Categories
Uncategorised

Offers bloody over

My lovely wife and I tried to buy a house the other day. We didn’t get it. Am I bitter about it? Bloody right I am.

Scotland’s system for buying and selling property is different from England or Northern Ireland. There’s one major benefit to our way of doing things: you can’t be gazumped, so when buyer and seller come to an agreement the house is taken off the market and that’s it. Hurrah. However, it has a major disadvantage, too: the practice of selling houses at “offers over” prices.

Normally when you buy things from people, it goes like this:

You: So, how much do you want for this, then?
Seller: Well, I want an impossibly large sum of money.
You: You’re having a laugh! I’ll give you half that amount, and a packet of crisps.
Seller: Nine-tenths and a multipack of Monster Munch.
You: Three quarters and a family pack of Salt’n’Shake.
Seller: I bow to your superior negotiating technique. Done.
You: Done.

It usually applies to houses, too.

You: A hundred grand? Come on! The windows are made of cheese and there’s zombies in the cellar.
Seller: They’re good zombies, and it’s very fine cheese.
You: Eighty grand.
Seller: Piss off! Ninety-five.
You: Will you kill the zombies?
Seller: Yes.
You: Ninety-one.
Seller: Ninety-two.
You: Okay then.

But not, as you’ve probably guessed, in Scotland. With offers over, the process is reversed.

You: So, how much do you want for this?
Seller: Hmmm, well it’s a very nice house. Fifty pounds.
You: I tell you what. I’ll give you A MILLION POUNDS!!!!
Seller: Sorry, but I’ve already been offered ten million pounds and the freedom of the city of Birmingham.
You: Damn you, offers over system! Damn you to hell!

Here’s how the system works: someone decides to sell their house, and the estate agent comes and works out how much it’s worth. The house is then advertised with a stupidly low price that the seller wouldn’t accept in a million years, and people come out to view it. They pay for surveys that tell them the house is on the market at a stupidly low price that the seller wouldn’t accept in a million years, and then they pay their solicitor to lodge a Note of Interest with the estate agent. That’s a legal document that says, “if you sell this house without letting us bid, we’ll sue your ass”. Or something. I’m not good at legal terminology.

With me so far? Okay then. When two or more notes of interest have been filed, the property usually goes to “closing”. That means by a specific time, say noon on Friday, everybody who’s interested in the house gets their solicitor to file a sealed bid. You don’t know how much anyone else is bidding, so you basically have to guess how much the house is worth using the magic offers over formula. If you get it right, the house is yours.

The magic offers over formula is:

* Take the asking price
* Add 10% if it’s not a nice bit of town, or 20% if it is.

Simple. Unfortunately, everybody else uses the same formula, so you have to use the super enhanced offers over formula, which is:

* Take the asking price
* Add 20%
* Guess what the other people might be bidding
* Add a bit more

But of course, everybody else is using that formula too. So you have to turn to the super mega enhanced offers over formula, which is:

* Take the asking price
* Forget the asking price
* Get down on your hands and knees and beg your bank manager to give you a stupidly large mortgage
* Offer all of the money in the world, plus 10%

Stupid, isn’t it? Naturally, we tried that – and we didn’t get the house. The winning bidder paid the asking price plus 45%. Forty-five-fecking-per-cent.

There’s an internet angle to this, honest :-)

Thanks to the internet, we can now see what prices have been paid for houses in a particular street – which means the offers over system creates a bubble. As soon as one house goes for silly money, buyers and sellers know about it; as a result, anyone else in that street wants the same sort of money, and every canny buyer knows that the going rate isn’t 10% or 20% over the asking price, but 45%. And the more people know that 45% is the going rate, the more likely the winning bids will exceed even that.

Not all buyers are canny or web-savvy, though, and as a result they use the basic offers over formula. As a result, the system bleeds them dry: every time they make an offer at 20% over the asking price, they’ve paid their solicitor and they’ve paid the surveyor in order to make an offer that there’s absolutely no chance of the seller accepting. The costs soon mount up: I know of several people who’ve spent months looking for houses, and who have spent two or three thousand pounds on surveys and offers for houses that they had absolutely no chance of getting.

It’s a racket, of course, and cynics would point out that in the property game, many estate agents have very lucrative legal and surveying wings – so some of ’em have a vested interest in getting people to make offers that won’t be accepted. “Sorry, you didn’t get the house!” Ker-ching! “I know! It went for 45% over the asking price!” Ker-ching!

Thankfully, change is afoot and there are moves to make the system less evil – and let’s face it, short of throwing acid in buyers’ faces and giving them wedgies, the current system couldn’t be much more evil – although it probably won’t happen for at least a year. The new system is called the single survey system, and it works like this:

* Seller puts house on the market
* Seller pays for a survey, which is available to all prospective buyers
* Everybody knows exactly what the property is worth

Although I suspect it will probably work like this:

* Seller puts house on market
* Seller pays for survey
* Everybody knows exactly what the property is worth
* Everybody ignores the figure and offers all the money in the world, plus 10%

Hurrah for progress!