At any point in time, there are thousands of properties on the market. That is a significant number of people waiting to move.
Over two articles, we will explains the steps which sellers can take to help reduce the time a conveyancing transaction takes and, in the process, make their property more marketable to prospective buyers. Plus, we will bust some of the myths around why the process cannot be sped up and what needs to happen to improve the process for all stakeholders.
Starting at the beginning
To be in a position to settle a transaction, the buyer’s conveyancer needs to have verified their client’s identity and the source of their funds; examined the seller’s title and search results; received their client’s mortgage offer; dealt with any other matters provided for in the contract of sale and purchase; and checked, queried and reported on everything to their clients (buyer and lender as applicable). That currently, prior to Covid-19, was taking 18 weeks on average in England and Wales with a “transaction drop-out” of around 34%.
But all of those things could actually have been started before the sale was agreed. Motivated homeowners who intend to sell can be dealing with some of this as soon as they decide to put the property on the market.
So why are they not aware of that?
Why can steps not be taken to reduce the transactions which fail because of delay or detrimental information revealed after acceptance of offer?
In Northern Ireland pre-Covid, the Law Society, National Association of Estate Agents (NAEA) and Royal Institute of Chartered Surveyors signed a MOU which basically agreed that selling agents would encourage sellers, on listing, to instruct their conveyancer to order title, and complete the information forms. As a result, they reduced timescales from 20 to eight weeks.
The NAEA Transaction Reform Group for England & Wales introduced a Sales Protocol in 2019, getting the information form (the Property Information Questionnaire) completed on listing and sending an agreed standard memorandum of sale with chain details to conveyancers. In a trial of 200 transactions, it reduced the timescales to seven weeks. The PIQ forms are available for free on the NAEA website.
In Scotland, it used to be the norm that a property was only brought to the market (by a solicitor or an estate agent) when the seller had their solicitor order up titles and basically ensure that the property was ready for sale.
As a result, missives (the equivalent of the sale contract in England and Wales) were concluded in a short period of time and the examination of title phase followed prior to settlement: a conveyancing transaction essentially being a three-phase transaction (contract/examination of title and reporting/settlement).
That changed, however, as a result of sellers or, more accurately sellers’ solicitors, wanting the buyer to have satisfied themselves on all contractual and title matters prior to a contract being concluded. A classic case of caveat emptor or “let the buyer beware”.
Thankfully, there is still an underlying feeling of commitment by buyers and sellers in Scotland but that is being eroded somewhat. There is, in reality, little difference between practice in Scotland and the “exchange of contracts” system which operates elsewhere in the UK.
Nevertheless, thanks to the success of the Home Report (a legislation-backed Single Survey containing valuation, an Energy Performance Certificate and a Property Questionnaire), the localised nature of the market and links between solicitors and estate agents (often the estate agent and solicitor acting for the seller are employees of the same company), Scottish transaction times are still six to eight weeks and “transaction drop-out” is believed to be less than 12%.
So why does this matter now?
Well, for those selling property now or contemplating the sale of their property, they could be completing their Property Information Questionnaires, ordering searches and title documents, and their conveyancer could be checking them over to get everything into ship-shape condition so that when a buyer is found, legal commitment could follow very quickly.
It is not that any of these things take a long time to gather but it is the conflicting information during the conveyancing process and the lack of any consistency of information that generates additional costly enquiries especially when they are gathered piecemeal over a period of time.
If all the information is available upfront then you avoid additional enquiries and also post-valuation queries because the valuer has the right information when he/she is inspecting the property. English local searches are on average ordered four to eight weeks after the memorandum of sale, on average take 10 days to come back and, where they result in a post-valuation query these, on average, take three weeks to be settled. However, if the information is available at the point of sale and the valuer can see the information at the point of valuation then we can take out a minimum of five weeks delay.
In Denmark, Norway and some states in Australia, to name but a few, they operate a vendor disclosure system and all the information is gathered at listing. Fall-throughs are so low that in some areas they do not even record them; where they do, it is less than 2%. But it is also worth noting that in those countries, exchange of contracts can happen within as little as six working days.
But we do not just have to look to other jurisdictions to see the impact. 22,000 properties are sold at auction every year. The legal pack available upfront before the auction means the contract is made instantly on the fall of the hammer. Data from an auction pack portal indicates that of the 200,000 properties which they added to the portal, one million people registered to view the pack and 22 million documents were downloaded. This demonstrates that prospective purchasers want to see salient information before lodging a bid.
In Part 2, we bust those property buying/selling myths and outline what needs to happen next.
Beth Rudolf, Director of Delivery at the Conveyancing Association and Professor Stewart Brymer of Brymer Legal Limited and the University of Dundee. Both are participants in the Home Buying & Selling Group – https://homebuyingandsellinggroup.co.uk/. The views expressed in this article are the personal views of the authors.
