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.
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?
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!
0 responses to “Offers bloody over”
Of course, you’ll love that system when it comes to selling your west-end des-res.
English friends of mine marvel at the wonders of our system.
There’s also the wild card factor to these things. I remember my sister selling her flat in Hyndland (which my father had berated her and her, then, new hubby for spending the ridiculous amount of Â£48K on). She kept saying how much she wanted the lovely newly-wed couple to get it, if they’d offer what was being looked for (can’t remember). Then the single doctor that worked in Gartnavel and had saved a whopping huge deposit over the years offered over Â£100K. Needles to say, fuck the newly-weds.
> Of course, you’ll love that system when it comes to selling your west-end des-res.
Heh. I don’t think it’s as silly where we are: there are lots of flats selling all the time, so it’s not a hotspot like Hyndland or whatever.
I think the best way to deal with the system is to talk with the owner before it goes to closing, so for example we looked at one the other day and had a chat, asked the owner what they were looking for and decided whether we wanted to pay that much. We didn’t (it wasn’t the right house) but it’s a much more sensible way of doing things. Sealed-bid closings are just ridiculous.
I think one of the other problems is that the sort of places we’re looking at, people don’t tend to move out unless it’s in a box. So you’re dealing with executors, and that means sealed bid time.
> English friends of mine marvel at the wonders of our system.
The lack of gazumping is a real plus, that’s for sure. Not having The Chain is a brilliant thing.
> Needles to say, fuck the newly-weds.
Of course. However, if I’d reached a handshake agreement with someone I’d stick to it. Which is probably silly of me.
>>However, if I’d reached a handshake agreement with someone I’d stick to it. Which is probably silly of me.
Nah, when I bought my flat I had to let my solicitors get all solicity on the vendors ass for trying to renege on a verbal agreement.
My point being that it’s not silly, they do chase up gentlemen’s agreements
That’s another thing that’s unique to scotland, isn’t it? Enforcing verbal contracts, I mean.
Yep, a verbal contract is legally binding in Scotland, while the English have a saying, “A verbal contract’s not worth the paper it’s written on.”
The other thing about offers over is that the agents refuse to value your house properly to discourage you from selling at a fixed price. When we sold, the agents were telling us “Oh, it’s worth somewhere around 60, 65 or so, but could go as high as 80 on a good day.” So, of course, we’d have been lunatics to go for fixed price, as that would have ruled out the 80 possibility. Thing is, as I now realise, there was never any hope in hell of it getting 80; that was just the agent making sure we sold at offers ovwer. What did we get? 63. Which was great. But we’d have sold quicker if we’d put it on at a fixed price of 65, and probably have ended up with the same amount.
Yep. It’s a mess.
I too am in the process of tryign to buy my first home…
ive found one, its the houe of my dreams..
my dilemna, its on at offers over!!!
what to do…???
ive taken all the advise i possibly can, ive had 2 viewings
1st one i fell i nlove, 2nd i checked for faults and practicallity etc..
i noted my interest
realised there were 4 other notes of interest, so quickly arranged a survey
paid for it!
the closing date is looming…
now someone else has gone to survey so i know im up against at least one other when the dreaded day finally arrives when i have to put in my offer.
my only hope is that i am not in a chain, mortgage is in place basically im ready to rock!
surely in this day and age when it is so hard for 1st time buyers to get onto the property market our sytem could change to a fixed price.
how easy would that be…how brilliant would that be…
everyone knows exactly where they stand !!!
would also save me forking out fortunes for properties that i loose out on for the sake of Â£100 !!!!!
woudl save on all the sleepless nights stress and worry !
so far to date this is the 12th house i have gone for,
with any luck this may be the one
keeping everything crossed, fingers toes, eyes & legs !!!
its all i can do !!!
so please spare a thought, and say a wee prayer for me
hopefully this time!
:(( plz plz plz this time
> surely in this day and age when it is so hard for 1st time buyers to get onto the property market our sytem could change to a fixed price.
It’s not the system that needs to change: you can already sell a house at fixed price in Scotland, and many people do. The problem is that estate agents tell their customers that they’ll get a better price through offers over, which is not usually true. Someone should consider challenging an estate agent under anti-fraud legislation over that, but it’d be a hell of a court case.
Best of luck. If it’s any consolation, my Glasgow flat was on at offers over Â£27995 (this was 1997) and they accepted my offer of Â£28000.
lost out again !!!
:((boo :(( hoo :(( boo hoo
unbelievable, and i bid way over the odds in the hope that i may be succesful this time !!
20% over my ass… try 30,40 or 50% even more, over the asking price!!!
ah well, here we go again…
got 5 viewings lined up for this weekend! joy !
i know that we have a fixed price system available, but so few vendors use it.
as you said, because the estate agents are conning their clients into the offers over way of thinking!
another thing that i think i would like to see change is the survey system we have.
yes at the mo you can buy into a survey, but its costing just as much to buy a copy of one, if the person who went to survey, doesnt put a block on it! so who’s really winning here… well the surveyours of course !!!
i thought there was a plan that the vendor was to be the one to have the survey done, as then show it to all the potential purchasers???
maybe im wrong, but it sounds like a bloody good idea if you ask me !!!
anyhoo the hunt goes on….
wish me luck
keep you posted !!!
I have the best story of them all….. A man walks in a Estate Agent’s office and puts his flat for sale, I offer a ridiculous amount of money for it, very happily he verbally accepts my offer with an entry date 6 weeks ahead. 3 days before the entry date, my solicitors realise the written acceptance of the offer hasn’t arrived yet, neither the title of deeds for the property! After countless calls to the seller’s solicitors they “suddenly” realise the man is NOT the owner of the flat, but his daughter. And she refuses to sign the paperwork.
So as they never signed the contract I can’t take legal action against them, regardless of the fact that me and my child are now left homeless.
I love the Scottish system…..
To be fair, that’s the very thing that happens a lot less under the Scottish system than the English. In England (and Northern Ireland), that can happen to you when both sides have done everything by the book. In your case, your solicitors were seriously remiss for not getting the contract signed earlier.
> 3 days before the entry date, my solicitors realise the written acceptance of the offer hasnâ€™t arrived yet, neither the title of deeds for the property!
I’m not a lawyer, but I’d be surprised if you didn’t have a case for suing your solicitors. Without those two basic vital things in place, what the hell were they doing for five weeks? Why didn’t they warn you earlier? If your solicitors aren’t there to protect you from being conned, what exactly is their job? You’re homeless because of their incompetence.
I agree with S2. There must be some sort of case for professional misconduct or something. Contact the RICS. I think there might be something under contract law as well since a verbal contract was made.
The new single survey systems has made the Scottish system more like the English one (but without the bad stuff). There’s been a huge move away from “offers over” to “offers in the region of” and knowing what something’s worth straight away is great. We’re in the situation of having had to provide the single survey for our flat, but also having to have prospective properties surveyed, as they’ve been on the market for a while.