Most Popular

Enter your email address:

Twitter

Is the property transaction process outdated?

By on October 31, 2013
Aborted Sales infograph (1)

Buying and moving to a new home is stressful, but rewarding once the financially demanding process is over and you are in your new home!

As well as being an online property portal that aims to provide a great service to our agents, Needaproperty is also heavily invested and concerned for the end-user’s experience. We know how taxing the latter process of buying a house or flat can be. For this reason, Needaproperty always ensures that buyers can browse numerous residential properties in one place, with fantastic search features unique to our site.

Having said this, we cannot ignore the flaws in the current property transaction process, especially when there is money involved. There is an estimated annual financial loss of £800million on transaction fees for sales – including those that have fallen through. eMoov.co.uk ‘s research also revealed that the average buyer spends close to £1,800 on legal fees, estate agent commission and surveying costs on a single property transaction.

Flaws Elaborated

Time: It takes approximately eight to nine weeks for the buying and selling process to be completed. This is far too long, as delay means more costs are incurred during that protracted time. In addition, leading to our next point – this lengthy process gives way for ‘bidding wars’ to occur.

‘Bidding Wars’: Many buyers have been let down by sellers when the seller accepts another offer despite having made an agreement of sale. This can be mainly attributed to the lengthy eight to nine week period, which makes the buyer vulnerable to out-bidders when no formal contract has been exchanged. ‘It is a supply and demand situation, demand is high, while supply is low – of course this leads sellers to actively seek and choose the highest bidder on their property’, says the CEO of Needaproperty.com – Scott Green.

Agreement of Sale: Buyers tend to agree to a sale both verbally and via solicitors exchanging property documents, prior to any exchange of legally binding contracts. This is a major flaw, because a colloquial ‘agreement of sale’ means nothing until the contracts have been signed. As a result, the buyer is even more susceptible to being the victim of ‘bidding wars’ as mentioned above and financial loss if the sale falls through.

Financial Loss: The financial loss incurred comes from four major areas; surveying/valuation costs, commission from estate agents, mortgage lenders and solicitors. These external parties involved in the transaction process still make a profit even when the sale falls through – why? Because there is no insurance policy or guarantee for buyers who invest their money in these four sectors, to protect them from aborted sales. In addition, the current property transaction system ultimately requires these four areas to be procured before any exchange of legally binding contracts.

Stress: As mentioned before buying a house is one of the most stressful life-changing event. Those buying a new home are emotionally invested right from the beginning of the search to the ‘sale agreement’. eMoov.co.uk‘s survey suggests that approximately half the respondents likened the stress of purchasing a house to the induced stress of getting married or being in debt.

We asked our twitter followers what they thought…

What is the solution?

The current system has been around for over 700 years with a few unfruitful changes. The introduction of the Home Information Packs (HIPS) by the New Labour government in 2004 is a fitting example. These packs were to be provided before a property could be put up on the open property market, with the intention of reducing the number of abortive sales. Unfortunately, the antithesis occurred as more costs were incurred in creating the pack, which later resulted in the suspension of HIPS in 2010. So what can be done now, to ease the property transaction process?

Insurance Policy: There ought to be some sort of guarantee or ‘financial security blanket’ that is offered to buyers. This is to reassure them that their financial expenditure (surveying, solicitor fees etc.) prior to exchanging contracts is not in vain or wasted, in the event that a sale is aborted. It also attributes a degree of accountability to the seller!

Adopt America (US) and Scotland’s methods: In America, an offer on a property requires a deposit and a written contract. The deposit is a buffer to reduce the likelihood of the sale being terminated. Scotland is less stringent – here, once an offer is accepted on a property, the ‘agreement’ is legally binding. This method is envied among buyers as it avoids delay and additional costs.

New Builds: New Builds are less stressful, as you are usually not buying from a previous owner and ‘bidding wars’ are highly unlikely!

We have discussed the flaws of the current system, the desperate need to update it and ways to improve. Needaproperty desires for the buyer experience to be a pleasant one, right from using our website to search to moving into your new home. The property market is a work-in-progress, especially with the evolution of technology. Things may change, sooner than later…we hope!

Let us know what you think!

Join the conversation on LinkedIn

Tweet us: @NeedAProperty

Facebook: /NeedAProperty

Leave a Reply

Your email address will not be published. Required fields are marked *