Reform the Home Buying and Selling Process

[KALKI]

Reform the Home Buying and Selling Process

In order to objectively and critically deal with the task at hand, one has to take all three sources of information available; the two reports from the DETR and the government proposal; and dissect them into smaller units. Done that the next process should involve comparing units of similar subjects to one another, starting at the deficiencies, then comparing the proposals of the government to the consultation paper in order to assess to what degree the government proposal adhere to it, or don´t, i.e., which points are left out of consideration, and finally set it against the flaws of the whole selling and buying process, as documented in the research papers of the DETR.

The emphasis that is given from the very beginning is the idea of better preparation by means of acquiring as much information as possible by and for both the buyers and sellers.

The first measure discussed; the seller´s information pack, in a very satisfactory manner adheres to the recommendations made by the DETR. Compared to the research results:

"…Only 8% of sellers assemble their title deeds before accepting an offer. A similar proportion put an information pack together containing guarantees and any past surveys. Only 2% instruct their solicitors to prepare a draft contract."

These flaws could then be abolished, if the seller sticks to the recommendations, and the whole process would have a head start symbolizing initiative on behalf of the seller as well as reduce "…problems in chains of buying and selling". However the government didn´t take in to consideration, the situation described in Section 75, of the DETR consultation papers; where a situation could arise, where although the sellers "had taken all reasonable steps…" but was not able to supply all the necessary information and document in time before announcement to sell a property. This will then delay the process down for the sellers, now if bound by law to do so, could not start at the time he/she thought suitable. This especially would apply in the situation of a seller who would urgently need to change homes for several reasons, might it be work or personal, and time is against him. Also then the process of bridging, where a seller wants to purchase another house, especially a particular house, gets hindered because he did not have the required information or document right in time for his own house to be sold, which in turn makes him acquire a bridging or a chain-breaking loan (although they have lower interest rates) incurring more costs on him. Also by applying for such a loan, he could in turn lose the house he wanted to purchase. Therefore flexibility is not present in the governments proposal, which otherwise would prolong the whole process without even starting it.

Concerning the statement that professional survey of the property should also be included in the information pack, opens up the question of actually who is responsible for paying the survey? It seems quite plausible that in the general interest of the seller; in order to speedup up the process and formulate a more accurate price, he/she should be responsible, however the counter argument would be that the buyer, in order to have self-assurance as well as confidence in the survey should conduct/pay for it himself, because it the end-effect he/she will be living there. Thus there is a thin line separating here, where decision-making could seem hard. On the other hand, if in any stage of the whole conveyance process the deal collapses for any reason down the chain, then the prospective buyer is left with a bill to pay, for which he gets nothing out of. Turning to the section with the preparation on behalf of the buyer; one can see from the results of the research papers that generally they are more prepared that the seller at the beginning of the deal. However still, the word "better" in the government report seem applicable, in cases where only 14% obtain a mortgage certificate and only 50% even consult a mortgage lender before making any offer. Thus half of the buyers in other words don´t really check their pockets before making an offer, which is definitely a mistake. This way there is a higher chance of the whole chain or deal to collapse, as is reported in the DETR paper, where it is stated that around "28% of offers that are accepted fail to reach completion…" mainly due to the sum provided by the lender does not satisfy the price demanded by the seller. In other cases also the financial status of the buyer changes, a situation that definitely cannot be punished by law.

Another aspect of the paragraph that could stimulate debate is the word "encouraged". Thus there would be no strict obligation to obtain a mortgage certificate by law, which in contrast to the many duties and obligation of the seller seems not very fair. If the seller is to be "required to provide" the relevant information and certificates, then why not the buyer as well? It was initially said that the whole process requires action by all the parties involved, while everything here is not equally divided and or defined. Also gazumping could be reduced if buyers were required to know their financial capacity beforehand. The phrase "other preliminary preparation", being ambiguous, leaves the buyer with lots of different things to do for, i.e. make their own survey on the property, which only around 1/10 or more do. Thus the duties of the buyer are not made compulsory, which gives him lots of freedom; a freedom that could jeopardize the whole process of conveyance.

The professionals described in the government proposals, are all put together in one box, which seems inappropriate. Although generally customers are satisfied with their work as a whole, mortgage checks and lenders usually do not require a long period of time for their work compared to the local authorities, which takes slightly longer. Exceptions to the general rules are present, where mortgages offers are delayed as well as delays with solicitors. Thus as recommended by the DETR, these parties should be asked to co-operate with each other in order to ensure smooth running with the whole process, especially in the interest of the consumers.

On the other hand, forcing lenders and institutions to process application faster could lead to possible errors in their calculations due to the pressure which in turn could turn out to be financially "negative" for them. One also has to consider the vast number of applications made in England and Wales and the pressure put on the lenders. Therefore a certain time-span given to lenders as described by the DETR in Paragraph 84-85 seems unadvisable, because dealing with 80% of application in two days might be plausible with certain candidates, however other might take longer time.

By saying that service providers should "adopt service targets" the government could have given more accurate guidance on the rouge outline of such a target and an approximate time span in which to achieve it. Mortgage lenders are given such a target, however yet again, problems as outlined above concerning errors due to pressure could occur.

Yet again ambiguity is surrounded with the concept of "examining the scope for developing 'chain-breaking´ loans rather then the bridging loans". It is correct that being still in the test phase, no law can be passed on procedures that probably might work well in other countries, but could prove difficult to implement in a larger market as that in England and Wales.

The usage of information technology is strongly emphasized by the government as well the DETR, which in this modern era seems very reasonable. However although professional institution might have it easier, the question of access to IT for all customers is not raised. Many people have little knowledge in this field and even now access to these services are limited. Thus some will gain benefits and others might be left behind i.e. be run over by those using IT as a method to increase efficient running of the whole process.

Encouraging insurers to develop insurances such as the ones mentioned, could prove to be hard in cases where gazumping seems to be quite acceptable/understandable i.e. as described by the DETR, where an individual deliberately slows down the process. Here the problem would lie in drawing the line between, who is right or wrong, or even questioning the fact whether or not such a distinction can be made. In the above case, the seller would be gazumping if he offered his property for sale to another buyer other than the original buyer, although the original buyer is really at fault with his/her slow pace, but still could receive compensation, solely due to the reason that he had taken out an insurance against being gazumped.

Concluding one could generally say that the proposals put forward by the government would definitely be successful in the attempt to eliminate or solve some or most of the problems faced by buyers & sellers of property. However it also has to be mentioned that a very strict attitude was taken towards the seller, compared to the measures imposed on other parties involved in the whole process. From the sellers, items and documents i.e. action was "required", however other players in the process were merely "encouraged" or "called upon" to undertake forms of action. This idea of concentration of responsibility towards a certain group, could in the end not ensure a more "faster or efficient process", but probably create more new problems or simply keep the ones started off with.

There has to be a more intense approach made in order to bring all the parties together i.e. in a forum from and in which further decisions can be made. The reason being that only the parties involved can really identify problems facing the whole system and not merely a government document. Therefore improvements in the whole process of conveyance can only be brought about through close co-operation, willingness on behalf of all parties concerned, creation and enforcement of laws that encompass deal with all parties, and last but not least, continuous, but gradual research leading to improvements and implementations of new ideas as well as laws, that are given ample time to develop in the chaotic system of buying and selling property in England and Wales.