There is a considerable amount of evidence in the marketplace to show just how damaging aborted transactions and fall throughs can be for every single stakeholder – from the customer themselves to the agent, to the adviser and lender, the surveyor and conveyancer, and indeed the Exchequer which misses out on all the tax from the purchase(s).
In a way, just on that last point alone, you have to wonder why more hasn’t been done at a Governmental level to tackle this very subject. Even during periods of huge housing market activity, there must always be an acute sense of disappointment and frustration that one in three transactions never make it to completion, depriving the Treasury of the tax from those individual purchases, but also all the economic benefit – and further and future taxation – that would be generated by other stakeholders involvement.
With no purchase comes no removals, no purchase means no money spent on new furnishings or white goods, no DIY activity, etc. It’s not just those upfront firms and businesses that are missing out on the income that would be generated but all those who might benefit after the move has been completed.
There is a corresponding issue here in terms of transactions and completion times, and that comes in the form of the time it takes to get to the end of a purchase. Of course, the longer it takes, the more time there is for a fall-through, but as we have also been trying to show, a lengthening time to completion means that the pipeline for agents/advisers/lenders/conveyancers, turns much slower and income generation is likely to suffer extensively.
Landmark recently produced its cross-market report on this very issue throughout the transaction chain, revealing that the number progressing to completion during Q2 this year was 11% down on the same figure pre-pandemic back in Q2 2019, and 7% down on the first quarter of this year.
As you will probably already know, the average transaction time also continues to lengthen, meaning that pipelines are taking much longer to work their way through. Landmark data shows that the average transaction time has gone from 91 days in the first half of 2019 to 118 days in the first half of this year.
However, some might question whether this truly impacts a business in the way we are suggesting? Is it having a debilitating impact on income generation, which will clearly impact on growth ambitions, future investment, bringing in greater resource, etc?
If you do want evidence, I would suggest you look at the recent half-year results posted by LSL which show in full effect how transaction delays impact on pipeline turnover and income. It reported an underlying operating loss of £1m in its estate agency division specifically citing delays in turning its pipeline; it said that, had the pipeline turned at a “normal” speed, that £1m loss would actually have been a £6m higher profit.
And the knock-on effect of this on profitability, was also visible. LSL said profit from activity in the second half of this year now wouldn’t come through to the business until 2023 and it was therefore anticipating full-year profits to be lower than previous expectations.
This lengthening of timeframes to completion and the subsequent financial impact on all stakeholder firms, including conveyancers, is something we have highlighted to the industry and Government, in order to impress upon everyone just how important the changes we want to see to the home buying and selling process are.
The other point to make here is around the shift in the UK housing market in recent weeks. We would probably all agree that this has been a seller’s market over the course of the pandemic and beyond, however conveyancers and estate agents are I hope beginning to see that we are moving towards more of a buyers’ market.
This, while fall throughs continue to number far too many and are increasing ever further. Conveyancers, like other property professionals, are suffering from resource issues at present, and again the longer the transaction takes to complete, the greater chance of an aborted transaction.
So, what will help? Undoubtedly, upfront information and how it is utilised by the industry and stakeholders can make a difference, helping move the market from “potential buyers” to “proceedable buyers” who have been provided with all the information they need upfront to make an informed decision, and have themselves been checked to see they are in a position to proceed before an offer is made and accepted.
By doing this, conveyancers will be able to focus on reviewing information all in one go – provided by the upfront information – thus reducing the cost of chasing up documents and dealing with conflicting or missing information. To quote Radiohead, this is the “no alarms and no surprises”, approach to purchasing a house and means we can greatly reduce the chances of anyone being caught unawares and feeling they can’t proceed.
Having a much more efficient process, makes everyone more efficient, ensures the transaction times come down, turns the pipeline far more quickly, and ensures everyone gets paid in a much shorter timeframe, increasing profitability, and allowing everything that profit ensures firms can do. The tools to solve this issue are here – let’s use them and cut the transaction times and fall throughs down to an absolute minimum and create a positive home moving experience for all.
Beth Rudolf is Director of Delivery at the Conveyancing Association (CA)
