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Call to End Scottish House Bid Anomaly 2007-09-09

Posted by clype in Money, Scotland, Statistics.
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Scotland’s house-buying system needs to be reformed to end the use of ‘secret bids’, according to Scottish Nationalist Party MSP for the West of Scotland, Dr Bill Wilson, who has lodged a motion at Holyrood asking for ‘The Scottish Government’ to change the way people buy homes.

He wants houses to be sold for a ‘fixed price‘ — or for buyers to be aware of the value of any rival bids for a property (‘open bids‘).

Mr.Wilson said he has taken action after been contacted by a couple, who were both university graduates with full-time jobs, but were still unable to buy their own home. He said:

‘I am most conscious of the difficulties faced by those trying to buy their first homes, although everyone buying a house is affected.

‘We should look at how other countries deal with this issue.’

He said the system of secret bidding was extremely stressful, with successful bids possibly 20 per cent to 40 per cent over the asking price. Mr.Wilson added:

‘There is no other significant purchase the average person will make which involves secret bids.

‘There is surely no reason why bids could not be open but anonymity retained.’

The merits of Scotland’s housing market are a matter of perspective.

To the seller the ‘offers over’ system allows homeowners to engender competition and gain the highest price possible.

But buyers face a ‘blind auction’ if a property goes to a ‘closing date’. The prospect of losing out, and money spent on a survey, is real.

All are in agreement the strength of the market lies in a quick, binding contract that prevents ‘gazumping’.

In the last year, house prices in Scotland have risen by 11.1 per cent. The average price of a home now stands at 130 681 GBP.

A recent report by mortgage lender Halifax found house prices in Scotland had increased by 110 per cent in a decade.

Like the system elsewhere in the UK, the buyer knows what the seller wants. The person who makes the first acceptable offer wins.

This system is open to market forces, creates competition and aims to get as much money as possible for the seller.

The offer can be anywhere between 5 per cent and 50 per cent above the asking price — depending on the strength of the market and the buying power of the purchaser — and is often above the survey price.

Skilful negotiation can secure a house early. But others go to a closing date if more than one party is interested. You submit an offer and wait and see if it is enough.

Mr.Paul Murphy, of ‘Personal Estate Agents’, in Shawlands, Glasgow, is Scotland’s Gold winner in the UK-wide Estate Agent of the Year Awards. He and his business partner, Mr.Cliff Dunn, have more than 40 years’ combined experience in the business. Mr.Murphy said:

‘In Scotland, the property is offered below what you expect to achieve to attract offers and bring in competing buyers.

‘For buyers, it is difficult, for first-time buyers, it is very tough.

‘But the deal is done when the offer goes through.

‘Elsewhere in the UK, it can fall at any time. A lot of people admire the Scottish system because of its strengths.’

Mr.Dunn said the system was ‘open to market forces’ and elsewhere you simply get the asking price, or below it.

‘The system is designed to be advantageous to the seller, that is what keeps the market buoyant,’ he said.

The offers over system has left estate agents open to accusations of setting artificially low asking prices to create competition.

‘We go with market forces, we are not dictating it, we must follow that system,’ said Mr.Murphy.

Solicitor Mr.Kenny Hill, of ‘Campbell and Sievewright’, has 16 years’ experience. He described offers over as unfair and pretty grim.

‘Some estate agents set out to unfairly draw in people who shouldn’t be drawn in,’ he said.

‘People are interested who can’t afford it and pay for a survey.

‘It is a highly corruptible system.’

He described the system elsewhere in the UK as fair — the seller knows what the buyer wants and whether or not they can afford it.

The key strength, said Mr.Hill, of the Scottish system is achieving a binding contract at an early stage — often within weeks of an offer.

‘In [England & Wales], you have no control, there is no binding contract and the system is fundamentally flawed,’ he said.

‘Gazumping means you can put in an offer and someone can come in with a higher offer.

‘That couldn’t happen in Scotland.’

While estate agents and solicitors disagree on the strengths of the Scottish system, they are agreed on its future.

Mr.Hill said the market is sustainable.

‘I’ve never heard of a crash in Scotland’, he added.

Mr.Murphy described Scotland’s approach as sensible, he said:

‘I don’t think it will crash, we don’t see boom and bust here.’

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