyers to back out if they don’t receive a mortgage offer on the right terms. If that happens, and the buyers then back out of the deal, you would be left committed still to pay the full price for the property you are buying, but without any sale proceeds to do it with. It's too big a risk.
Contract races. Great for sellers. Lousy for buyers. But actually not so great for sellers either. It may lose you your best buyers.
Buyers have to be fairly desperate to agree to a contract race. It costs them big fees if they lose. It puts them under considerable stress, trying to line everything up in time … and they don’t even know what time they have. Even if they are ready to exchange before anyone else, the sellers are still under no obligation to sell to them; they could put the price up, remarket the property, or still go with the slower buyers. So, your best buyers may simply go for another property. Meanwhile, the other buyers may fail to come through.
Giving a good buyer a clear run is usually the better strategy, in our opinion.
Don’t put anything in writing which implies that you will definitely exchange contracts with whoever offers to exchange first. Sellers sometimes don’t go ahead with the people who win the race. They prefer one set of buyers over another, or they decide to remarket the property at a higher price; or they tell all prospective buyers to raise their offers and convert the contract race into a ‘best offers’ bid.
If that happens, aggrieved buyers will be looking for anything they can use to threaten to sue the sellers. A letter from you apparently confirming that you will exchange with the first buyers who are ready will just encourage them. I have not personally come across a case where sellers were successfully sued for not performing their side of a contract race deal, but it doesn’t mean it couldn’t happen.
People don’t always have sensible reasons for delaying exchange of contracts. Some buyers are just naturally indecisive. Some think they ought to buy, but really they would prefer to put it off for a year. Others may be fearful about ‘problems’ the solicitor mentions. They don’t wholeheartedly want the property, but they can’t quite bring themselves to pull out either.
It is easier for them to defer a decision: get the solicitor to ask you some more questions, or go back to clarify some answers.
People like this don’t seem to realise that they will never exchange. Natural-born ditherers need someone to force them to make the decision to commit.
Ultimately, you may have to say to them: ‘We have answered all your questions as best we can. We are not going back again to the landlords / council / neighbours. Take a view on what you have. Exchange. Or we will pull out for you.’
Then you at least know exactly where you are. If they still don't exchange, you can decide to give up on them and remarket the property.
‘Exchange contracts by close of business on Friday or we will withdraw the contract’. That is a typical sellers' deadline.
What is so magical about Fridays? It doesn’t seem to matter whether the deadline is being given on a Monday or a Thursday, the deadline always seems to expire on a Friday. Maybe it is because sellers want to avoid another weekend of anxiety.
Deadlines work if they allow enough time for buyers to sort out whatever is outstanding. But they are a waste of time if it is just the sellers lashing out in frustration and giving deadlines which are unworkable.
If you are going to issue a deadline, you surely must want the buyers to meet it and exchange contracts. If not, then you might as well pull out now, not issue a pointless deadline.
So a deadline has to be issued. But if not for Friday then for when?
To decide how much time to allow before the deadline expires, you have to first work out what is holding up the buyers and how long it should take to resolve it and then exchange.
Those points are really obvious – hardly any need to spell them out, you might say – except that sellers are usually so hyped up and furious when they tell their solicitors to impose a deadline, that punishment becomes a motive and they lose sight of the cool business purpose of achieving a deal.
In my experience, reasonable deadlines usually work. They either produce an exchange, or they prove that the buyers just aren’t going to exchange. There are many buyers who can’t make their minds up to pull out, although in reality they will never proceed no matter how much you do to meet their ever expanding questions and problems. So, it’s good to know and move on.
An unreasonable deadline on the other hand doesn’t work because: