Goodwill Charter: Press Release
May 2004
Government figures show that 28% of all property sales transactions fall through prior to completion[1], however, in England and Wales gazumping and gazundering are a horror that Estate Agents are powerless to stop. Under the Estate Agents Act, estate agents are legally bound to pass on all offers received to the seller and it is up to the seller whether or not they consider them. Until all papers are signed there is no legal obligation to buy or sell, resulting in high levels of abortive sales and lost expenses.
London-based estate agents, Greene & Co., are leading the way in reducing levels of gazumping and gazundering by independently pioneering their own legally binding Goodwill Charter. Since it’s introduction, in 1999, the Charter has significantly cut the amount of abortive sales owing to gazumping or changes of heart by half. On average only 1 in 5 sales bound by the charter are unsuccessful, representing a significant reduction from the industry average of 1 in 3 sales falling through . The successful use of the Charter has now led to it being seen across the property industry as a potentially more effective solution than the government’s proposed Home Information Packs (HIPS).
The government’s view is that HIPS, proposed as part of the Draft Housing Bill, will speed up the process and reduce the time when gazumping and gazundering can happen. However, there is concern that HIPS will still not give legal redress from withdrawal and will not solve the real problems experienced by home buyers and sellers. Two-thirds of those polled in a survey by the National Association of Estate Agents (NAEA) are against HIPS and the NAEA are also concerned about the repercussions on the property market.
Greene & Co.’s Goodwill Charter locks vendors and purchasers together and stops them from entering into sales they have no intention of honouring. Both parties pay in an agreed amount (usually £500-£1000), and promise to buy/sell to each other within a predetermined period (usually 21 days). The vendor promises not to take any other offers during that time and the buyer promises to buy the property and not gazunder. If either backs out with no good reason the other gets the money. It won’t make up for a broken heart if the buyer has been set on a particular house, but it will help pay the bills and make people think twice about changing their minds on a whim. If both parties keep to the agreement for the agreed time period the money is returned to them.
David Pollock, MD, Greene &Co., believes that this type of agreement will eventually become compulsory. He said of the charter:
“The beauty of such a scheme is its very existence. If the other person won’t sign the charter that will tell you a lot about the sort of person you’re about to do business with”.
[1] Source: Office of Deputy Prime Minister: Draft Housing Bill