Covid-19 creating the biggest paradigm shift in UK property

The Covid-19 pandemic is creating the biggest paradigm shift in the UK property sector since the arrival of the internet yet, after the initial shock of lockdown back in March, the return to work in May has seen large parts of the industry simply revert to the way things were before.

In my opinion this is a large part of the reason why sales transactions are taking over six months from listing to completion. It also contributes to why the substantial pipelines that most businesses have now created, are at risk of aborting, and not producing the much needed transactional income and economic benefits that everyone hoped for.

The Government has fuelled the flames with its stamp duty “holiday” which has brought forward the moving plans of many but, if reports of transaction times taking six months remain true, it is already too late for the majority to get their property on the market and expect to complete by the end of March next year! This is terrible news and a sad indictment on the inability of large parts of the industry to innovate and bring about positive change. Unless the Government makes permanent changes to stamp duty or extends the “holiday”, I foresee a “blood bath” in February and March with transactions either needing to be renegotiated (with mortgage lending issues etc.) or falling through.

Generically, conveyancers are, sadly, largely part of the problem rather than the solution. I am still hearing reports of staff on furlough, firms working from home with out dated IT that does not facilitate remote working and this, coupled with a reactive rather than proactive approach is a huge contributor to delays in the process. I appreciate the need for cashflow but this is less likely to materialise unless some resource is allocated to ensuring an ability to process the work.

Of course, mortgage lenders are reverting to Mark Twain’s famous description of bankers who are happy to lend you an umbrella when the sun is shining but demand it back as soon as it starts raining. Of course, one can understand a greater air of caution in these challenging times but the effects of these issues would be mitigated with buyers obtaining agreements in principle ahead of purchases and if the conveyancing process was swifter.

Search providers and management companies on leasehold properties are also failing to cover themselves in glory.

Estate agents who, in the last twenty years, have capitalised on their position as catalysts for the process and controlled the distribution of conveyancing work, often based more on receiving a referral fee than on the quality and speed of service being provided, have largely missed the opportunity to change and improve the process.

Back in March, the talk was of virtual viewings with agents accompanying potential buyers around properties on zoom or other web based software. Whilst, buyers are never likely (or advised) to purchase based on a virtual tour rather than a property visit, the more enlightened agents took the opportunity to restructure their operations so that the “virtual viewing” became the first stage viewing in the sales process, making better use of everyone’s time and meaning that when physical viewings took place, the conversion to offers and sales was much greater. Most agents now, in October, are back conducting large numbers of physical viewings with a “throw it against the wall and hope it sticks” approach.

Agents should, in co-operation with conveyancers, have moved far more proactively towards “legal ready” instructions. Quite simply, at the time the property is placed on the open market, the sellers side should prepare all of the standard information that a buyer will need so that by the time a buyer is found, a good two or three weeks can be taken off the overall transaction time.

I blame both agents and conveyancers for, in the main, failing to do this. Naivity from agents who are just happy to get a property on the market for sale and a reluctance from conveyancers to undertake any work that may prove abortive.

Most agents work on a no move, no fee basis and I have often argued that both they and conveyancers should be more closely aligned in the propositions they put in front of consumers. I understand the commercial imperatives but a combination of better use of IT and increasing fees would solve this aspect fairly easily.

My view is very simple, the only realistic way to speed up transactions and therefore reduce the delays and risks that come with it, is to get ahead of the game and for everyone to be better prepared. Sellers being legal ready and buyers being finance ready. It won’t solve everything but is would certainly help. It will need the professionals involved though to be brave and bring about change. The Home Buying and Selling Group (of which I am a participant) have issued their “pledge” and there are some local “schemes” emerging across the country to try and move forward.

Home Information Packs were perhaps deemed a failure but, whilst the implementation and product needed refinement, the intention and provision of upfront information was correct. That history is possibly tarnishing the landscape and causing too many to be too reticent about change.

It was Machiavelli that stated in his epic book the Prince:

“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success than the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions and lukewarm defenders in those who may do well under the new.”

In my opinion, Covid19 will prove to be the current equivalent of the meteorite that killed off the original dinosaurs and, particularly if we see more local or even national restrictions put in place, many of the current dinosaurs who remain oblivious to the paradigm shift occurring, will probably remain so until it’s too late.

4 Comments

  • test

    There is currently, one main reason why transactions are taking so long. Those who drive the process, lenders, agents, conveyancers, Local Authorities, surveyors etc are unable to cope with the sheer volume of work.

    Most of the BLG members are working hours that is not healthy, increasing their prices and turning away work.

    At this moment in time I do not want to be drawn on who the weakest link might be and why. However, as most people who know me appreciate, I was a firm believer in Hips (and my Hip business was getting very close to producing exchange ready Hips) and am a firm believer in seller’s packs, and using the ‘legally dead’ time to produce them, i.e. when the property is on the market.

    Keep your eyes open for Bold Legal Move, a pack production process that will be launched very soon.

    In the meantime, the Government needs to re-think the cliff edge end of the SDLT changes. Not only (as Mike says) will there be a blood bath in the first quarter, but there will also be an eerie silence in the second quarter and beyond.

  • test

    The scrapping of HIPs was a huge mistake – we had given evidence to Parliament that it was improving transaction timescales, but with the change of Government and with powerful vested interests lobbying against HIPs, the baby got thrown out with the bath water. Without compulsion, the voluntary HIPs being offered again today will always struggle, unless all Estate Agents use their considerable sales skills to make them an essential part of the process for the customer.

    I feel enormous sympathy for Conveyancers – it’s a really tough job that is enormously undervalued by customers, who increasingly want their cake and eat it.. do nothing, minimise cost, then when it suits them, make unrealistic demands.. all on a “no sale no fee” basis. As a result of stress and poor returns, many Conveyancers have left the profession. Now there is a capacity crisis, and Conveyancers have a once in lifetime opportunity to put their prices up considerably, to correctly reflect the time and effort required. I would also immediately charge double the amount of legal fees on leasehold transactions, and charge a proper legal fee for doing the lender’s legal work – if customers don’t like it, they can try their luck elsewhere.

    Estate Agents should support legal fee increases, and educate customers to value their Conveyancer and not shop on price alone.

    • test

      Roger I agree with your last sentance. In addition estate agents should be working with their clients selling to help them prepare ‘Up front’ information. Estate agents need to win this space to help broaden their offering. It is often the estate agents energy and drive that keeps the deal together.

  • test

    Well we agree 100% with everything you say Mike. As you known Ryder & Dutton Estate Agents in conjunction with 8 Law firms started what we call Contract Ready (Legally Ready) – in July and using our superb Minerva Platform we are now starting to see the benefits. In some areas – eg Calderdale (Halifax) searches can take 7 weeks but under contract ready the searches can be available as soon as the contract is sent which can be the day after a MOS is sent.

    We are also removing loads of duplication by sharing ID and Property Information forms with both conveyancers and agents.

    This doesn’t solve the whole chain issue but it does remove substantial delays and is just common sense. No one will solve all the issues overnight but by using the right technology and by people being open to change things will start to happen. There has been too much hot air for many years from lawyers and agents. This time to change is now.

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