Selling houses: Time to import new ideas?

Despite the recession, the British obsession with home ownership is far from over. After years of boom and bust, can we learn anything from how they do it abroad? Oliver Bennett reports
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The Independent Online

Should we change the way we buy and sell houses in this country? Some, including the top estate agents' and surveyors' trade bodies in the country, think the recession and ongoing housing slump present an opportunity to rethink the process.

Earlier this year the Property Standards Board (PSB) was launched. With major input from the National Association of Estate Agents (NAEA) and the Royal Institution of Chartered Surveyors (RICS), the PSB's big idea – in response to Sir Bryan Carsberg's influential 2008 report into residential property – is that Government should assist the industry to achieve higher standards and better consumer protection.

Makes sense, right? After all, the boom and bust has alerted us that something was awry. Perhaps it's time that our horse-race system be changed – and one of Carsberg's recommendations was to learn from overseas sales practises. "I don't think we're perfect, and if you look around, there are places where they do it better," admits Peter Bolton King, chief executive of the NAEA.

This idea has been given credence by the many Britons that own property abroad, and who have often found that buying outside the UK isn't necessarily harder than buying at home, leading the PSB to see if one might cherry-pick the best methods and upgrade the system.

In many parts of the world, for example, they have the same legal notary for both sides of the transaction. This cuts down on the adversarial system – a feature of our transactions. Sealed bids and the struggle to sign contracts are rare in France and elsewhere – English buyers don't have to provide evidence of an ability to pay until the transaction is well underway – and the process is often faster as a result.

Ian Tonge, chairman of the NAEA International Committee, says that our system can "give you time to reflect. But I do think we could have a faster system of commitment."

As our system offers ample chance for gazumping and gazundering, it could be moderated by what Gillian Charlesworth of the RICS calls "early certainty" systems, such as the use of deposits. "I think some system of conditional finance would make the British system saner," says Keith Baker of Croft Baker Solicitors, a specialist in the French system. "Also, French consumer protection is very robust."

To an extent, the notorious Home Information Packs have attempted to address the UK's deficiencies. But there are also deep cultural attitudes. "One of the biggest barriers is our commitment to caveat emptor," says Charlesworth. "In the US, for example, they expect more disclosure." The "buyer beware" principle is why we commission speculative surveys, and as Tonge says: "It's a problem that needs to be overcome. It's about 'why didn't the buyer ask', rather than 'why didn't the vendor tell'."

Tonge now feels that agents should be licensed. "In the late 1970s, corporate estate agents and 'no sale, no charge' replaced independents." Experienced people left the business, leaving it a deregulated quagmire. "When I tell people elsewhere in the world that anyone can set up as an agent in Britain they laugh," he adds.

Others point out that we have a mature system. "There's pros and cons everywhere," says Nick Barnes of estate agency Knight Frank. "Some think the Scottish system is better, but their bidding process can lead to silly prices."

Charlesworth adds that "tinkering around with the mechanism may not be the answer. But we think agencies should be standardised and the quality worked on: the service, standards and ethics." We'd be able to re-enter the renewed housing market with more confidence – rather than expect to be ripped off.



FRANCE

"The French use 'suspensive conditions' extensively," says solicitor Keith Baker, also vice-chair of the NAEA's international committee. "In the UK, we wait to exchange when finance is in place. In France, you can exchange without the finance in place.

But there's a duty to act in good faith, with a condition to provide assurance 10 days from the start date and a cooling off process (usually seven days) after you place your offer. The system creates confidence in the process."

Thus people complete quicker in France – and there's more formality. "They're very strict when it comes to completion, with comprehensive personal identification," adds Baker.



GERMANY

As in other European Union countries, in Germany one independent executive works for both buyer and seller. Houses are sold in long-term spirit, and profits are taxable if re-sale occurs within 10 years of purchase. "Germany is stable, with the purest ownership title," says the spokeswoman for Property Frontiers. "In England, even if it's a freehold, it often belongs to the Crown or whoever. In Germany, it's yours, including the soil."

It's common to sell without an agent – "von privat", as they say – but don't look for signs: the Germans don't do them. Commissions are high at between five and seven per cent of the purchase price. Home ownership, at 42 per cent, is the lowest in the EU.



SPAIN

As well as being top of the expat charts – with almost a million resident Brits – Spain tops the EU home ownership charts at 85 per cent. Completion can be quicker here, says Des Rowson of Spanish specialist DLR Properties, plus you get better service. "Agents charge more at about three to five per cent, but there's a lot of hand-holding," he says. "With a registered agent you pay a deposit of €3,000 (£2,740) and if something comes up then you get it back. It stops gazumping."

Spanish buyers do need to check they don't become liable for outstanding debts, and that they won't be charged for infrastructure improvements. "Savvy buyers use independent solicitors, not one offered by a developer."



ITALY

Lynda Travella of British-based agent Casa Travella, says that Italy is a relatively settled buying and selling culture. "If you sell after five years of ownership, you don't pay capital gains tax," she says.

"It encourages people to stay put, rather than to move." A small five to 10 per cent deposit accompanies an offer, binding the buyer and seller subject to conditions, and as with Germany and France, the legal notary acts for both vendor and buyer – though it's recommended to have your own legal advice. Buyers need to watch out for quirks, such as offering first refusal to the neighbours at asking price in a rural area. Doing your place up? In Italy it's normal to build first then apply for planning permission.



USA

The problems in the US housing market have had notorious consequences – we all know what a sub-prime mortgage is now. But the American system has its merits. "In the UK, you can take it to the limit then back out," says Bolton King. "In the US they have a deposit system which, if you pull out, you lose."

If an offer is accepted, the contract will be signed by buyer and seller and becomes legally binding, guarding against gazumping. Plus, the US system allows you to go with several other agents – or "multiple listing" – at no extra cost. Foreign buyers: watch for visa and rental restrictions.



SWEDEN

Sweden has a simple, conservative system. "They like a big deposit and want to know how you're going to service the loan," says Richard Watkinson, a Briton who runs a holiday company in Sweden. "The fees are quite steep, at about three to five per cent, and you have to put a 10 per cent deposit down. If you default, you will probably lose that, and possibly pay expenses towards the subsequent resale."

Unsurprisingly, given the space and the availability of housing, the highest proportion of second home-ownership in Europe is in Sweden, with summer homes by the coast being particularly popular.

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