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Broken deals, costly delays and 'gazumping': Welcome to the U.K.'s ruthless housing market

If you think it's tough to buy a home in Canada, try navigating the U.K.'s vicious housing market. Buyers and experts alike say Canadians have a superior system — one where deals are binding and you won't find yourself suddenly "gazumped."

Meet the families who have suffered heartache and the Canadian trying to change the system

Canadian Emi Morimoto, her husband Thomas Walker, and their 16 month old son, Ripley, in front of their building. They bought the 675 sq. ft. two- bedroom for £315,000, or about $530,000. (Submitted by Emi Morimoto)

After five years of renting a cozy one-bedroom apartment in North London, Canadian Emi Morimoto and her husband thought it was time to uncork the bubbly.

They had finally pulled together a down payment for an upgrade, and the hard part seemed over.

"We wanted more space, we wanted a family and it wasn't going to happen in a one-bed flat like that," said Morimoto. Their budget was around £325,000 (about $550,000), just enough for a vintage, starter two-bedroom apartment on the outskirts of London. 

They assumed they could move within months of finding a place. 

Instead, over the next two and a half years a real estate film noir played out as offers were accepted by sellers, and then reneged on months later — days before closing.

 Deal after deal fell through.

"Every time I talked to my friends in Ontario they were stunned," said Morimoto, 34, who has lived in the U.K. for 11 years after meeting her British husband on a work-abroad year in Japan after university. 

"There are just so many opportunities to get screwed over here."

The problem goes beyond London's notoriously expensive real estate. The system in much of the U.K. allows for deals to collapse frequently. The HomeOwners Alliance, an advocacy group headed up by Canadian Paula Higgins, is lobbying for a revamp.

"It is bonkers that the U.K. has kept this chaotic system and has not pushed through reform," Higgins said. Only Scotland has modernized its buying and selling process.

A sold apartment in one of London’s ‘mansion blocks.’ Many of these apartments don’t have elevators. (Salma Nurmohamed/CBC)

1 in 3 sales collapses

The story of Morimoto, a PR account manager, and her video editor husband, Thomas Walker, is a common one.

Their first accepted offer was in the summer of 2018. 

But it fell apart months later, even after paying £800 (about $1,400) for title searches, surveys and appraisals for their bank.  

"We weren't given a reason, the sellers just said, 'no.'"

Typically in Canada, an accepted offer on a home is a contract which neither seller nor buyer can back out on once the agreed conditions of sale — such as financing, a home inspection, or other subjects — are met.

While it may take time for the deal to close and possession to change hands, walking away once those conditions are removed comes with consequences, such as losing a deposit or the risk of a lawsuit.

But that's not how it works in most parts of the U.K., including London. 

An accepted offer isn't binding in any way, so either party can pull out at any time while inspections are completed, property searches done, surveys and appraisals booked and financing secured. In the U.K., this all takes about three months to complete.

It's why the HomeOwners Alliance claims one in three sales falls through before making it to that final stage, with buyers losing £400-million annually in wasted costs. 

Recently sold attached homes in Southwest London. In most of the U.K., an accepted offer isn't binding in any way and an estimated one in three deals falls through. (Salma Nurmohamed/CBC)

Getting 'gazumped'

Morimoto and her husband's second offer slipped away a few months later, when the seller asked to hold off on a contract for another half a year — he'd started a new job and didn't want the pressure of a house sale at the same time. 

But it was after the third failed deal on an offer of £330,000 (about $560,000), that Morimoto questioned if they would ever be able to move forward.

The seller took £5000 more from another buyer on the eve of Morimoto's deal closing.

"It was soul-crushing,'' said Morimoto, who was three months pregnant at the time and had just been given two month's notice by their landlord to move, as their rental had sold.

"I think one of the biggest things was the well-being of our baby, and wanting to provide a comfortable good home to spend that first year, and we are trying so desperately to do that."

Georgina Woollams, 38, was a victim of 'gazumping,' where a seller pulls out on an accepted offer and sells to someone else for a higher price. (Submitted by Georgina Woollams)

This underhanded-but-not-illegal practice — when a seller takes a higher offer well after an initial deal is struck — happens so often, the British even have a game show-like name for it.  

It's called getting "gazumped." 

Georgina Woollams, 38, got gazumped in a big way.

Woollams, who owns a communications agency, and her husband found their perfect 1,600-square-foot family home in Surrey, a leafy London suburb about an hour by train to the city centre.

Three weeks later they were told the sellers were going with another buyer who offered £25,000 more than Woollams' already accepted deal for £875,000 (about $1.5 million).

"I think it's disgusting that someone could just pull out on you," she said. It was their second collapsed sale. "I have absolutely no idea why we are put in this position."

"Someone needs to change the system."

Make people sign a contract

That's what Higgins, the Calgarian who is the CEO of the HomeOwners Alliance, is trying to do.

"The commitment to buy or sell comes too late in the game," Higgins said.

She  is campaigning for "reservation agreements," basically a binding contract at the offer stage where both parties commit a thousand pounds. 

Canadian Paula Higgins is the CEO of the HomeOwners Alliance. She is trying to bring in binding agreements for accepted offers. (Salma Nurmohamed/CBC)

At the same time, the homeowner would be required to put together a "packet" of documents for buyers with title information, the equivalent of condo board fees and meeting minutes, and other information buyers currently spend weeks chasing down. 

Higgins said this would remove a lot of uncertainty and shorten the time needed to close the deal.

Housing analyst Neal Hudson of Built Place, an independent housing research group, agrees the whole process needs a serious remodel. 

"But then there's just a lot about the housing market in England that if you were designing a property market from scratch you wouldn't do it that way."

Broken chain and broken dreams

Hudson says it's the uncertainty and delays that also cause the home-selling "chain" to be so vulnerable.

"Many people will be both buyer and seller at the same time so the chain relies on multiple housing and selling processes sometimes happening on the same day, making it a fragile process."

Sellers must offload their own homes before trading up, but with no commitment from their buyers until the last minute. 

And if you still have your current house when you buy another, you'll owe an additional three per cent "stamp duty" up front and in cash — akin to the property transfer tax in B.C. and the land transfer tax in Ontario.

Nurseries and furniture 

It's this "chain" that cost Emma Paterson her dream row home in Wandsworth, in South London.

Paterson and her husband, both 37, accepted an offer in the spring of this year on their own one-bedroom home in London's East End. 

Their offer to purchase a 1250-square-foot, three-bedroom place was in turn quickly accepted, only to have the buyers of their own apartment pull out four months later. 

Emma Paterson, 37, and her husband lost out on a three-bedroom place and thousands of pound in fees and other expenses because of a broken ‘chain.’ They still haven’t sold their home or bought up. (Salma Nurmohamed/CBC)

They needed that sale to make their purchase, but the chain was broken.

"We were obviously quite gutted. You invest time and money in building the next phase which involves looking at nurseries in the area, and making progress."

They even bought furniture, which they will now need to rent a storage locker for. 

That's on top of losing a painful £3000 on legal fees and search costs.

The house, on the left, that got away from Emma Paterson and John Way in Wandsworth in South London because of a broken chain. Three bedroom houses in this neighbourhood typically sell for over £850,000, or $1.4 million. (Salma Nurmohamed/CBC)

Will the system ever change?

The U.K. government was supposed to trial Higgins's binding reservation agreements last year, but that trial has been delayed.

The Law Commission, an independent body set up by Parliament to recommend reform, is eyeing a full system overhaul — in part by studying what works in Canada and other countries.

But in the meantime, both Higgins and Hudson say the U.K. is a big, busy country with too many other priorities. 

So for now, Canadian Emi Morimoto tries to help friends with their expectations.

"If you think you're going to buy and move in within three months you're disillusioned because that's just not how the system works here."

Last fall, two and a half years after their first accepted offer, the couple — and their new baby — finally bought a 675-square-foot, two-bedroom apartment in Kingsbury, North London. 

They didn't gazump.

ABOUT THE AUTHOR

Salma Nurmohamed is a freelance journalist working in London, England. She was previously a Senior Producer and assignment editor with CBC News in Vancouver.

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