Why the home buying and selling process in England is outdated, inefficient and expensive
ACCORDING TO RIGHTMOVE, the UK housing market is experiencing the most significant increase in demand over supply in the past decade, inflating the average house price by 0.8% just in March alone. Almost two out of three properties on agents’ books are under offer making this the best-selling market in the past decade. But how many of these properties will reach completion?
According to twentyCi, one in three sales or 28 per cent of all agreed sales subject to contract did not result in the exchange of contracts in 2020. Sales falling through have risen to a record high in the last 22 weeks. Service providers have struggled to deal with the backlog of purchases that have been fuelled by the stamp duty holiday.
The internet is flooded with buyers and sellers telling tales of either the seller or the buyer withdrawing from the agreed sale. With excuses about not wanting to move anymore, personal circumstances changing suddenly, only to find that the house has either come back on the market at a higher price or the buyer has changed their mind and do not want to proceed without offering a proper explanation. According to the HomeOwner Alliance, each sale that falls through costs an average of £2,727 in lost fees and charges for conveyancing, survey and searches, with emotional cost often considerably higher.
The main complain amongst homebuyers is not the cost of moving but the uncertainty. They say that “it is crazy you don’t know who you can trust, and you can be asked for the same information multiple times for things like utility bills etc., when the information is available online. There is no certainty or transparency, which is crazy when this is your biggest asset.”
What is the solution?
A collaboration of industry professionals set up a Home Buying and Selling group in 2017 to advise the government on ways to improve the buying and selling process. The buying process is 22 weeks of economic stasis whereby you cannot book a holiday, get your kids into school or even buy a sofa. The group suggests that if we had binding offers, you could be in your new home in 12 weeks, making it a much more efficient process.
Binding Offers:
Binding offers, also known as reservation agreements, are when buyers reserve the right to buy a property when the offer is accepted. The seller and the buyer sign a contract agreeing that the home will not be sold to anyone else within a defined period, typically three to six months. Each party commits to paying a deposit to cover costs in the event a contract is not honoured.
However, a binding offer is only worth contemplating if there is greater transparency where the seller provides the information such as surveys, searches etc. before signing the binding contract, and the buyer has proof of funds or mortgage in principle ready so that the seller is confident that the buyer is serious.
Compensation Agreement:
This could be an agreement set up when the offer is accepted that either side would commit to paying any costs incurred should either party pull out for a non-justifiable reason. This is a system that works well in the Netherlands and Australia.
Buy and sell at a property auction:
Property auctions are an incredibly efficient way of buying a property as you essentially exchange contracts the minute the hammer falls, and you tend to complete 28 days after that. If the seller or the buyer withdraws from the sale after that, they will lose their deposit or compensate the other party.
However, you have to be incredibly careful when buying at auctions and ensure that you do your research before you even consider bidding. Make sure you read the legal pack, get the house surveyed before you bid and make sure your mortgage can be arranged in time if that is how you plan on funding the property purchase. If you tick all boxes, not only is a property auction a very efficient way of buying a property buy you can bag some bargains as well.
Get Britain Moving Campaign:
UK housing wealth hit a record high of £7.56 trillion last year, more than four times the value of all companies in the FTSE 100. According to Savills estate agency, the combined value of all homes in the UK rose £380 billion in 2020 compared with 2019, the most significant increase in five years. Yet there are 600,000 sales stuck in the system, and this needs to be addressed, and the home buying and selling process needs to be dragged into the 21st Century.
The Times last week launched a campaign to “Get Britain Moving: Speed up. Streamline. Save Money.” It has two main aims: to reduce uncertainty by calling for the introduction of reservation agreements and greater transparency through the use of digital innovation to create, faster, more secure and less stressful way to buy a property.
The government has repeatedly stressed the importance of the housing market, directly employing more than half a million people with each home estimated to add almost £38,000 to the GDP. This is an issue that needs to be addressed fast as this is not a new issue but is getting worse, and there needs to be some accountability on both the buyer and the seller’s part.