For those who think the Scottish property buying system is better

How does a silent Auction work then?

I fail to see the issue there. People offering over is normal.

Compared to

On offer for 175k
Accepted for 154k
Seller gets a 220k offer day before handover, takes it, the entire chain falls through.

Where was this flat, he asks out of interest and in relation to his own 🙂

West end up against the boundary of Maryhill in Glasgow

Seller gets a 220k offer day before handover, takes it, the entire chain falls through.

Which can and still does happen until missives are exchanged.

How does a silent Auction work then?

eBay is a slightly modified "silent auction", you basically submit bids upto the closing date, but can submit as many bids as you like (ebay obviously just does the last bit for you). So ebay means the winner pays the 2nd highest price (plus a minimum increment), whereas a silent auction you pay whatever you bid.

On offer for 175k
Accepted for 154k
Seller gets a 220k offer day before handover, takes it, the entire chain falls through.

Depends, unless the 'seller' isn't also a 'buyer' then they've just collapsed their own sale too. So there's a strong incentive on everyone to not be a dick.

I fail to see the issue there. People offering over is normal.

Ah, you maybe dont understand the survey setup here in Scotland

Home report valuation of £175,000
Sold stc for £220,000 in a silent auction

Up here, the survey is done by the seller before the house goes on the market, and the surveyor gives the valuation, in this case £175k. That means the lender will give the buyer a mortgage based on that valuation only.

The house actually sold for £220k. That means the buyer has to come up with a deposit based on whatever LTV mortgage they're getting based on a valuation of £175k, plus find an additional £45k as the winning bid was £45k higher than the HR valuation.

In England the survey is done after the bid is accepted? Then you could have a word with the surveyor and ask if they can value it at, or close to what you've offered.

Under the Scottish system, it means people with loads of cash to play with, can massively outbid people who've just managed to save up enough for just a deposit based on X% of the home report valuation. It means those on low incomes and/or the young have even less chance of getting on the property ladder

What @BoardinBob says, it's brutal for first time buyers in particular.

Under the Scottish system, it means people with loads of cash to play with, can massively outbid people who’ve just managed to save up enough for just a deposit based on X% of the home report valuation. It means those on low incomes and/or the young have even less chance of getting on the property ladder

I'm really not sure I see that as any different. Here sure, that first time buyer can ask for a mortgage on 220k to buy a house valued at £170k but the lender likely says no, even if they say yes, they still need the additional 10k of deposit they don't have because you only had enough for a 170k mortgage.

I'm not sure what folk are suggesting to "fix" this? That the property should go to the first buyer to come up with the HR valuation?

I’m not sure what folk are suggesting to “fix” this? That the property should go to the first buyer to come up with the HR valuation?

Rock paper scissors in place of bidding I reckon.

I’m really not sure I see that as any different. Here sure, that first time buyer can ask for a mortgage on 220k to buy a house valued at £170k but the lender likely says no, even if they say yes, they still need the additional 10k of deposit they don’t have because you only had enough for a 170k mortgage.

What lenders are doing mortgages over 100% LTV???

Prior to the Home Report being introduced in Scotland, the survey setup used to be the same as England. Make an offer, offer is accepted, you get a surveyor and the surveyor would usually speak to the estate agent to find out what the winning bid was, and unless it was insanely over the asking price, the surveyor would value it at the winning bid.

Now there's a debate that the surveyors are undervaluing properties as the actual selling price is normally well over what they value it at.

What lenders are doing mortgages over 100% LTV???

None that I know of, hence "lender likely says no"

Ah, you maybe dont understand the survey setup here in Scotland

Please tell me more about this strange system.

Yours sincerely

Joshvegas of Peebles

What do people suggest as an alternative?

(And we've just been bidding on houses that have all gone 25-30% over asking. It's silly season imo.)

And we’ve just been bidding on houses that have all gone 25-30% over asking. It’s silly season imo

See I think this is what the OP is mistaking for a flaw in the system. Since covid people have just been going wild just to get a house they think they want and the dog and are prepared to risk their own wedge to secure it.

It's a rock and hard place if someone wants or needs to move offer what the bank will support and not get it or offer over and get it and risk the price dropping because it sure of shit won't be coming out of the banks cut.

Last time i bought a house in Scotland it was horrific, was looking around Glasgow as well, up to Strathblane, sealed bidding made it a nightmare, we must have bid on about 6 properties and were blown out the water every time, as BoardinBob stated, you had to make up the difference on top of your deposit, by the time we gave up on anything offers over it took us a while to find a fixed price house that was decent, and that was just outside Bonnybridge!

I much prefer the English way, yes you can get gazumped, but i've never seen it myself, there's a bit more security for the seller which is good, but the flip side is that the buyer has potential risks added, we were cash buyers in Scotland as well, but that didn't mean much for those sealed bids, for the fixed it meant we had our offer accepted quickly and were in the house in no time.

See I think this is what the OP is mistaking for a flaw in the system.

Nope, it’s the combination of valuations not being valuations and the sealed bid system that needs attention IMHO

The Scottish system sounds simmilar to the Canadian system, I don't know too much about either, but it can drive prices up if you get into a bidding war.

But the thing with the canadian system is you can't get 'Gazzumped' ..If you put in an offer and it wins, but the vendor then gets a better offer, and dismiss you as a buyer they basically have to pay you compensation.

Prior to the Home Report being introduced in Scotland, the survey setup used to be the same as England. Make an offer, offer is accepted, you get a surveyor and the surveyor would usually speak to the estate agent to find out what the winning bid was, and unless it was insanely over the asking price, the surveyor would value it at the winning bid.

by the time home reports came about that was the case but only ten years before that offers subject to survey would have been dismissed as not committed and so if you wanted a survey you did it before you bid.  This meant you could pay survey fees on a lot of stuff you didn’t win.  It also meant that the surveyor might say 175k  but you wanted to offer more so have to talk him up.  But you will probably not get to 220k.  Another surveyor might have said 190k (since it’s subjective) and might be willing to round that up to 200k…  with a finite pool of surveyors you might also be talking to someone who is “advising” the competition.  A single survey paid for by the person profiting from the transaction is fairer.

really though the surveyor should be valuing it at the price the mortgage company can expect to get if they had to resell it tomorrow, that will always be less than the winning bidder - it could be the second place bidder but they only went that high because they knew the winning bidder might beat them - so it’s true value is probably around the 3rd place bid.  I believe surveyors and estate agents talk regularly so they will know if there were 8 bids all between 210 and 220 and they undervalued or if there were three bids around 175, one at 200 and a crazy at 220.

the odd thing to me is that a property is listed at o/o 154k if the home report is 175k and the market is Bouyant.  That sounds like estate agents playing silly buggers - advertise cheap to get people in and then boast you get 45% above asking rather than 25% above that the firm across the street achieves (from a more sensible asking!)

I’ve bought three houses in Scotland.  One was fixed price, one was offers over and the other was offers over but we made a quick but respectable offer that was accepted without going to closing.  We also made a number of offers which were unsuccessful at each stage.  We sold both houses with closing dates.   I think the system works ok, but has drawbacks.  I don’t think the alternative model used in England is any better.

im surprised that with interest rates comparatively high, more people returning to offices and lots of people complaining about financial pressure that property prices are still growing.

the odd thing to me is that a property is listed at o/o 154k if the home report is 175k and the market is Bouyant. That sounds like estate agents playing silly buggers – advertise cheap to get people in and then boast you get 45% above asking rather than 25% above that the firm across the street achieves (from a more sensible asking!)

I've seen this so many times recently, really nice houses listed for well below what you would expect to pay. It just makes a mockery of the whole thing tbh.

the odd thing to me is that a property is listed at o/o 154k if the home report is 175k and the market is Bouyant.

+1

only ten years before that offers subject to survey would have been dismissed as not committed and so if you wanted a survey you did it before you bid. This meant you could pay survey fees on a lot of stuff you didn’t win.

Also, this.

ten years before that offers subject to survey would have been dismissed as not committed

Bought my first 2 flats in Shawlands in the early 2000s when the market was crazy and both times my offers were subject to survey and both were accepted by the seller

Homebuyer reports were introduced in 2009. Premilenium an offer “subject to survey” would have been regarded as pretty meaningless.  The advantage of the Scottish system was supposed to be that an offer was binding.  Subject to survey left a get out clause.

The advantage of the Scottish system was supposed to be that an offer was binding.

Now this is one we have seen fail.
Property 'sold' and then someone unable to complete.

The offer is morally binding subject to successful completion of the missives. I often see properties coming back on to the market if something goes astray e.g. buyer unable to get a mortgage or the buyers own house sale falls through. It is only once the missives are completed and signed by both parties solicitors that it becomes legally binding. That can take three months or so.

I would also say, having bought in England too. Open auctions, best and final offers, gazumping and more were all experiences we had there.
It also didn't stop the rampant over-bidding in a heated market.

I much prefer the English way, yes you can get gazumped,

You've obviously never been gazumped!

Throws everything into chaos, schools, chain falls apart, stuff in storage, absolute nightmare, even with a week's notice

And (some) estate agents seem to be completely unregulated cowboys

So much of the stress seems to be a result of them playing silly buggers (they're on comission so it's almost built into the system)

Yes not sure what you can do about people bidding over valuation, whether that’s a survey valuation (Scotland) or estate agent (England). Just means the house is in an area more people want to live in than available houses?

Having the survey and valuation carried out ahead of sale is the improvement over the English system. So much less stressful for sellers and buyers.

Isn't the flaw in the Scottish system the valuation being made by the surveyor, before the property goes to market?
How do you establish 'value' before any bids are placed?
Is the value of a property not that which more than 1 buyer is prepared to pay?
In this instance, if there were multiple offers above say £210,000, then that is the 'value' in the market at that time.

How do you establish ‘value’ before any bids are placed?
Is the value of a property not that which more than 1 buyer is prepared to pay?
In this instance, if there were multiple offers above say £210,000, then that is the ‘value’ in the market at that time.

This is the problem. There's a huge disconnect between what people are willing to pay, and what surveyors think the property is worth.

As a first time buyer in England I would say neither sound that different to each other on the price front. People who already own property have seen their asset rocket in value in the last few years whilst the money in the banks of savers has eroded. We had 20% deposit saved up and were still being outbid way above asking, either people must be taking crippling mortgage payments, or selling their own overinflated house is providing enormous deposits on the next

It’s all about area and climate, in Scotland it was a nightmare looking around areas in the northeast of the city, like bearsden, milgavnie, strathblane, etc, so sealed bids were pretty much standard, we’d go 20-30% over and on one we lost by a huge margin, but move to the central belt and it was less of a margin over the price or fixed.

It’s the same down here now, go into an area that’s desirable, you can be up against a lot of folk with large savings, they can afford to add 20k if it’s getting them near what they want (work, schools, etc), most of us can’t do that and first time buyers are being pushed towards simpler, less desirable homes.

At the start of lockdown when the market was crap I considered buying a place in the valley as a second home/holiday let (Yes, I know, sorry). I soon found out how this was going to work, and that the offer price bore no correlation to the price it would sell at and soon walked away from the whole idea.

As above, the pricing the agents give it makes a mockery of the whole process.

As above, the pricing the agents give it makes a mockery of the whole process.

It is daft. It's supposed to get viewers through the door. That makes no sense though as everyone knows to look at the offers over figure and add 30/40% then decide if it's affordable before viewing. I much prefer the English setup of "offers in the region of".

There's also bugger all negotiation here. Closing date of Friday lunchtime and it's a complete lottery. We sold our flat in 2020 at closing date. Home report valuation was £145k, estate agent put it on at offers over £130k.

The actual winning bid was £165k and the half dozen or so bids ranged from £140k to £165k.

How do you establish ‘value’ before any bids are placed?

We have just had ours valued.
Both agents suggested going in at their valuation - and that the Homebuyers report would probably reflect their valuation.
But both went on to say "but you will get more" and suggested that if we keep the advert below £300k we get more interest and bids.
I asked both why we don't just say it is worth £320 (around what seems right to us) and then the Homebuyers is accurate and buyers can bid around that.
Both were clear that is not the behaviour of buyers - apparently buyers love some bidding up action and FOMO of a Best and Final process...
🤷‍♀️

I’ve seen this so many times recently, really nice houses listed for well below what you would expect to pay. It just makes a mockery of the whole thing tbh.

Surely it's up to the seller to decide their 'strategy' for the sale, are you saying that you want some kind of control over them?

It’s the same down here now, go into an area that’s desirable, you can be up against a lot of folk with large savings, they can afford to add 20k if it’s getting them near what they want (work, schools, etc), most of us can’t do that and first time buyers are being pushed towards simpler, less desirable homes.

This has always occurred, for ever.

I hadn't realised so many folk wanted us to move to a Controlled Economy - wonder how many of these folk would vote for this? 😉

What Argee says. We're on the southside of Glasgow in what is regarded as the best catchment in the country - prices are nuts and continually increasing. House round the corner (3-bed semi, extended) went on the market at offer over £365k, sold at closing a couple of days ago at £485k...13 offers I'm told. Crazy. We just sold our house, offers over £285k, HR £315K and it went for just under £340k. Interestingly when discussing the fee's with the estate agent you could have it fixed or a %....without going into too much much detail he said that going with a % meant they'd try harder to get a higher price, how they'd do that I'm not sure but it definitely tells you that they're at it.

how they’d do that I’m not sure

"you'll need to bid at least 20% above to stand a chance, it's a very popular area/home"

That's basically manipulating the price which will drive prices in that particular area up, can't be allowed surely?

That’s basically manipulating the price which will drive prices in that particular area up, can’t be allowed surely?

Allowed? I think it's encouraged!

Completely standard practice. The agents know what houses are selling for and push buyers in that direction. That is essentially their job after all, to get the best possible price for the seller and their subsequent commission.

We’re on the southside of Glasgow in what is regarded as the best catchment in the country – prices are nuts and continually increasing.

Dunblane begs to differ... 😉

That’s basically manipulating the price which will drive prices in that particular area up, can’t be allowed surely?

Is that not how it has always been unless you are in Soviet housing?

Both were clear that is not the behaviour of buyers – apparently buyers love some bidding up action and FOMO of a Best and Final process…

I can confirm that this is inaccurate at best.

I can confirm that this is inaccurate at best.

I agree. I was trying to be ironic, but it doesn't come out on text.
I found it fascinating that is what the estate agents both thought.

Under the Scottish system, it means people with loads of cash to play with, can massively outbid people who’ve just managed to save up enough for just a deposit based on X% of the home report valuation. It means those on low incomes and/or the young have even less chance of getting on the property ladder

This exactly how in works in England also, people with loads of money can offer more for the house they want regardless of its advertised price.

Under the Scottish system,

It certainly sounds "not worse" and I'd go so far as to say potentially better for everyone. One of the biggest problems is that low valued stuff doesn't make it to market in England, it's valued low* and "mates" are informed and it sells for a touch over valuation to a developer/buy to let type before it gets listed.
Result being there's very few low cost homes available to "the general public"
At least the system in Scotland means this is much less likely.

*I'm "sure" this would never be below market rate as that would probably be illegal.

There’s also bugger all negotiation here.

My last buy and sale both involved a bit of negotiation. It can be "here's an offer, do you want to accept it or hope to get more before we find somewhere else?"

This exactly how in works in England also, people with loads of money can offer more for the house they want regardless of its advertised price.

It's not the same though, because as someone pointed out in England your mortgage valuation is then generally matched to the sale price.

So if you have a 80%LTV mortgage offer and want to buy a house for £200k with a £40k deposit, you go ahead and do that.

In Scotland you look at a £160k house, put in an offer of £200k, but can only get £128k as a mortgage, and have to find the extra £32k yourself as the bank only takes the valuation in the sellers survey.

In Scotland you look at a £160k house, put in an offer of £200k, but can only get £128k as a mortgage, and have to find the extra £32k yourself as the bank only takes the valuation in the sellers survey.

Putting the 'risk' on the folk with the money rather than the Bank (and the rest of us).

It certainly sounds “not worse” and I’d go so far as to say potentially better for everyone. One of the biggest problems is that low valued stuff doesn’t make it to market in England, it’s valued low* and “mates” are informed and it sells for a touch over valuation to a developer/buy to let type before it gets listed.
Result being there’s very few low cost homes available to “the general public”
At least the system in Scotland means this is much less likely.

*I’m “sure” this would never be below market rate as that would probably be illegal.

Whilst it's probably possible to do something like this if you wanted to swap two properties and avoid stamp duty or something. Who are these nerfariouis yet benevolent people selling property at below the market rate to their mates?

I agree. I was trying to be ironic, but it doesn’t come out on text.
I found it fascinating that is what the estate agents both thought.

I was trying to agree with your irony, but I think I suffered the same problem!

You're absolutely right though, although I wonder if it's what they actually thought or if it's just what they were telling you to help you feel less guilty about the absolute emotional rollercoaster about to ensue for your prospective buyers.

I moved (in England) at the start of last year, and 2021 was a stressful time not helped by three buyers pulling out once an offer had been accepted. I don't have many thoughts on how to improve things but in my opinion that should be outlawed and any thing that helps prevent that would be an improvement,

Still think the conveyancing is the biggest issue across the UK, how in this day and age it takes so long to do, especially if there was a linked database, it just makes a mockery of the whole thing, and opens up things like gazumping, failing chains, etc. If it wasn't a self sustaining industry, the government might actually try and fix it.

Who are these nerfariouis yet benevolent people selling property at below the market rate to their mates?

"below" market value? That would be the estate agents who get a nice kick back from the developer at the end of the month so value the house low.

Most local estate agents will know the same developer(s) well and all of whom know they want 2 bed houses, these post codes and for <180k

All of them tell you about 170 then have a cash offer by mid afternoon rather than 185 and letting it go to market. Low sales prices in the area keep the valuations deflated so the next house and the next all get the same.
If they went to open market they might actually sell for £190, then £200 etc etc.

There's nothing benevolent about it, they diddle the seller and push more and more reasonably priced housing into rental.

It's not about avoiding stamp duty, it's about maximising profits by minimising competition.

Still think the conveyancing is the biggest issue across the UK, how in this day and age it takes so long to do, especially if there was a linked database, it just makes a mockery of the whole thing, and opens up things like gazumping, failing chains, etc. If it wasn’t a self sustaining industry, the government might actually try and fix it

It's what my missus does for a living. Absolutely archaic, antiquated industry. Ground to a halt at the start of covid as they still rely on paper physical copies of so many documents, and the various bodies involved absolutely refuse to move to digital solutions. Painfully slow process and a catalogue of errors from start to finish

Now this is one we have seen fail.
Property ‘sold’ and then someone unable to complete.

Yes - ask a typical solicitor when you are buying and they will tell you its binding and you may be sued if you try to pull out.  Ask your solicitor if you are selling and your buyer pulls out - then is suddenly will be a lot less certain.  "Well you might be able to sue but if he doesn't have the money to complete the transaction he likely doesn't have the funds to pay you damages either"!

This is the problem. There’s a huge disconnect between what people are willing to pay, and what surveyors think the property is worth.

This is cyclical, the surveyors take a long time to catch up with the market trends and are looking "forward" as well.  There's a fair amount of "judgement" in the number they come up with but really they are working for the mortgage company to protect their risk so should be on the lower side.  A property might be worth 20k more to "you" if the decor/kitchen/bathroom are all to your taste or you have a degree of urgency to find somewhere (because you want to move in before school starts, a job move, you have sold your place) or because you have missed so many properties and are getting fed up, or perhaps you have family nearby who will help with childcare, or its walking distance to your job or has space in the garden for a wfh office pod.  The flip side is if "everyone knows" property is usually won at 20% above home report value then if the surveyor tries to catch up with the market, it just sends a message to the buyer its worth even more and if they have access to the cash they may well offer 20% above the "corrected" price.

It’s the same down here now, go into an area that’s desirable, you can be up against a lot of folk with large savings, they can afford to add 20k if it’s getting them near what they want (work, schools, etc), most of us can’t do that and first time buyers are being pushed towards simpler, less desirable homes.

I don't want to sound like a capitalist boomer - but that's essentially nothing new.  Markets have always been easier for wealthier folk to access and those starting out have entered at the bottom.

In this instance, if there were multiple offers above say £210,000, then that is the ‘value’ in the market at that time.

In principle yes, but what the surveyor is really being asked to do by the mortgage company is assure them of a price which they could definitely expect to get, he can't account for the fact that three people are getting carried away and offering too much on this property because next week they might not be there so he's actually valuing on what rational people would pay rather than the desperate to get it!  Gradually over time their values to drift up to match the true market value - but they don't want to have overvalued everything and then have mortgage companies complaining when they can't liquidate the assets.

We had 20% deposit saved up and were still being outbid way above asking, either people must be taking crippling mortgage payments, or selling their own overinflated house is providing enormous deposits on the next

Or people with inheretances or affluent parents giving them a leg up.  They all like to believe that their hard work has helped them help thier kids but really in most cases its just societal inequalities getting reinforced.

Still think the conveyancing is the biggest issue across the UK,

+1
Just antiquated and archaic.
But a bunch of people make a half decent living out of this, so they have no intention of changing.
Particularly in Scotland with our homebuyers pack, the conveyancing could be much much more efficient.
My £550/month rental agreements in Scotland were 32 double sided printed contracts - with a upto £10k for getting it wrong penalty and 'watched over' by the council, with exemplar 'how to do it right' from the Scottish Government. The same flat was sold with a 2-sided contract...

We just sold our house, offers over £285k, HR £315K and it went for just under £340k.

I asked both why we don’t just say it is worth £320 (around what seems right to us) and then the Homebuyers is accurate and buyers can bid around that.
Both were clear that is not the behaviour of buyers – apparently buyers love some bidding up action and FOMO of a Best and Final process…

Both were clear that is not the behaviour of buyers – apparently buyers love some bidding up action and FOMO of a Best and Final process…

nobody loves that process except the agents

It's a bit like hand reared fois gras geese queuing up to be fed and this being seen as proof by the farmer that they like it.

Just to loop back on this, we had an offer accepted this morning at just over 20% over valuation.

At least I now don't have to spend the rest of the summer viewing shitty flats at over inflated prices in dubious hipster locations.

Keep the faith!

Good news

Personally, I would prefer:

Binding contracts when an offer is accepted/buyer to pay a 10% deposit held in escrow.

Higher fees for estate agents (shifts the focus from quantity/price to quality/service)

Independent surveyors who state material facts only (no valuations).

good stuff mr shoes

Thanks all. I’m actually quite excited about it.