Below is a further or 2nd explanation of the new ‘RHA’ or Registered Housing Agent’s strategy using the House Price Virtuoso Solution:
In order to become more even-handed in their dealings, and so be of better service to all of their clients, estate agents must start acting primarily for buyers rather than sellers, instead of only for sellers or vendors.
This means traditional estate agents would need to become involved primarily in searching for and introducing the present seller to their next property (as buyer), as well as assisting in the sale of their existing house (if any).
To do this the forward purchaser’s agent would become the agent that negotiates both the terms of purchase of the next property and the terms of sale of the house to be sold as part of the move. We’re calling these ‘RHAs or Registered Housing Agents’. They would, in fact, be advising the buyer as their client on both finding and selling houses in this explanation.
In order for this to happen, estate agents must stop using sole selling contracts and begin offering agency ‘Moving Contracts’ or ‘MC agreements’ for their clients instead.
This would mean that the primary work of the estate agent (as RHA) would become to locate and then introduce acceptable houses for each buying client, whilst at the same time, retain responsibility for negotiating the sale of the client’s existing property – the one to be disposed of as part of the proposed move but only by acting for a new buyer. One thing this solution can do is to massively reduce the rate of sales chain failures.
To explain how this would work in practice, let’s use the term ‘the subject property’ to mean the house being sold, and the term ‘the object property’ to mean the house to be purchased.
Two new documents would be involved with this new process :
An ‘MC agreement’ entered into by buyers initially just with one agent, or a series of ‘MC agreements’ with different Registered Housing Agents (instead of just having a ‘sole agency selling contract’ with one specific estate agent as generally happens now).
A pre-contract ‘lock-out or reservation agreement’ with a set time duration, during which the vendor of the property concerned could not accept other offers until the specified lapse-time occurs without incurring defined penalties. These would primarily be aimed at the vendor if they should default without just cause, but some form of recompense, payable to the vendor, ought also to be reserved in the event that the buyer was the party that decided to withdraw prior to actual exchange of contracts.
Clearly, all buyers would be advised to ensure that property surveys will first have been carried out and are satisfactory, regarding the object properties being bought, before signing their lock-out or reservation agreements. Having a professional survey is normally advised for most types of residential property being purchased anyway.
Once the whole scenario is fully understood and implemented, these new methods would prove to be self explanatory and perfectly straightforward to follow.
The following is an explanation of the logistics of the process, whilst looking forwards, by going up the sales or lettings chain.
- Vendor 1 sells to Buyer 1 (that’s property 1 of course); with buyer 1’s solicitor doing the conveyancing.
- Then, when Vendor 1 goes to buy forward they become Buyer 2 (of property 2 ); buying from Vendor 2 (with Vendor 2 and Buyer 2’s solicitors doing the conveyancing, as is usual).
- The new bit is that Buyer 2’s solicitor pays the RHA out of funds provided by Buyer 2. (The seller pays no separate fee.)
- Then to progress further up the chain, Vendor 2 becomes Buyer 3 (of property 3); and buys from Vendor 3 (with Vendor 3 and Buyer 3’s solicitors doing the conveyancing, again as usual).
- Once again the new bit is that Buyer 3’s solicitor pays the RHA out of funds provided by Buyer 3: – and so it continues all the way up the chain.
As explained, each separate vendor signs two lock-out or reservation agreements, each one involving buyers of different properties.
The primary lock-out or reservation agreement is with the vendor of the property they have agreed terms to purchase.
The second lock-out or reservation agreement is with the purchaser of the property they currently own and wish to sell.
NB. Under the revised arrangements, no selling agent fees are involved anymore in either case of course. The buyer’s solicitor will arrange payment of the buyer’s RHA fees, on satisfactory completion of the actual sale and purchase – where previously the vendor’s solicitor paid the vendor’s estate agent.
To reiterate, it should be noted, the ‘RHA or Registered Housing Agent’ is always paid on completion by the buyer (instead of by the seller as happens now).
Each agent that was working on the ‘sale’ of each property, would simply be informed, generally by the specific vendor or through their solicitors, when to stop marketing at the appropriate time. That is, after a lock-out or reservation agreement has been signed by them. This is broadly what happens currently, after terms are provisionally agreed by each vendor.
(If deemed important in the particular situation at hand, relevant ‘RHAs or Registered Housing Agents’ could, of course, be asked to endorse the specific lock-out or reservation agreement concerned, for added clarification.)
To explain again, this would mean there will be a need for two lock-out or reservation agreements to be signed by each vendor.
The first with the purchaser of the property that they are in the process of buying.
The second, between themselves and purchaser of the property which they are simultaneously selling.
It should be emphasised however, that each buyer should always sign the lock-out or reservation agreement relating to the house they wish to buy first.
They should sign the lock-out or reservation agreement for the house they are selling second. Both would, of course, generally be signed at the solicitors office, one immediately after the other.
Doing this should not be any more complicated than owners signing the various legally binding pre-contract papers which they currently need to sign.
This process must involve each vendor hearing from and responding to the two different solicitor’s firms involved. It would of course be feasible for their own solicitors to deal with this much as at present.
For a 3rd (or final) explanation of this unique proposal please click on the following link.
Posted by: Peter Hendry, Housing Valuation Consultant
Author:– The House Price Virtuoso Solution
If there remain outstanding questions relating to my proposals I’d be glad to discuss these.