Greater certainty remains key to avoiding aborted transactions
When it comes to housing transactions, I often look at the regular statistics that are released and think of what might be.
For a transaction which can be the most stressful of all to complete for consumers, we don’t tend to dwell a great deal on what could make that experience better, or indeed the huge amount of wasted money that the process eats up each and every year.
I can think of few other purchases which would follow the path of buying a house, or indeed where the people involved would just have to suck up the disappointment that hits those people involved in approximately a third of all transactions each and every year.
Can you imagine walking into a car dealership, ordering a new car, paying a deposit, then having the dealership pull out on you and them keeping your deposit? And they would be able to say, ‘Sorry that’s the risk you take.’
Now I appreciate that consumers don’t put down a deposit on the home at the outset, although you might argue it’s required for a new-build, but they do have to pay upfront for a number of services related to that sale. And they’re only paying for them because they have to in order to buy the house.
That, to me, suggests that it’s a commitment on their part, certainly a financial commitment and I can’t quite fathom that these people are being left out of pocket when/if a property falls-through and they don’t get to actually buy it.
It’s even more galling when, in most cases, the individuals concerned are not at fault at all, although there are also a lot of buyers who pay this money and then pull out themselves.
In essence, this is a messy situation by anyone’s estimation, and the latest figures appear to reveal it’s getting worse. According to House Buyer Bureau, nearly 70,000 property sales fell through in the second quarter of 2023, a 10.2% increase on the same quarter.
Extrapolate that out, and we’re talking around 270,000 to 280,000 transactions falling through in the UK this year, which is likely to be over a quarter of the total number that do complete.
In terms of wasted money, the average cost of a fall-through is deemed to be just shy of £3,400, which means in Q2 alone, almost £238m was wasted on sales which didn’t complete, and it won’t take a genius to work out that means we are just short of £1bn of wasted cost from all the fall-throughs that take place within our market.
Anyone looking at that figure and not finding it mind-blowing and, quite frankly, embarrassing is probably not quite grasping its enormity, not just on the pockets of those who are shelling this money out, but in terms of the wasted time, resources, investment, money that property market stakeholders will be having to stomach, and the wasted business and income that could have been generated.
It is, quite frankly staggering, and the somewhat remarkable tale here is that the number of failed transactions this year is actually less than last year for both numbers and the total cost of each one.
While I’m acutely aware of the work, particularly from the conveyancing sector, to bring these numbers down in terms of better upfront information, digital solutions, and the like, the fact that this isn’t headline news across our industry, and that all stakeholders – particularly the Government – haven’t tried to nip this in the bud years ago, is again somewhat embarrassing.
In our own way, we’re trying to cut down on the wasted costs of a fall-through by providing clients with a free search pack if this issue does befall them, but clearly overall it would be far better for all of us – but specifically the consumer – if we could cut the number down to even half of its current level.
It’s perhaps no wonder that some people view the purchase process with nothing but fear and trepidation, and how odd that we still have a process in which this can happen so regularly, especially when it seems so out of kilter with the consumer purchase experience in all parts of retail, for example.
Greater certainty, greater knowledge, greater transparency, greater efficiency, when buying a home would all help reduce the chances of a transaction failing, and it’s not as if we don’t have solutions to be able to deliver all of this.
This will remain an issue until we grasp the nettle and deliver upfront information to consumers at the very start of their journey, not half-way through it, and we should also seek to ensure conveyancers are instructed as early as possible, and that everyone is able to benefit from a central hub for property information, and that we don’t have multiple stakeholders all carrying out the same tasks, for example, ID verification, when they should all be able to rely on one source.
Introducing that certainty and efficiency will make a massive difference; there are too many surprises currently – remove these and we should reduce the aborted transaction numbers, ensuring greater consumer satisfaction and an ability to get paid for all the work carried out by all stakeholders.
Mark Snape is chief executive officer of Broker Conveyancing