House Hunter: How does the Scottish system work?

THE PROBLEM

THE PROBLEM

Jane O'Malley writes: My husband's job is being relocated so we're having to move from Yorkshire to Scotland. We want at least three bedrooms in a modern house, located in a beautiful part of Scotland and priced between £300,000 and £350,000. My husband will have to visit different offices, so our home should be within about an hour's drive of both Glasgow and Edinburgh.

We're experienced at moving house - we've done so five times in 12 years because of our jobs - but this is the first time we've had to live in Scotland. I've heard good things about the Scottish house buying system but I'm uncertain about one element of it - the "offers over" method of pricing.

I'm suspicious that we may look at a lot of properties that have advertised prices that appear to be within our limit but because of "offers over", we may find ourselves out-bid by buyers who know the system better than us.

I want to know the answers to these questions please: how does offers over really work? Why does it exist north of the border but not elsewhere in the UK? Is there a chance of opting out of it and simply making a fixed offer? Is it more prevalent in some parts of Scotland than in others?

THE ADVICE

Graham Norwood writes: This is a topical query, given the reform of house buying starting soon across the UK. In England, Wales and Northern Ireland, most sellers advertise an asking price for a home on sale. In a competitive market, buyers offer the asking price or slightly above; in quieter markets such as the current one, most buyers make first offers of about 90 per cent and barter with the seller to an average of about 95 per cent of the asking price.

In Scotland, however, prices are advertised as either being "fixed" or "offers over". Fixed-price sellers will accept the first offer for that price, or something near it, just as elsewhere in the UK.

"Offers over" means the price quoted is the lowest that the seller will accept. Estate agents and solicitors (who act as estate agents in parts of Scotland) advise sellers to adopt this system if they think a property will quickly attract competitive offers.

After this, a blind-bidding system is put into action. Potential buyers who view the property have to lodge a "note of interest" through their own solicitor, to ensure they are told when a closing date for bidding is set. Once enough notes have been lodged, the seller's solicitor sets a closing date and potential buyers must submit secret, closed bids. It is often the case that each bidder has a separate survey on the same property.

Usually the highest bid wins, although a seller is not obliged to accept it and may opt for a lesser amount if the buyer in question can, say, move more quickly.

There are ways of beating the system if you really want a house and can throw money at it. For example, you can make what is called a pre-emptive offer, which has to be 20 to 30 per cent (or even more) above the asking price. You must tell the seller of the offer, through your solicitor, in a bid to tempt him or her to favour your bid over all others.

After a bid is accepted there is the "conclusion of missives", the equivalent of exchanging contracts. While this goes on, yet another higher offer could come in from an existing or new bidder. Estate agents and solicitors must tell the seller, who then decides whether to stick with the "accepted" offer or switch to the higher one.

Many reputable estate agents in Scotland dislike the offers over system. They believe it makes a mockery of professional valuation, as some homes are deliberately under-priced when they go on sale to encourage feverish bidding. But it is still common, so for a £350,000 maximum you would be advised to look at properties advertised with offers over £250,000 to £300,000.

Reform may be at hand, however. The Scottish parliament has tested a single-survey scheme to reduce duplicate surveys by rival bidders, and Scottish politicians are monitoring the introduction of home information packs in England and Wales, which aim to make the house moving process smoother, quicker and cheaper.

THE SOLUTION

Property one: A modern four-bedroom bungalow with a large garden near Arrochar.

Price: Offers over £295,000.

Agent's details: This spacious bungalow, built in 1990, has been redecorated by the present owners. It is set back from the village of Arrochar and is within the Loch Lomond and Trossachs National Park. It is has two bathrooms and has been occasionally used for bed and breakfast accommodation.

Agent: Savills, 0141 222 5875.

Property two: Modern three-bed home with garden.

Price: Offers over £265,000.

Agent's details: Orchard Grove is on a small estate of modern homes, in the valley of the River Tay on flat land between the river and Kinoull Hill. It has three bedrooms, two bathrooms and a triple garage with an adjoining workshop. It sits in grounds of almost three quarters of an acre.

Agent: Strutt & Parker, 0131 226 2500.

Property three: Modern five-bed house with large garden ( above).

Price: Offers over £295,000.

Agent's details: This spacious family house was built nine years ago by the current owners, in a peaceful location at Heriot in Midlothian. It has five bedrooms, three bathrooms, a conservatory, workshop area and a garage.

Agent: Knight Frank, 01578 722814.

FACT FILE: SCOTLAND

New properties in Scotland increased strongly in price over the course of last year, encouraging sellers who may want "offers over" bidding to produce higher starting prices. The Nationwide building society says the average cost of a new home north of the border rose by a little over 10 per cent during the year, although it predicts smaller increases in 2005.

The markets in both inner-city Glasgow and Edinburgh rose by more than 10 per cent in 2004, too, and some commuter areas further away saw even higher increases.

For example, Falkirk prices rose 16.9 per cent and Stirling by 22.8 per cent as a result of people moving further out to more affordable areas, according to the Edinburgh Solicitors' Property Centre.

If you would like House Hunter's help in finding a property in the UK or overseas, write to: The Independent, 191 Marsh Wall, London E14 9RS, 020-7005-2000 or e-mail: househunter@independent.co.uk