‘Estate agents should embrace all the options to fix broken chains’

From a home mover’s perspective being confronted with a sale falling through is one of the most crushing things that can happen in an already highly stressful scenario.

By no fault of their own they’re on the hook to lose thousands of pounds and possibly the home of their dreams – all because someone they’ve probably never met has pulled out at the last minute, suddenly changed their offer or was unable to arrange a mortgage.

UNENVIABLE POSITION

And there’s not a huge amount buyers can do about it. And if they’re in the unenviable position of being a first-time buyer at the moment they’re almost certainly at the start of a chain.

Obviously, buying a vacant property is a way to avoid chains but these are few and far between.

Another route is through uncommon financing arrangements such as selling before buying, arranging a bringing loan or increasing their mortgage before moving.

But most don’t have the financial freedom to do so and follow the typical route of finding a buyer for their current property to release the funds at the same time as they move into a new one.

And as we know, as a result the vast majority of typical transactions involve a property chain of some length.

Broken chains

And as the housing market feels the impacts of fourteen interest rate rises from the Bank of England demand is shrinking and ultimately transactions are becoming less stable as affordability takes a hit and people have to rethink their mortgage arrangements.

Recent industry estimates have suggested that the number of collapsed property transactions has increased 10% between Q1 and Q2 this year. This is corroborated by HMRC data that has measured an overall fall in residential transactions of 20% between September 2022 and 2023. And lower demand is also stretching sale times. Recent market data shows that the time it takes to sell a home doubled between 2022 and 2023.

Naturally, agents are feeling the pain of such a slowdown in the property market.

Not only are there fewer transactions overall but those in the process of transacting are susceptible to big shifts in affordability as the market adjusts to these higher mortgage rates.

So how do agents and sellers fix this thorny issue beyond sitting on their hands and waiting on the next big boom in the housing market? The answer is simple – embrace greater choice.

TRICKY ISSUES

Third-party products are out there to help agents solve exactly the sort of tricky issues, such as broken chains, that are the result of a cooling housing market.

Tech-enabled approaches such as those offered by instant buying firms or predictive data science platforms, for example, can help either immediately find a buyer to rescue a chain, or provide agents with the information they need to act quickly when a transaction falls through.

However, the agency sector remains largely analogue. When presented with a collapsing property chain the most seasoned estate agents might be able to find the perfect buyer in a matter of weeks, leveraging their extensive contact books, peer-to-peer networks and intuitive feel for the market. Unfortunately for a lot of agents this remains a pipe dream and especially so in a cooling market.

It’s not that the industry is resistant to change. Many agents simply aren’t aware that there are other options to the traditional route.

But as the housing market enters a particularly uncertain period it’s imperative these choices are clear and widely available.

Fred Jones (main picture) is Chief Operating Officer at UPSTIX