Homebuying: A contract to keep the gazumpers from your door

Homebuyers and sellers could have access to a new contract which reduces the risk of a sale failing as early as next year, according to former head of the Office of Fair Trading, Sir Bryan Carsberg.

Carsberg, who is president of the E-Homebuying Forum, said the organisation is working on a template for a contract that will deter buyers and sellers from welching on the deal before it reaches the point of exchange. "We are looking at providing a lock-out agreement that would, among other things, stop gazumping and gazundering. But it would be voluntary, not a requirement for the buyer and seller to sign up."

The contract would require both parties to continue with the house sale at the agreed price subject to certain conditions: if, for example, the property were found to be suffering subsidence, the contract would become nullified. But if the market suddenly dropped and the buyer wanted to reduce the price, the contract would hold firm and the buyer would either have to continue with the deal at the agreed price, or lose their deposit for withdrawing from the deal.

Carsberg says the size of the deposit would be agreed by both parties at the outset, but would be "big enough to be a serious indication of intent".

The E-Homebuying Forum is also considering how more information about a property can be provided to expedite the transaction.

A pre-offer survey service, provided by the Homebuyer Centre, may do exactly that. The survey, carried out by a member of the Royal Institution of Chartered Surveyors, is designed to enable buyers to feel confident they are offering the right amount for the home they like, and negotiate a discount off the asking price where appropriate.

This reverses the existing process in England and Wales where, once you have found a property, you put in an offer "subject to survey", and then pay for either the basic homebuyer's survey, or the more in-depth building conditions survey, and use the findings to haggle down a price you have already agreed.

According to the Homebuyer Centre's Tim Hammond, the pre-offer survey can be conducted within 24 hours, and takes about an hour. "In practice, the surveyor will go along on the second viewing and then provide a report setting out the list of things that need doing, and how much they expect to be able to negotiate off the price," he says. "If there is interest from other buyers the vendor will know you are serious, as you are presenting an offer based on the full facts of the property."

If the buyer goes ahead with the purchase, the pre-offer survey is free with the cost discounted against that of a normal homebuyer or building conditions survey. If not, the buyer is charged a fee ranging from £150 to £250 plus VAT.

Househunters are also assisted by one of the Homebuyer Centre's agents, who will use his or her knowledge of the local area and property market to further negotiate down the price. Buyers are not charged upfront, and only pay a fee if a discount is negotiated.

"The pre-offer survey shifts the balance of power from the seller to the buyer, and is the perfect antidote to complacent vendors who think their property is worth considerably more than it is, often fuelled by estate agents who have over-valued in order to win instruction," Hammond says.

But not all are convinced. "If you can get the pre-offer survey done fast enough to demonstrate your seriousness, the vendor will view you as the preferred buyer," says Melanie Bien from broker Private Finance. "But there is a danger that while you are waiting for the findings, another buyer could get in there first, make an offer, and get it accepted."

Sarah Beeny, property expert and founder of DIY estate agent Tepilo.com, adds that while it is always a good thing to find out as much as you can about a property before you buy, it's difficult to see how the pre-offer survey would prove advantageous in financial terms.

"Will buyers really want to pay to get a pre-offer survey done on the off-chance their offer will get accepted?" she says. "You also need to be realistic about the actual reduction in price you might get by negotiating on issues raised in the survey, as there aren't many cases where buyers are making vast savings."

Beeny also urges buyers to tread carefully when trying to knock prices down. "There is no hard and fast rule that says you should offer 10% or 20% less than the asking price. The key is to assess whether or not the property is good value," she says. "Many people will be prepared to pay the asking price, so if you refuse to do so you may well lose your dream property to someone who will."

David Hollingworth from broker London & Country adds that while the pre-offer survey means a buyer can back up a lower offer with specific information about the state of the property, it is not dissimilar to the home condition report (HCR) that was meant to have been included in a home information pack.

However, HCRs were scrapped after complaints that buyers would not trust them, and that mortgage lenders would not take them into account.

"The main difference now is that the pre-offer survey has to be paid for by the buyer," Hollingworth says. "But the idea of having to incur costs before you even know if you're in the game is not particularly attractive. I can't see many buyers taking this up."

One of the biggest issues with the house-buying process in England and Wales is the fact there are no guarantees before contracts are exchanged (something the E-Homebuying Forum's contract could address).

"If you have made a successful offer, you can still drop out once you've had the survey done if the results are not favourable," Hollingworth says. "Equally, the vendor can pull out if a better offer comes along, or if they retract from the market. Buyers opting for a pre-offer survey must remember that only exchange of contract will make it binding."

Furthermore, if you've paid for the pre-offer survey and the vendor pulls out, or refuses to lower the price, you also lose the fee you've paid – although the Homebuyer Centre is offering insurance for such an eventuality, at a cost of £39 for cover of up to £600.

Crucially, Bien says that having the survey done before you make an offer won't improve your chances of the seller not pulling out. "As a buyer, the key is to show commitment," she says. "Move quickly and do things when you say you are going to do them, and the seller is far less likely to mess you around."