Padraig Hyde & Sons,
Auctioneers, Valuers & Estate Agents,
Property Management & Maintenance Services.
117 North Main Street, Youghal, Co. Cork.
TEL: 0818 555 700
 024 - 91355

Reform of the property market

{ Posted on Jan 29 2014 by admin }
Categories : General

An interesting article in the Sunday Independent of 19th January commented on the reappearance of gazumping in the Dublin housing market, especially in on-demand areas. Gazumping is the practise whereby a Vendor accepts a higher offer from a bidder despite having already agreed to sell the property at a specified price to another bidder. Of course, being Ireland, gazumping is perfectly legal and estate agents can be caught in a trap – they have a legal duty to submit offers to the Vendor even where the property is already sale agreed. Usually, the standard practise is to halt viewings and marketing on a property once it is sale agreed but that does not stop previous viewers from ringing and submitting offers even after being told the property has gone sale agreed. Gazumping costs people money and time – purchasers may already have hired engineers and solicitors to undertake work and then be lumped with subsequent bills when the Vendor engages in gazumping.

Of course, it is not uncommon either for Vendors to experience frustration having accepted offers from a bidder who subsequently withdraws having experienced a change of mind.

It’s a commonly frustrating area of the market for buyers, sellers and estate agents alike when agreed sales fall through. But being Ireland, the laws are lax in this regard. Other countries have varying degrees of control on the sales market with some such as Scotland experiencing far fewer gazumping issues owing to their legal and property system – house surveys are often done prior to submitting offers and offers are submitted and accepted in writing, forming the basis of a legal contract. In addition, should a solicitor know of a client (Vendor) who attempts to gazump, they will refuse to act on their behalf as this constitutes professional misconduct by the Solicitor concerned.

In the US, offers are also submitted and accepted in writing with a specified period of time to complete house surveys for example. Sellers may also have a specified ‘cooling off’ period during which time they may back out of an agreed sale. Whilst each state varies in its property laws and systems, written contracts of offer and acceptance would be the norm across the US, providing the basis for a legally binding contract.

However, to reduce instances of gazumping and collapsed sales in Ireland, some reforms could be introduced.

For example, to quicken up the sales process, a ’sales pack’ could be prepared before placing a property on the market showing its marketable title, BER cert etc. In some countries, this can also include a structural survey of the property as well. The result is that buyers have full knowledge of a property prior to placing any bids or ‘bidding blind,’ reducing the chances of a collapsed sale owing to discovering these issues thereafter. Alternatively, a 14 day period for structural surveys from acceptance of an offer could be instituted with Vendors having the same 14 day period as a ‘cooling off’ period.

A reform of the offers system could be instituted with some minor reforms already having being introduced. The Irish Property Regulator for instance has published a mandatory form for estate agents to record all offers made on a property and which must be retained on file. Yet this does not solve the problem of gazumping or collapsed sales. Therefore a system of written offers and acceptance could be introduced as in other countries, specifying inspection periods, closing dates and acceptance terms thereby forming the basis of a legally binding contract. Such forms would have to be signed by bidders and sellers alike.

Other proposals could include deterrents – in an instance of gazumping for example, the Seller could have to refund any survey or legal costs already incurred by a bidder on the basis that their offer had been accepted. An ‘exclusivity period’ could also be introduced barring sellers from accepting offers from others during a specified period of time and giving purchasers a set time frame to organise surveys and financing for example. Or to reduce the numbers of collapsed sales, a non-refundable deposit of 0.25% or 0.5% of the purchase price could be introduced after 14 days of a purchaser receiving contracts for sale, allowing them time to complete house surveys and their Solicitor to review title deeds.

Of course, any number of reforms could be introduced all with their own advantages and disadvantages. Whilst the recent property market crash has alleviated instances of gazumping around the country, any recovery could also reintroduce the practise. A more thorough reform of the property market however would help to alleviate many of the common frustrations experienced by buyers, sellers and estate agents alike when it comes to gazumping and collapsed sales or purchases.

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