Posted by: housingdabble | March 2, 2011

Can “Goodwill” hold a sale together?

The recent telegraph headline “Gazumping makes a comeback in London” may just be the standard article used after a positive new years start to the London market, but the reality is that the lack of real commitment from either party right through to exchange of contracts leaves the UK system wide open to this practice.

When talking to estate agents I’m told there has been an increase in the timescale from sale agreed to exchange of contracts and obviously a longer timescale increases the likelihood of sales falling apart.

Over the last few years there have been numerous debates over the problems with HIPs and the UK system in general, but what action can be taken by agents right now, without the need for government legislation, to improve the process for all parties?

One agent that has taken action is London agent Greene and Co, who have introduced their own Goodwill Charter. When you hear the results I think you’ll be surprised that more agents haven’t followed suit.

The Goodwill Charter, devised to encourage fair play, is legally binding and requires both buyer and seller to pay an agreed amount (usually £1k) into a pot to demonstrate their commitment to the deal. It’s not the amount of money that seals the commitment, but rather the fact that both parties have openly acknowledged the importance of seeing the deal through.

It has stopped Greene and Co’s abortive sales by half – yes half – and makes sellers and buyers honour fair play and decency by not allowing them to enter into sales processes they have no intention of honouring. They have also seen a significant reduction in the amount of Gazumping and have no doubt used it as a tool to attract vendors based on an increased certainty of the deal going through.

It’s a fairly simple solution, that increases the number of sales that complete and I think it shows that we can find ways of improving the process without having to rely on the government to act – Hat’s off to Greene and Co.

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