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Government looking at ways to tackle 'gazumping' and restore trust in home buying process

The government has begun a call for evidence on ways to make the home buying process in England and Wales "cheaper, faster and less stressful" for those involved, and to rebuild trust and confidence between sellers and buyers.25 Oct 2017

It is seeking views on a number of issues including ways to tackle 'gazumping', which describes the practice of a seller continuing to market the property and accepting a higher offer from a new buyer. The government favours increasing awareness around and the use of reservation contracts and 'lock in' agreements, rather than an outright ban, according to its paper.

The government has also proposed encouraging sellers to pull together more information in advance about the property to ensure that it is 'sale ready', as well as looking at ways to digitise the purchase process. This would not be intended to "[add] extra work for buyers and sellers or see a return to Home Information Packs", but could instead require sellers to provide potential buyers with information about property boundaries, outstanding disputes, service charges or ground rents before an offer is made.

Government research published alongside the report showed that 46% of sellers had concerns about a buyer changing his or her mind after making an offer, while 32% of sellers and 28% of buyers were dissatisfied with the solicitor used by the other party. While the research did not find high levels of actual gazumping, the practice was a concern to 16% of buyers overall and of particular concern to those in areas such as London.

The consultation is the latest such exercise by the government aimed at fixing the 'broken' housing market, following the publication of its white paper on housing in January. It follows recent proposals to address abuses of the leasehold system, new protections for renters and a crackdown on unfair practices by managing agents.

Communities secretary Sajid Javid said that the government was "determined to take action" to improve the home buying process.

"We want to help everyone have a good quality home they can afford, and improving the process of buying and selling is part of that," he said.

As many as one quarter of potential house purchases fall through in England and Wales each year, at an average cost of around £700 each to both sellers and buyers, according to the government. As around one million homes are bought and sold each year, this could amount to "hundreds of millions of pounds spent on failed transactions", it said.

According to government research, the "real lack of trust between buyers and sellers" can lead to people assuming the worst if there is an unexpected delay in the process, or if the transaction is taking longer than they were lead to expect. Although the Land Registry and others are making changes to their practices to help buyers and sellers better understand the process, the government wants to explore ways in which buyers and sellers could be encouraged to disclose more information about their circumstances and intentions or to enter into contractual agreements committing them to proceed.

The government is also seeking ways to improve the purchase process for buyers of leasehold properties and new build properties in particular, in recognition of the specific concerns these types of transactions raise. This could include requiring management agents and freeholders to respond to inquiries within a fixed time period, capping fees or standard mandatory forms for leasehold transactions; and helping purchasers of new build homes quickly secure a mortgage offer so that they can meet developer deadlines.

Other proposals set out in the paper include banning or improving transparency around referral fees paid between estate agents, solicitors and mortgage brokers; and allowing solicitors to act for both sellers and buyers, as is already the case for licenced conveyancers. The government is also keen to explore ways to innovate around the property search and conveyancing stages of the home buying process, to reflect the ease with which purchasers can search for a new home online.

Speaking on the BBC's Andrew Marr Show at the weekend, communities secretary Sajid Javid signalled that the government could make announcements around housing in the Budget next month. He said that the government should be considering whether it could "take advantage of some of the record low interest rates that we have" in order to borrow more to invest in the infrastructure that leads to new housing.

However, chancellor of the exchequer Philip Hammond later denied that borrowing to fund housing investment was government policy in response to a question from Liberal Democrat leader Vince Cable in the House of Commons.