Making progress in conveyancing

Conveyancing remains the bane of the lives of everyone involved in house-moving. But change is coming, says Richard Reed.

Link to Conveyancing featureSorry, I’m going to have to pull out…” The words every agent dreads. There can be few things more frustrating – weeks of time and effort with initial viewings, second viewings, ID checks and liaising with solicitors go down the drain in an instant. It’s back to square one.

It is estimated that an astonishing one in three property sales now falls through at some stage in the process.

Calculate that in terms of staff time in remarketing the property, viewings and paperwork – again, the cost run to millions of pounds a year.

Scotland, of course, has a different system – once a price and timescale are agreed, the buyer’s and seller’s solicitors exchange letters called ‘missives’ setting out the terms and conditions of sale, creating a legally binding contract.

There are calls for the rest of the UK to adopt a similar system and the government is now looking at a pilot scheme to see if it could work south of the border.

Some of the big house-builders already use what are known as reservation agreements, requiring the buyer to put down a cash deposit of around £1,000 to secure a house off-plan.

Communication is the key

Link to Conveyancing featureThis concept has started to spread to private sales, though opinion is divided as to whether a deposit system will work unless it becomes a legal requirement. “It’s not a bad idea – the process can be extremely stressful, knowing there is a deposit there would give reassurance,” says George Smith, Managing Director, Sales Pro.

It is a risk. It depends how large the reservation fee is. I don’t think a £500 reservation fee would make buyers question whether to pull out or not. It’s got to be £5,000, or so. George Smith MD, Sales Pro.

George is also concerned whether the timing of the trial is right, “I think it is a risk that it will put certain buyers off, especially first-time buyers. It depends how large the reservation fee is. I don’t think a £500 reservation fee would make buyers question whether to pull out. It’s got to be £5,000, or so.”

Sales Pro manages the entire sales-progression process for estate agents, its fall-through rate is just 12 per cent – which is well below the average 33 per cent, despite being skewed upwards by tricky conveyances on London leasehold properties.

“Constant communication – that’s the key,” he says. “A constant line of communication between every party. We can only control the controllables, as long as everything is transparent and all parties are aware of it, we can deal with it.

“It’s the shock factor that makes people pull out; it’s keeping things secret, whether it’s second thoughts or a changing financial situation. As long as it’s discussed about there is always a way round it, saving the deal, if the finance is still in place.”

Cost of fall-throughs

Emma Vigus, Managing Director, Mio, a sales progression platform, says property transactions fall through for a number of reasons.

“One key challenge is that the research to date hasn’t fully explored the real causes of aborted transactions, which makes developing effective solutions difficult.

“We also need to appreciate that transactions often fail for reasons that are beyond the control of the estate agent, or indeed any other party to a transaction – deaths, divorces, marriages, births or sudden changes in financial circumstances which nobody could have foreseen.”

Vigus believes the key to solving the challenge is to focus on mitigating risk factors.

“Managing the expectations of the buyer and the seller from the start of the process is critical. I’d much rather have an informed view of what’s going to happen and how long it’s going to take rather than being told it’ll all be completed in six weeks,” she says.

Robust qualification of the buyer and seller to ensure they are both committed and equipped to complete the transaction is also important.

Buyers and sellers need to see what’s happening and why. Evidencing efficient sales progression shows the value they bring to the process.

“Time-wasters don’t help anyone and it’s fairly easy to weed them out with clever questioning. I’m a big fan of the provision of more up-front information to ensure the buyer has taken an informed decision based on the facts, rather than just the sales pitch.”

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She thinks agents should also make full use of sales progression tools such as mio, which allows agents, buyers and sellers to see the state of play at a glance, to ensure good communication once the sale has been agreed.

“Buyers and sellers need to understand what’s happening and why it’s happening,” she says. “Agents need to appreciate that evidencing efficient sales progression is a great way to demonstrate the value they bring to the process.”

Something on which everyone is agreed is that transparency is the key to a successful outcome – and that it’s a good idea for buyers to have some ‘skin in the game’.

Reservation agreements may well deter some buyers – but as the old saying goes, a bird in the hand is worth two in the bush. Every time.

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Time consuming process

Link to Conveyancing featureCarl Brignell of Elite Conveyancing thinks that drawing up reservation agreements can cause so much argument between buyer and seller that they are more trouble than they are worth.

“We were spending two or three weeks negotiating a reservation agreement when we could just have cracked on with the conveyancing and got to exchange the standard way. I understand the demand, because it’s such an antiquated process but I’m not convinced reservation agreements are the answer.”

We hear every day of clients who want to buy a property, instruct a solicitor, haven’t heard from them for a couple of weeks, and then decide they’ve found something else. Carl Brignell, Elite Conveyancing.

Brignell believes the biggest factors in the high fall-through rate are the “out of date” conveyancing process and overworked or underqualified conveyancers who fail to keep clients updated.

“If they knew what they were doing and they weren’t overloaded the process wouldn’t be as onerous as everybody makes out,” he adds.

“We hear every day of clients who want to buy a property, instruct a solicitor, haven’t heard from them for a couple of weeks, and then decide they’ve found something else.”

Elite uses a small panel of hand-picked conveyancers, with agreed protocols, while agents are kept regularly updated on progress. Brignell also thinks the reservation agreements used by housebuilders are usually one-sided.

“Typically the developer wants you to commit to purchasing their property unconditionally,” he says. “Once the solicitor is instructed to act for the buyer, they say, ‘Hang on, subject to survey, subject to funds, subject to a clear search, subject to us being able to look at the lease…’ – and all those things.”

So would any kind of deposit scheme work? “The concept isn’t a bad one, it gives you a shortcut to everything we’re talking about, but at the moment it’s being touted by private companies… There needs to be a standardisation of what these reservation agreements are so that it’s fair on both sides.”

Big deposits needed

Link to Conveyancing featurePeter Joseph, CEO of conveyancing platform The Moving Hub, agrees, but thinks fees would need to be pretty hefty for the system to work. “The last one was about three months ago, it was ridiculous,” he says. “The clients were looking at a new-build and the deposit was £750, they said they were still looking at other houses. In the end they were happy to lose that money, and went elsewhere.

If the government steps in it would need to be one 1 or 2% of the purchase price, but a caveat could be to have to be another survey on the property as well as the mortgage survey. Peter Joseph, The Moving Hub.

“If the government step in it would probably have to be around one per cent to two per cent [of the purchase price], £2,000, but the caveat would have to be to have some sort of survey on the property other than just the mortgage survey.”

Joseph believes the house-buying process needs to be more transparent, a survey should be carried out up front by the vendor, or failing that, the cost should be refundable if issues show up that weren’t known about or disclosed.

Emma Vigus adds, “The fairest way would be that the seller puts in a bond of £350 to be redeemed by the buyer if they are out of pocket on the survey. That would be the ideal solution, but it’s way, way off.”

Joseph says it’s not uncommon for buyers to put in “silly” bids in the hope that one will be accepted. “Often it’s an investor looking for a second property. Sometimes it happens with first-time buyers, too, who play the game with different developers.

“If people have something to lose there isn’t so much gazumping and gazundering and it would make the whole process much more transparent and quicker.”

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Link to Conveyancing featureSohail Rashid, CEO and co-founder of conveyancing data firm View My Chain, believes reservation agreements have their place, but not for every type of sale. “I don’t think it works for the whole of the market but look at new-build, reservation agreements have a very good outcome in completion times and fall-through rates,” he says. “That data would suggest that a proportion of the market would benefit from that certainty, because we know that SSTCs don’t give that to consumers.

I don’t think it works for the whole of the market but look at new-build, reservation agreements have a very good outcome in completion times and fall-through rates. Sohail Rashid, View My Chain.

“There will be some sellers and buyers it doesn’t work for, and there will be some areas of the market where it doesn’t deliver those outcomes… but overall there would be some benefit to increasing certainty earlier in the process.”

Like others, Rashid believes the main reason for sales falling through is a lack of transparency, leading to doubt and second thoughts on the part of the buyer – with complex conveyancing chains the chief culprit, in his view.

“The issue on fall-throughs and why there are so high is due to consumer confidence. Sales progression is taking 18-20 weeks compared with 12-14 weeks a few years ago; that’s the bigger issue rather than speculative offers.”

View My Chain aims to tackle that problem by harvesting data from a variety of sources that allows everyone in the chain – buyer, seller, agent, conveyancer – to see precisely what stage has been reached, and what milestones have been ticked off.

Rashid says the length of a chain is often a big unknown – something he describes as shocking. “Over 50 per cent of properties are now subject to a chain and there are multiple points of risk that need to be carefully managed,” he says.

“With lower consumer confidence there is increased risk of people, due to a lack of transparency, thinking the transaction isn’t progressing and therefore increasing the chance of a fall-through.”

Pilot schemes

Link to Conveyancing featureGazeal, the company that has been pioneering the idea in England, held discussions with the MHCLG just before Christmas about how a pilot scheme might work. “We wanted to make sure that when they go to trial they execute it the correct way,” said director Bryan Mansell. “We were concerned they might execute a badly performed trial that gave them the conclusion that reservation agreements don’t work, whereas we know they do work, because we are already doing it.”

We were concerned they might execute a badly performed trial, concluding that reservation agreements don’t work, but they do work, because we are already doing it. Bryan Mansell, Gazeal.

Bryan said he didn’t expect any new scheme to be mandatory, but that agents would sign up as part of a voluntary code of conduct. “They are very keen to go to trial, they just wanted to make sure they plan it properly, take on advice from various parties, and pick parts of the country where they can try it and assess the feedback.”

Mansell was given no firm date for when the trial might be rolled out, but says his “gut feeling” is that it could be June or July.

Gazeal offers a reservation agreement where rather than having to stump up a hefty cash deposit, the buyer and seller each pay a £250 reservation fee. If either party withdraws from the sale for no good reason, Gazeal guarantees to pay £2,000 to the injured party – and recovers the cash from the person who defaulted.

It’s a system that obviously works, as so far Gazeal has achieved an astonishing 100 per cent success rate with all sales going through to completion.

Since the reservation agreement also includes timescales for exchange and completion, it concentrates minds on both sides. Mansell estimates an average of three and a half weeks are shaved off the conveyancing process, with both parties’ solicitors working to meet the agreed deadlines. Crucially, there are ‘get out’ clauses for issues such as undisclosed faults showing up in a survey, or problems with a title. “When a reservation agreement is executed the correct way it doesn’t penalise people, it just sets out very clearly what is expected,” says Mansell.

Old school, new rules

Meanwhile, behind all the debate about new methods of working, one innovative company is focusing on streamlining what is already there, using the power of cutting edge proptech. Convey Choice, a leading provider of expert conveyancing services and part of the CLS group, has made it their mission to drive change by modernising the conveyancing process, significantly reducing the time involved for all parties.

Their online platform unites estate agents, brokers and financial advisers, providing a more transparent approach. This improves communication and delivers speed, convenience and efficiency. Their new automated tool instantly completes all due diligence required to start a transaction and, crucially, it provides real-time updates so the homebuyer can track the progress and be kept in the loop at every stage.

Bring on the change!

So, many estate agents would agree, it is time for a major change in the conveyancing process – whether that is a totally new approach or a digital revision of the existing process. The good news is that those with ideas and innovation are focused on improving the entire home moving process.

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