Beware of Conditional Selling: a Warning for First-Time Buyers and Home Movers
Written on 2 January 2024 by
Whether you’re a first-time buyer or seasoned home mover, buying a house can be one of the most stressful experiences we go through, often marked by excitement and anticipation. To make matters more complicated, some estate agents engage in a practice known as “conditional selling”, which can pose a serious threat to your property dreams. In this blog, I will discuss what conditional selling is, why it's concerning and how you can protect yourself from it.
What Is Conditional Selling?
Conditional selling is a strategy employed by estate agents to maximize their profit.
Conditional selling is most commonly recognised as a situation where an estate agent or sales rep pressures or incentivises the customer (by saying it will be quicker or cheaper when this isn’t necessarily true) to use their own mortgage broker, financial adviser, solicitor, or in-house services. This could be despite having a Decision in Principle already agreed with a lender or solicitor lined up. Estate agents engage in this practice to maximise the profit from a buyer as they will be incentivised to recommend a partner’s services.
Subject to Sale Clauses
Another thing you may not know but need to be aware of is the “subject to sale clause”. This is an example of conditional selling where the seller accepts an offer from a buyer but includes a "subject to sale" clause which allows the seller to continue marketing the property and to potentially accept a better offer during the period in which the initial buyer tries to sell their current home.
Why Conditional Selling Is a Concern
- Unpredictable delays - conditional selling can lead to significant delays in your home purchase process, causing uncertainty and frustration. You might invest time, effort, and money into a property only to have it slip through your fingers
- Access to lenders rates and criteria - estate agents are typically restricted to a panel of lenders, while they may have access to the mainstream lenders and subsequent rates, there are over 120 lenders in the market which means being a whole of market broker provides more opportunities for clients that have unusual income or circumstances to secure a mortgage offer. Mortgage brokers like John Charcol will strive to ensure you receive the best possible rate by keeping you regularly informed on market conditions
- Emotional stress - the emotional toll of conditional selling can be severe. You might find yourself in a bidding war or pressured to change your offer, leading to stress and disappointment
How to Protect Yourself
- Be informed - educate yourself about the property market in your area. Understanding common practices will help you recognize conditional selling when you encounter it
- Ask questions - when making an offer, ask the estate agent whether the property has any "subject to sale" clauses. Request clarity on the seller's intentions and timelines
- Prepared finances - ensure your finances are in order and you have a clear strategy for selling your current home before attempting to buy a new one. This will reduce your vulnerability to conditional selling
- Move quickly - if you're genuinely interested in a property, move swiftly. Get your finances, mortgage, and paperwork in order, so you can make a strong, attractive offer
- Legal advice - consult a solicitor or conveyancer with expertise in property transactions
- Request an exclusivity agreement or take the property of the market - in some cases, you can request an exclusivity agreement with the seller. This legally binds them not to accept other offers during a specified period, giving you some peace of mind
- Speak with an independent mortgage broker - a broker like John Charcol will help you through the purchase journey and will often liaise on your behalf with all the stakeholders such as the lender, conveyancer, surveyor and the estate agent. Remember that you don’t need to use the mortgage broker that the estate agent recommends. If in doubt, contact us and get a second opinion
Conclusion
Conditional selling is a potential pitfall in the property market that can catch first-time buyers and home movers off guard. Being aware of the practice, asking the right questions, and taking proactive measures can help protect your interests and ensure a smoother home-buying process. By staying informed and prepared, you can navigate the complex world of real estate with confidence and make your property dreams a reality.
Category:Nicholas Mendes