Will house prices ever stop rising faster than inflation?

I have worked as a Chartered Surveyor in the property sector from the 70s to the 90’s. During this time I have seen the relentless upwards direction of travel of house prices as related to true affordability, based on general earnings, first hand.

The golden dream of becoming a home owner by purchasing using mortgage borrowing repayable over the next 25 years, was something that was every young family’s ultimate ambition at one time. This has morphed into a nightmare recently. Why?

First of all, landowners have increasingly scooped-up increasing gains on the value of the land involved – by relying on the increased amounts to be borrowed by both first-time buyers and others further up the property chains.

Secondly, the banking and finance sectors have hijacked most of the profit remaining to be found and taken a big slice of it for themselves. In other words those institutions lending capital on mortgages have annexed a greater and greater share of the profits by doing what they think they are supposed to be doing – i.e. advancing increasingly large amounts of finance. More recently, they are now even prepared to increase the mortgage term length beyond the original 25 year repayment period, moving towards 30 years or more, which is highly questionable.

Simultaneously, interest rates, which have dropped to extremely low levels at the moment are enabling buyers to over extend themselves using loans they should not be being advised to take out.

The super-rich, on the other hand, are able to utilise the same unrestricted availability of mortgage finance to outbid the rest, using the collateral they already possess. The difference between the two positions is stark.

Shared ownership schemes (part rent part buy) have begun to appear which further decrease the actual dream of owning a whole building and the plot it is built on, in one’s lifetime.

House prices are being talked-up increasingly by estate agents whose primary interest above all else is to make the sale at the best price possible.

Employment is becoming more uncertain with flexible working hours making earnings unpredictable.

The actual cost of living is going up whilst basic wages are not keeping pace.

The housing market’s core buy-prices are further adjusting to match the described ‘loosening’ parameters. This has tended to happen in the past but the graph is exponential and it is set to continue in the relatively near future because house prices themselves are pegged in a practically unregulated market. In such a heady market, those who will have over extended themselves will, as a result, suddenly find they have a big financial problem.

The more wary amongst potential first-time buyers, are understandably holding back.
Apart from being wary, the main reason for this is that asking price levels of ‘so-called’ affordable housing today, are no longer truly affordable to them.

The only solution to this pernicious problem:- is to lower the buy-in prices of housing for all owner occupation.

How? That is the question?

The answer, as provided by those in the financial sector, is to offer to build more houses to increase the supply so that prices will finally and in theory reduce!

The main flaw in this argument is that it will take many years worth of building new housing (certainly if traditionally constructed), before sufficient numbers of them could push the prices down even a little. In the meantime, builders, landowners and mortgage lenders would hope to be able to carry on making their profits unhindered!
By the time the planned massive building boom will have begun to have had any noticeable effect, the players described will have made all the profits they were hoping to make for themselves!

The other and far more applicable answer would be to make the necessary changes to the way houses are bought, sold and let. Doing this now, alongside building more housing units, is the best and only way to restore the housing economy to sound health once again.

What do you think about this idea for drastically improving the operation of all housing markets potentially across the whole of Britain?

Constructive comments are very much welcomed.

The House Price Solution: devised to resolve the current housing crisis completely

Part 3 of The House Price Solution:

For those who wish this, here is a more detailed description of the new ‘Registered House Agent’ strategy including the House Price Solution:

Firstly from the vendor’s viewpoint:
A. Under the Moving Contract or ‘MC agreement’, the agent would still act for vendors (as now), but instead of merely being a selling agent, would act primarily as their buying agent. In other words, the same agent would find them their next house, ‘the object-property’, negotiate the best terms with that property vendor’s agent (whether that agent has an ‘MC agreement’ or not), and also sell their existing house.

As a follow-up but unlike the existing arrangements, the RHA or Registered House Agent with an ‘MC agreement’, acting for the buyer, would request ‘the object-property’ vendor to instruct their solicitors to sell their property to buyer 1.

At the same time a two party pre-contract agreement called a ‘lock-out or reservation agreement’ would be signed, the parties being as mentioned above but with the option of including, as a third party, the relevant RHA(s) if deemed necessary in specific circumstances.

The basis of each agreement which would be legally enforceable would provide for a set lock-out time, during which the forward vendor (i.e. the seller of the property in question ‘the object-property’) would not continue marketing the property or show any more viewers around it and agree not to canvas for or take any other offers prior to an ‘exchange of contracts’ with the named buyers, providing that this occurs within the agreed time limit.

If the terms of the agreement were broken, the party disadvantaged may seek to claim the sum set down in the agreement by way of damages or compensation.

In addition to bringing more certainty in concluding negotiations between the parties, the effect of this would be to stop (or substantially reduce) gazumping happening in the intervening time. As stated earlier one thing this solution will also do is to massively reduce the rate of sales chain failures.

[N.B. If the agent which happened to secure the best deal for the vendor, both for the sale of their existing property and the purchase of their preferred next property did not already have an ‘MC agreement’ with that particular client at the time, one could be signed retrospectively, or in other words at the same time as the lock-out or reservation agreement was to be signed by ‘the object-property’ owners; and this would effectively over-ride all other ‘MC agreements’ in the same way that a last Will and Testament over-rides all prior wills.]

B. If an existing, or alternatively a new agent were to obtain an offer involving a higher price on ‘the object-property’ – acceptance of this would become subject to the expiration of the pre-contract lock-out or reservation agreement and would merely give the existing buyer of the house in question, added impetus to make sure that a legal contract for the sale of land and buildings was concluded as swiftly as they could do so and within the lock-out timescale. There should be penalties specified in the agreement aimed primarily at the vendor of ‘the object-property’, if they should default without just cause but also in respect of the purchasers. However the opportunity to default if either party wished to would remain, as no contract for the sale of land would yet be in place.

All legal conveyancing would be carried out primarily in the way that it is done at present.

C. In the event that the lock-out time period was unavoidably exceeded or formal contracts for sale were not exchanged within the prescribed time, the pre-contract lock-out or reservation agreement would expire, or lapse.

The owner of ‘the object-property’ could, of course, then carry on using their existing RHA or Registered House Agent, and/or instruct more RHAs, by using ‘MC agreements’, both to find them their next house and sell their existing one – the one that was the subject of a recent abortive sale.

The vendor of ‘the subject property’ however, (i.e. the buyer whose lock-out or reservation agreement has just lapsed), may simply carry on with their search for another suitable property, again using their existing RHA via an ‘MC agreement’, or signing up with additional agents using more ‘MC agreements’ if this should be deemed necessary.

It should perhaps be explained here that existing estate agents with traditional selling contracts would, in the interim period and while these new procedures became fully accepted, slightly confuse the picture until sufficient numbers of estate agents began offering this new and improved service. For this reason a consensus in favour of the necessary change, including Government legislation confirming this would undoubtedly be required.

Secondly looking at this from the buyer’s viewpoint:
1. An estate agent with an ‘MC agreement’ would initially be commissioned by a vendor as above, both to find that particular buyer their next house, ‘the object-property’ and negotiate the best terms they can on that purchase, as well as assist, using a different MC agreement, acting on behalf of a different buyer to conclude the sale of their existing house (if any). Once ready, the relevant agent (or the agent offering the buyer the best overall terms), would request the forward vendor to instruct their solicitors on the terms agreed for sale, as in ‘A’ above.

The successful ‘RHA or Registered House Agent’ would be paid on completion of the combined sale of the purchaser’s existing house and the legal completion of the house being bought, ‘the object-property’, using similar machinery as currently exists with conveyancers.

A pre-contract lock-out or reservation agreement, as explained in the vendor’s example above, would be signed again by ‘the object-property’ vendors, the buyer, and their ‘RHA or Registered House Agent’, if deemed necessary.

As already explained above, this would simply provide for a set lock-out time during which the forward vendor (i.e. the seller of ‘the object-property’) would agree not to continue marketing the property or show any more viewers around it and would agree not to accept any other offers prior to exchange of contracts with the named buyers, provided that this occurs within an agreed time limit. However, as previously explained, there would remain the opportunity to default if either party wished to, as no contract for the sale of land would yet be in place.

As explained above, the primary effect of this would be to stop (or substantially reduce) gazumping happening in the intervening time, by formalising the terms provisionally agreed between the parties which would be an extremely valuable addition.

In other words, unlike existing ‘selling agents’, the RHA or Registered House Agent with an ‘MC agreement’ would be primarily helping the buyer to find their ‘object-property’, and would assume responsibility for both transactions, but importantly, they may also sub-contract out the sale of the existing house to other RHA or Registered House Agents if this should prove to be necessary, e.g. where the RHA concerned is not active in the area in which the existing property is located.

This would mean that the active RHA or Registered House Agent with an ‘MC agreement’ would have had to have found a buyer for the house being sold (‘the subject property’) before they could conclude a deal for the forward purchase ‘the object-property’. This, of course, should happen in the normal course of events, in most cases, anyway but currently it does not always.

2. Again, if any other agent should attempt to contact the owner, or the owner’s ‘RHA or Registered House Agent’ handling the purchase of ‘the object-property’ with a different offer worth considering, they would be told the house is currently sold, (subject to contract), of course. An agreed pre-contract lock-out or reservation agreement with a set time duration would be running, such that the vendor of ‘the object-property’ could not accept other offers prior to exchange of contracts. As already explained this is designed to stop, or substantially reduce, the occurrence of gazumping within the agreed time-scale but would not be an actual contract for the sale of land so would be straightforward to have executed.

As a result, any new estate agent (even one with an ‘MC agreement’), may still offer a higher price – making the offer subject to the expiration of the existing lock-out or reservation agreement. Again, this would merely give the existing buyer more impetus to make sure a legal contract for the sale of land and buildings to them was concluded as swiftly as they could do that.

3. In the event that the time was exceeded and the lock-out period expired or lapsed, ANY estate agent, as long as they are a licensed RHA with a buyers MC agreement, may then legitimatelytry and finalise acceptance of a new offer and if they did so, new terms with new people would then be substituted. Under these circumstances it is easy to see why having an effective lock-out or reservation agreement would help the performance of the housing market as a whole, primarily by setting down agreed time-scales for the progression of conveyancing under the terms of the offer.

Assuming the new introducing agent was working for a different or prospective buyer but still via an ‘MC agreement’, then again a new pre-contract lock-out or reservation agreement having a new lock-out time provision would be executed with the new purchasers (to replace the expired one).

Obviously in these circumstances the earlier purchaser would, by that time, have lost their rights to conclude a purchase of that particular property.

The following is repetition from the previous page giving the explanation of the logistics of the process, whilst looking forwards 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.

NB. No selling agent fees are involved anymore in either case.

In each case, it should be noted, the ‘finding’ or Registered House Agent is paid on completion by the buyer (instead of by the seller as has happens up until now).
The agent which had been working on the ‘sale’ of each property would be told when to stop marketing by the vendor at the appropriate time (as happens currently).

In essence this means that the agent doing the selling, only has to market ‘the subject property’.

After a buyer is found, it’s the buyers agent that would do all the ongoing work, including managing each purchase through to completion – instead of the selling agent as at present.
Except when the transaction involves only a sale, it’s the buying agent that gets paid the fee.

If the transaction is purely a sale, arrangements would need to be made, via the vendor’s solicitor, for that agent to submit his account and be paid – in a similar way to the historic arrangements.

The Effects:
In the above situation it is then possible for the ‘failed’ buyer to conclude a deal to buy a different house using either the same (or a different) ‘Registered House Agent’ using ‘MC agreements’ with whomsoever they appoint as agents.
Flexibility for each buyer is thus is significantly increased.

Once terms have been provisionally agreed on a different ‘object-property’, and they have a purchaser for their own house, they could again arrange for a pre-contract lock-out or reservation agreement to be executed for that property.

This new method of securing an offer on a house should mean increased choices becoming available for buyers, because each buyer would have increased access to more estate agents, as licensed RHAs, helping them to find suitable properties.

It would also enable buyers to make final decisions based on the very best opportunities currently available, both in regard to the selling of their existing house and in regard to the purchase of their preferred next house. As just explained, this would be accomplished by enabling buyers (if they should think it necessary) to appoint multiple estate agents, as licensed RHAs, to work for them in their search for the property that best suits their requirements.

By freeing up buyers in this way, the housing market would start functioning more like a perfect market than it has in the past. This would be of considerable advantage to all the players involved – both business-wise, and by increasing the choice of property for buyers.

Essentially, the only thing that an estate agent, as licensed RHA, would not be able to do, using ‘MC agreements’, would be to act solely for a vendor of course, and this is the primary change which I advocate should now happen.

I accept that ideally this would require the government of the day to give it their backing, if (and as is most likely) traditional estate agents are reluctant to make such a change themselves. It should be stressed however, that the advantages for such estate agents, as licensed RHAs, would seem to me, patently to outweigh the disadvantages by a very considerable measure.

[As an aside, there would need to be a retained flexibility for those vendors without any forward purchasing intentions to sell without having to use a new ‘MC agreement’ and instead merely use an estate agent as a free selling agent by allowing buyers and their RHAs to enquire after the property – as happens at present. However for this to work, there would need to be a provision in agency law that if a later ‘MC agreement’ were signed by the same client it would take precedence over a traditional sole or multiple agency selling contract and that the latter would be superseded by the former.]

Unlike the plan to build large numbers of houses very quickly, which is doomed to fail in the short-term because of the logistics of building them, this improvement to the way in which the housing market functions could be made very swiftly indeed.


TV programs such as BBC 1 Panorama’s ‘The Great House Price Bubble?‘ investigating the pros and cons of ‘Help To Buy’ mortgage guarantees, screened on Monday 11th Nov. at 2030hrs, and Channel 4’s Dispatches ‘The Property Market Undercover’ the week before, have recently investigated the current situation and found continuing serious misfeasances in the way that houses are sold. Since we are still in the aftermath of the worst financial crash since the 30’s, with interest rates still at rock bottom, it’s only right that something fundamental and of significance should be done to change and improve the operation of the housing market.

But why?
Let’s look at the following extracts in the news following the 2008 financial crash:

Seen 11 Nov 13:
www.estateagenttoday.co.uk/news_features/House-prices-in-astonishing-leap-across-country-claim

Seen 14 Oct 13:
www.estateagenttoday.co.uk/news_features/Brian-Murphy-Blog
“In the period 1997 to 2007 significantly more than a million housing transactions took place each year in England & Wales. In the period 2008 to 2012 the number of transactions has not been above 662,000 with numbers averaging 640,000 over the last five years.” These numbers quite clearly demonstrate how constrained the market has become, with many would-be borrowers citing the inability to save the level of deposit required by lenders as their primary reason for not entering the property market.

Increased borrowing arrangements have come on-stream since the 2008 recession and these have contributed to a rise in average prices, which is accelerating ahead of net wages increases. This is continuing to be of concern.

Seen 22 Feb 17:
www.gov.uk/government/uploads/system/uploads/attachment_data/file/592364/UK_Tables_Feb__cir_.pdf
The seasonally adjusted figure for residential sales completions to Jan 2016 (prov) was 1,231,400 with a broadly similar number of sales completions for the 2017. The uplift in House prices recently having been seen may be fairly attributed to excessive bank finance, with the resumption of more lending following the 2008 financial crash and which is, in my opinion anyway, a primary cause cause the housing markets to start overheating yet again.

What could existing estate agents do better?
Much – based on the explanations above.

For a glimpse of some of the current and ongoing problems associated with traditional estate agency, please see the following links, which will open in a new tab or window. These would all be resolved by estate agents becoming licensed RHAs, using ‘MC agreements’ instead of ‘Selling Contracts’.

Also seen on 17th November 2019:
Our Prime Minister was giving an election speech at the CBI conference. Statistics cited in a question to him indicated that house prices for first-time buyers are running at 8 times average annual wages. The question was whether the Conservative government’s housing policy is about affordable housing for all of our workers?
The answer given did not fully address this and therefore this continues to give rise to increasing ongoing concern.

So, what should be done?
Recognise that there are problems with the knee-jerk reaction simply to build more houses. The problems are twofold.
Firstly, as we all know, to build substantial numbers of houses takes time. This needs ‘forward’ planning. It simply cannot be done in an instant, or even in a year!

In peacetime (i.e. whilst our country is not at war with another), residential planning consents should be delegated to all local town or parish councils for them to determine, depending upon local housing need.

This way, genuinely democratic decisions may be arrived at using local decision-makers whom are best able to understand what the current needs of the community are at any particular time. 

It is unreasonable to expect those making decisions about local housing quotas centrally, to be able to understand what is best for each town or parish when it comes to deciding residential land use and development. A change in this particular regard should therefore be considered for debate at government level.

The different local housing markets could be brought to balance and price levels better able to reflect local demand for housing, more appropriately.

The other necessary change would involve making housing markets operate more efficiently than currently happens, by requiring estate agents to work for buyers rather than being able to work for both buyers and sellers as happens currently.

As a retired residential property valuer I remain convinced that if democratically elected local councillors were to be granted full authority to decide local residential planning applications, the effect of this could resolve the whole housing crisis.

Decisions made by such elected representatives would not be based upon NIMBYism ‘Not In My Back Yard’; quite the contrary!

Instead it would be a question of ‘IN My Back Yard’, as these councillors would be representing the wishes and needs of the local community – not simply trying to resist necessary change!

There could be no finer outcome than this, especially where residential property is concerned, because with this solution these councillors could work to actually resolve the housing crisis which we are now all being affected by, particularly owing to its increasing severity.

Secondly, however many houses are quickly built, they will only form a tiny percentage of the total number of houses already available and so can only have a tiny affect by lowering the prices being paid for them. Doing this will not therefore resolve the problem.

Instead, the way to improve the market and in so doing, get fair prices for all is to change ‘the way’ houses are currently marketed by improving current methods.
The methods used by estate agents nowadays, have been used for several decades, without change, and understandably now require careful reform.

Unlike the plan to build large numbers of houses very quickly, improving the marketplaces could be done very swiftly.

I forecast that by replacing traditional estate agents’ selling contracts with MCs, turnover in the housing market would quickly start to recover and the direct result of this would be, more builders starting to build more houses, as there would then be a ready market for these.

Some Earlier Quotes:
housing-minister-role-is-relegated-to-a-junior
Richard Lambert, chief executive officer of the National Landlords Association, said among other things:“It is extremely disappointing to see The Coalition reduce the significance of housing within Government. Given the significant challenges facing households throughout the country, it is essential that housing takes centre stage in the political debate.” We agree.

Help-to-Buy-second-phase-opens-to-business
And Andrew Tyrie, chairman of the cross-party Treasury Select Committee, said that ministers had failed to allay its concerns about the housing market. He warned that with the “chequered history of government interventions in residential property, great care will require to be taken”.

Also, ‘Help to Buy’ was labelled mad and “very dangerous” by the Institute of Directors.

I do agree with this remark too, which then begs the question:
“Exactly what should be done, by whom, and when by?”

The answer clearly is: – The present government should bring in ‘Moving Contracts’ or ‘MC agreements’ to replace ‘Selling Contracts’ before the next General Election.

Here’s food for thought?
It’s definitely within the grasp of top estate agents to permanently improve the UK housing market themselves. But why don’t they?

The above work employs a new concept in economics called Market Design. This is a relatively recent area of economics.
It has the potential to utilise established economic theory to rescue the British housing market.

It involves asking the question: ‘What is our goal?’
Its goal is to develop a way to make housing markets throughout the UK more inclusive, so that new buyers can further increase home ownership everywhere, as opposed to large numbers of people continuing to rent whether by choice or otherwise.

The ‘designed’ change would be to make estate agency operations within the housing sector become oriented towards listening to every buyer’s requirement so that those owning property can more easily both buy and sell when moving between two properties, by getting both transactions to happen in a synchronised way.

I’d certainly be interested in your thoughts and observations and would be happy to publish any that are constructive.

Thank you for reading this detailed proposal. Please send in any comment or suggestions you may have for moderation and publication.

If you should like to review the beginning of this detailed proposal please follow the link below.

Back to initial explanation:

The House Price Solution

How to Improve all local housing markets across England and Wales

Posted by: Peter Hendry, Housing Valuation Consultant
Author of:– The House Price Solution (otherwise known as The Hendry Solution).


Bibliography:
Earlier online articles involving discussion amongst estate agents, which illustrate the problem generally.

www.estateagenttoday.co.uk/news_features/House-prices-in-astonishing-leap-across-country-claim

www.estateagenttoday.co.uk/news_features/Mortgage-lending-the-highest-in-five-years-says-Bank-of-England

www.estateagenttoday.co.uk/news_features/New-Get-A-Move-On-campaign-aims-to-shake-up-home-buying-and-selling

www.estateagenttoday.co.uk/news_features/Dodgy-estate-agency-practices-put-under-spotlight-in-TV-programme

www.estateagenttoday.co.uk/news_features/Asking-prices-up-again-as-property-supply-dwindles

www.estateagenttoday.co.uk/news_features/Shelter-calls-on-ministers-to-rethink-Help-to-Buy

www.estateagenttoday.co.uk/news_features/Talk-of-a-housing-bubble-is-hysteria-says-think-tank

www.estateagenttoday.co.uk/news_features/New-OFT-guidance-issued-on-definition-of-estate-agents

www.estateagenttoday.co.uk/news_features/Sarah-Beenys-private-sales-site-Tepilo-to-relaunch-as-online-agent

www.estateagenttoday.co.uk/news_features/A-tale-of-two-Britain-in-bipolar-housing-market

www.estateagenttoday.co.uk/news_features/Estate-agents-are-an-army-of-invaders-who-must-be-stopped-says-Cable

www.estateagenttoday.co.uk/news_features/RICS-call-to-cap-house-prices-is-shot-down-in-flames

www.estateagenttoday.co.uk/news_features/Second-steppers-still-stuck-in-first-homes

www.estateagenttoday.co.uk/news_features/Supply-plummets-in-London-property-drought

www.estateagenttoday.co.uk/news_features/Housing-market-recovery-threatened-by-low-volume-claim

www.estateagenttoday.co.uk/news_features/Asking-prices-hit-their-highest-ever-says-Rightmove

www.estateagenttoday.co.uk/news_features/Estate-agents-and-surveyors-beg-to-differ-on-state-of-market

End of explanation.

What do you think about this idea for drastically improving the operation of all housing markets potentially across the whole of Britain?

Constructive comments are very much welcomed.

The House Price Solution: devised to resolve the current housing crisis completely

Part 2 of The House Price Solution:

Below is a further or 2nd explanation of the new ‘RHA’ or Registered House Agent’s strategy using the House Price 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 House 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 House 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 House 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 House 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.

Part 3 of The House Price Solution:
For a 3rd (or final) explanation of this unique proposal please click on the following link.

The House Price Solution 3rd (or final) explanation

Posted by: Peter Hendry, Housing Valuation Consultant
Author of:– The House Price Solution

If there remain outstanding questions relating to my proposals I’d be glad to discuss these.