London Property - Home of Super Prime

From offer to exchange with Michael Handford-Arnold

April 22, 2022 London Property - Home of Super Prime Season 4 Episode 9
London Property - Home of Super Prime
From offer to exchange with Michael Handford-Arnold
Show Notes Transcript

Today Farnaz Fazaipour discusses the potential challenges during the process of getting from offer to exchange with Michael Handford-Arnold of Palace Gate.

Michael is a seasoned professional in the Prime Central London property market and he offers some advice on what to look out for during the sales process. He also discusses how relationships with solicitors can affect a sale and what to do when bank values versus market values differ.

Join us to discover the difference between gazumping and gazundering and what you should be doing if you currently own a property in preparation for a potential future sale, even if it is not something you are considering in the immediate future. 

As always, we would love to hear your thoughts. Please feel free to contact us for all enquiries at

At London Property, we use our experience, expertise, and deep-rooted relationships to connect super-prime property owners and tenants with hand-picked experts. We also aim to inform and entertain Londoners through content across multiple platforms.

Interviewer - Farnaz Fazaipour  | Property Investment & Ownership

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Unknown Speaker  0:00  
London Property, Home of Super Prime, where you can find informative educational and entertaining content, covering all aspects of property.

farnaz Fazaipour  0:11  
Hello, and welcome to the London Property Podcast. I'm your host Farnaz Fazaipour and we are speaking today to Michael Handford-Arnold who is a seasoned professional with 26 years of experience at the top end of the market. And Michael, you're going to talk to us today about the topic of how many deals actually fall through from when an offer has been accepted before we get to exchange and also the important role that an agent plays in that process. Welcome, Michael.

Michael Handford-Arnold  0:43  
Thank you very much,  Farnaz! lovely to be on your podcast.

farnaz Fazaipour  0:47  
So tell us, Michael, how important is the role of the agent and talk us through, you know, what are the things that you need to manage? And what are the things that end up in resulting for deals to fall through and why that figure seems to be one and three properties actually fall through from when an offer has been accepted before contracts are exchanged? 

Michael Handford-Arnold  1:10  
Well, an agent has to wear one of many hats and consistently check what's going on with the expectations of the buyer. Actually have to nurture the buyers expectations and try, and when they stall, sometimes they go "Oh, goodness, I don't know if I made the right decision or not". Make sure that they realise that they have at the very start and continue to reiterate that all along. There are various complications with solicitors as well. Sometimes you'll have an out-of-town solicitor that doesn't understand central London leases, I have one at the moment. And you have to try and get everybody on board, and basically massage them through. So literally all the time, you have to be constantly looking at every aspect of the sale. And and just literally try to do what you can do to keep everything, all the balls ticking and rolling along.

farnaz Fazaipour  2:02  
So would it be fair to say that, you know, the more hands-on an agent is in making sure that all the moving parts are being nurtured, the less likely it is that a transaction will fall out of bed? 

Michael Handford-Arnold  2:15  
it's absolutely vital that that an agent looks at every part of it. Because you need to be there to answer the question, that slight doubt that a purchaser might have, you need to assure them or take them back to the property and look at the view where you're going to do this, reaffirm them with why they wanted to buy that property in the first place, then the quite often they go and they're happy.

farnaz Fazaipour  2:38  
And would you say that most of the reasons that a transaction falls through is that the sentiment of the buyer changes because it is after all the biggest investment you make in your life. 

Michael Handford-Arnold  2:48  
Exactly, exactly. The sentiment changes. They go, Oh, gosh, we've got must get something I mean, it tickes all our boxes vaguely. And then they go through the whole rigmarole of making the offer, maybe making a slightly higher offer because what they've initially offered isn't enough. And then they sort of think back into thinking it's a lot of money, do I really want it? Or is that road a bit too busy for me. And then you've got to really step in. But also the agents job in the first place is to ensure that you've not got a buyer that isn't sure about what they're buying, because then it will fall to pieces. You know, you can tell it while you make an offer. And yeah, it might see this, you can tell generally, if you're experienced, you can tell if a property will suit a person. I mean, you know, you're not clairvoyant, but you can generally get an idea.

farnaz Fazaipour  3:36  
So one of the most important things is don't actually get deeply involved in a transaction with a reluctant purchaser because the chances of it falling out of bed or higher.

Michael Handford-Arnold  3:45  
Absolutely. You're creating a disaster at a later date. And then they will lose faith in you because they already felt pushed into that, you know, always say now, are you sure? Don't ask me. Yes, I think I think it suits you but I'm not you. How will you feel in eight months time after living here? And then that reaffirms them. You can see the reaffirmation sort of wiping over their face a lot of the time. But of course, you're not out of the woods until it exchanges you have to keep reaffirming them all the way along.

farnaz Fazaipour  4:15  
Okay, so playing the role of agents and psychiatrists.

Michael Handford-Arnold  4:21  
I was going to say it's a psychological journey, and you're gonna have to wear one of many hats. Also, your relationship with the solicitors is vital because solicitors at the end of the day, but a lot of them aren't that keen on agents. They just they just aren't, so I think develop a relationship with both sides of the both sets of solicitors and it can be done. It literally can be done. If you just simply say what do you need? I'm here to help at any stage. And if they're a particularly stuffy solicitor, you just say look, you become quite obsequious and say I'm a very good secretary, what can I do and that always gets Okay, thank you very much. So of course 57 hats you have to work all the time. And then then it should go through, there is no reason why it should.

farnaz Fazaipour  5:04  
Yes, there's nothing more frustrating for a solicitor than an annoying agent calling and saying what's happening? What's happening? What's happening?

Michael Handford-Arnold  5:10  
And has it exchanged? Has it exchanged? Has it exchanged? You know, and the agent's going to get a 60,000 pound Bill 60,000 pound commission, and the solicitor is probably going to get two and a half. So, you know, excitedly sort of overexuberant agent saying, I really don't understand why it's not exchanged. You know, that is a red rag to a bull with most solicitors, and that is surefire way to stall things, irritate them. And in the background, your buyer might need a bit of encouragement at that stage. So just view every aspect of it carefully and act accordingly.

farnaz Fazaipour  5:45  
Right. So if you are going to keep calling the solicitor call him to be helpful not call him to be pestering him.

Michael Handford-Arnold  5:50  
Exactly. Is there anything I can do? You know, send an email. Is there anything I can do? Are you happy with where you are at the moment? Please let me know if there's anything at all I can help with from my side. And then even if they don't reply to you, the information goes in. And then if you need to call them about something at a later date in the sale, they'll pick up the phone.

farnaz Fazaipour  6:11  
And keeping the momentum going is actually a big part of the whole process as well, isn't it? 

Michael Handford-Arnold  6:16  
Oh, no, exactly. It's plates on sticks, as the Greeks would say, you've got to keep them all spinning at the same time. And make sure make sure each single plate has its own momentum.

farnaz Fazaipour  6:25  
Yeah. Yes. So we've touched on the aspect of legals and then you've got, what a property's been, you know, terms have been accepted at a price. And then if you are raising finance, then the next hurdle is the valuation. 

Michael Handford-Arnold  6:42  
Exactly. And then again, here we go again, with your sort of psychological side of things, you're not sure what type of value you're going to get. So you have to do as much research as possible into comparable prices, and actually make them see why this level is the level that's been accepted as acceptable. It really are, your comparables are the most important and meet them there. Don't just make an appointment, meet them with paper comparables, and chat to them and ask them, What are your concerns? Do you have any? Do you think this, that? They won't, you know, tell you straight away, but you can sort of get a gauge them by that, again, down to experience, you can gauge their thoughts, by the way, they reply to your questions. And again, that's a huge help.

farnaz Fazaipour  7:24  
So there's there's never really taking a back seat, as far as an agent goes in a transaction.

Michael Handford-Arnold  7:30  
You never take your foot off 62 Gas pedals, which you've got going on all at the same time. If you do, then you'll lose out on one or more of them.

farnaz Fazaipour  7:39  
Yeah. And then the other thing is that values, you know, bank valuations tend to be a lot more conservative often, compared to actual values achieved in the market. And I guess, you know, the valuers have got a duty to the banks to make sure that they're protected, you know, for all sorts of eventualities, but when when a buyer is faced with a valuation that comes in lower than what they've offered, you know, what are the reasons? And what are the ways to manage that, that that process? 

Michael Handford-Arnold  8:09  
Well, hopefully, you'll have a comparable just waiting, some details in your hand of somebody who possibly sold for a bit more than that. And maybe that one doesn't have as nice of a terrace, or doesn't have as nice a smart kitchen as as a lot of them do. And you say, Well, clearly, if they're prepared to pay that, for that, this property that we're selling now is worth this. I realise you have to be conservative about it, but look at number 27, here are the details of it. It has a far nicer kitchen, the aspect's slightly better, and yet that went for more money. So that gives you a guide to people's intent, and what they're willing to pay. This is why this one doesn't look bad either.

farnaz Fazaipour  8:49  
So on the subject of keeping momentums going, it's really important for a seller to come to market really, really prepared.

Michael Handford-Arnold  8:57  
Extremely prepared with all your papers ready. If there's a delay at any stage, you're, you're you're opening up an opportunity for something to go wrong.

farnaz Fazaipour  9:07  
And on that subject, I had a conversation with a very experienced selling agent who's who's got decades of experience in the prime central London market. And she was advising a client in front of me who had an old building. He didn't think it was old, but it was old. And she said "Look, in order to prevent from things having to be dealt with later, why don't you do a building survey now?" Which I thought was actually a really smart way of looking at it. And if you are looking at a property that you know could potentially have red flags because it's old, the roof needs doing,would that be a smart thing to do? 

Michael Handford-Arnold  9:51  
Absolutely. I even wasn't in London, but the principle remains: the friend's parents had been living in a house for nearly 45 years. And again, like so many properties in London, it was a Georgian property. And they can have quite a few things wrong with them such as the roof structure, etc. I advised them to have a survey, so they knew exactly what was wrong. And that was why it was priced at a certain level. This is what's wrong, this is how much it's going to cost to do it up, we are still priced at the right level.

farnaz Fazaipour  10:22  
So we really need to have one focus in our minds when we're dealing with transactions. And that is that transparency is key. The more transparent you are from the word go, the less likely it is for tempers to get heated or for things to go wrong, surprises to come out of the woodwork.

Michael Handford-Arnold  10:42  
Absolutely, clear as a bell from start to end. And if somebody says along the way, oh, but I didn't know about that deathwatch beetle in that house in full, I didn't know. And you said, Oh, no, no, sorry, please refer to the survey that the seller had done. It has got it there. And we actually went through it. And we recommended somebody that could come in and do a second opinion on how much that might cost to rectify if you weren't comfortable with the figures that the seller has provided. Oh, yes, you did. And I am still happy. There, you've nipped it in the bud. Whereas if you didn't have that, that could create a whole thing because oh, well, if it's got this, it might have this, and it might have that and how much is that going to cost? And immediately they're off on a negative journey.

farnaz Fazaipour  11:25  
So we've spoken about managing buyers, and their fluctuation in sentiment towards the decision that they made. We've talked about the survey and the fact that it's actually quite smart for a seller to try and get a survey done in advance if they know that things are going to come up in the survey so that there's transparency in the beginning of the of the transaction. We've talked about values, and then we've got some other things that come to mind that are problems in the chain. So you might have either party be involved in the chain for example. Can you tell us a bit more about that?

Michael Handford-Arnold  12:02  
Well, well, the chain, those are the quite regular things, and they are quite a nightmare. You then have to rely on calling another agent further down the train and getting their take take on it. And you might very quickly get an idea that that agent is perhaps not as experienced or up to speed as you may like them to be. And again, they can cause the chain to rupture purely because they don't have the experience etc. to get there. So it might be a genuine reason. It might be some surveys come back and it's absolutely fallen to pieces, but the chains are the least attractive of situations. That's why when a buyer comes forward and says they're either cash or they're chain free, that at the end of the day, if they're a genuine, earnest purchaser and they do have the money, etc. They've got their mortgage offer, you wouldn't not entertain them.

farnaz Fazaipour  12:55  
Well, it all goes back to how much interest you've got on your property. And what are you willing to, to accommodate. 

Michael Handford-Arnold  13:00  
Exactly, exactly. 

farnaz Fazaipour  13:02  
Probably one of the most undesirable reasons where deals fall through after both buyer and seller have spent 10s 10s of 1000s of pounds on lawyers and surveyors and bank valuations and so on. Especially in prime central London where you could end up being 20 30,000 pounds out of pocket before you even get to exchange, is when you get gazumped. So let's talk about that.

Michael Handford-Arnold  13:26  
Gazumping is the official nightmare.

farnaz Fazaipour  13:29  
Actually, I'm going to I'm going to change what I just asked you and say we've got gazumping and we've got gazundering. So let's let's first of all tell our listeners what is gazumping and what is gazundering.

Michael Handford-Arnold  13:42  
Gazumping is when a deal is going through, and you basically suddenly everything's ticking along usually quite nicely. And then suddenly another agent or even one of your own buyers might be coming forward, having had second-thoughts with a much higher offer, they might be cash, and they may seem to be good. The trouble with this is I do think you are tempting fate in many in many circumstances with this. Gazundering is getting to the literally the last point before you exchange and then dropping your offer that causes such anger for the clients. Some of them on principle will just simply pull out because they won't have it. It might be costing them a lot of money to pull out, but they will pull out. Now in some situations if it's a good property, the gazunderer will go okay, now I will come back to the table whatever. But if they don't, then then it is a complete nightmare and you have a very angry seller on your hand. 

farnaz Fazaipour  14:52  
There might also, I mean, in defence of the gazunderer which I think everybody's worst nightmare is, somebody who pulls out of what the they said they're going to do and tries to change the goalposts. But in defence of the gazunderer, there's also sometimes things come out of the woodwork, which affects the expenditure for the purchaser because the survey has disclosed something or, you know, there's been a dramatic change of events in the market or something, then, you know, that person can say, Well, look, I will continue buying the property from from you, but I can't do it at that level anymore because now I've got to redo the roof. 

Michael Handford-Arnold  15:26  
But would you call that gazundering?

farnaz Fazaipour  15:29  
Right, so gazundering is very specific. It's taking advantage of a situation before the finish line.

Michael Handford-Arnold  15:35  
Absolutely. Is it is wrapped in skullduggery. I mean, reaffirm, from reaffirming, you know, your your offer, because you suddenly found out there is something severely compromising the property. And it isn't worth what you felt it was worth or what your surveyor may say it's worth or something's happened via some other situations and whereby it's pretty obvious that you know, your offer is a little bit toppy, considering what you may have to do, but I put gazundering under skullduggery, no other.

farnaz Fazaipour  16:08  
So now we've reached the end of the process. And we're at a point where the inevitable has happened and a deal has fallen through. So you've got some very unhappy people who are out of pocket. What happens in situations like that with solicitors fees, do they change? Or will they continue charging you at the rate that they were going to charge for fall through? And what about mortgage offers?

Michael Handford-Arnold  16:35  
Well, it depends on your own solicitor, if you have a family solicitors that have looked after a certain family, they would never charge the same rate all along. If it's a new solicitor that they're using, they may or may not it depends on the firm. Usually the large firms just simply say I'm sorry, it's the same level of expertise you're getting, we can't give a discount.

farnaz Fazaipour  16:58  
So it's probably quite useful to go into the legals with trying to have a fixed costs maybe.

Michael Handford-Arnold  17:03  
Exactly, exactly, have a fixed cost and ask the question, I mean, not to tempt fate, what if the sale doesn't go through and then I employ you for another set of another property I found?

farnaz Fazaipour  17:16  
And what about mortgage offers?

Michael Handford-Arnold  17:18  
Mortgage offers, well they have their own sort of expiry date. If it's expired, then you've got to do it all again, I'm afraid. Quite often people have made, this is the important thing about getting everything, your ducks in order before you start. People will come they've got a mortgage offer, but they've forgotten, they've only got three weeks to run on it. So by the time it gets around to the valuation, it's expired, and you have to start from scratch again, that can annoy your vendor.

farnaz Fazaipour  17:42  
And finally, the deal is fallen through everybody's walks away. And then the sellers sitting there thinking, who should I blame?

Michael Handford-Arnold  17:49  
That is when you really come into your own of pointing out, we're going to try this marketing strategy, going back to disappointed applicants, making sure that they can come forward with a decent offer if they still want the property. And you have to go on damage control, like you have never done before in order to try and remain instructed. Because that is the point where they literally think, okay, I want another agent. If they know you and you've sold with them before, then they'll put it down there experience that as well just put it down to the market and just carry on as normal. But many, many, many people you will need to massage severely to maintain your instruction.

farnaz Fazaipour  18:29  
Well, thank you very much, Michael, for talking to us. It's certainly obvious that whoever gives you a transaction to manage will be in extremely capable hands and have a very positive experience which is which is also part of the equation, isn't it?

Michael Handford-Arnold  18:40  
Very kindly of you to say so, Farnaz. Thank you very much.

Unknown Speaker  18:43  
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