Does Up-Front Information Really Help Home Sales To Move More Quickly?
I recently had the misfortune of reading a blog post from a member of the M.S.P. brigade (not to be confused with the M.C.P. brigade although I believe a firm link has not yet been scientifically disproven).
This Male, Stale & Pale enemy of progress, is not only quick to shoot down any kind of change in the property industry, his "expert advice" to others in the profession is questionable at best, and downright dangerous if you're following it in the hopes it would save your business.
He mockingly suggested there was zero evidence that up-front information actually helped people to move home quickly, and whilst he suggested it might shave "a week or two" off the process, the implication was we'd all be far better off following the status quo, allowing things to take as long as they take, and to hell with the impact it has on the clients they're being paid to serve.
A thoroughly naïve stance to take at best if you ask me, but let's give him the benefit of the doubt and take a look to see if his comments actually have any substance or if it's all just bluff, bluster and hot air.
At the time of writing this blog, the average timescale from acceptance of an offer on a property, to exchanging contracts, is running at about 20-22 weeks – down 4-6 weeks from the height of the craziness of the post-lockdown market incentivised by the stamp duty holiday.
The closest comparable we have to the residential, 'sale by private treaty' market is to look at auctions where many properties are bought and sold each month. Why auctions? Because to me, they're a prime example of having a ton of information available up-front in the form of an auction pack.
The auction pack usually carries the draft contract, fixtures and fittings forms, local searches, property information forms, and a copy of the title deeds – with some variation of this depending upon where you are in the country and the auctioneers concerned. Most buyers arrive having read the auction pack on the lot(s) of interest, or had their legal team cast their eyes over it. More importantly, everyone knows they're making a legal commitment on the day of the auction, with a completion deadline set in stone for a short time after.
So, let's take a look at some statistics to see how things compare:
According to this article – auctions account for between 2-2.5% of residential sales each year or around 1 in every 45 home sales – a low number compared to other methods of sale such as private treaty or private off-market sales, and this method of sale is not for everyone. Buyers can be put off due to the need to have their all finances in place ready to go and they're working towards a very tight deadline to complete the sale, with severe penalties if things go wrong.
Sellers can also be put off because there's a common misconception that properties which sell in auction achieve less than they would otherwise achieve on the open market via an estate agent, and they fear they could be financially penalised if the property doesn't sell for whatever reason.
But looking past the old wife's tales and urban myths, an interesting pattern starts to emerge. The first is the certainty of sale that can be achieved through auction. Statistics show that around 80-85% of auction listings sell under the fall of the hammer during the auction. This is substantially more than the chances of achieving a sale via an estate agent, which according to consultancy firm Jefferies, is around a 51% chance of achieving sale certainty. And that's without factoring in the risk that one-in-three property deals will fall through.
Now, I'm not bashing estate agents here – remember we're focussed primarily on the question of whether up-front information helps to sell properties more quickly. And it seems there's very strong evidence to support up-front information significantly helps sellers and buyers to achieve this goal.
Now let's look at timescales…
The average timescale for a seller deciding to put their property into an auction, and the completion date for them achieving their objectives of getting the cash in the bank is around 7-10 weeks – allowing 3-6 weeks for marketing, exchange of contracts on the day and completion 28 days later (although some auctions have shorter completion dates). And perhaps the biggest advantage of sale via auction is certainty of sale on the day (assuming someone is keen enough to buy and pay a price in excess of the reserve).
This is a significant contrast to the 4-16 weeks of marketing by agents, then the 20-22 weeks of legal legwork to go through before the transaction can complete. In effect, we're talking less than half the time it currently takes a deal to progress through legals alone, without factoring in any marketing time. And again, that's assuming the whole thing doesn't fall apart because people are totally fed up with waiting for the keys to their dream home.
Does it end there?
Well consider this. The average sale price at auction is currently around 85% of open market value – so the question a seller must ask is, is it worth the discount to achieve sale certainty quickly? Only a seller can answer that based on their personal circumstances.
But this divide in achievable asking prices is now being bridged by something called the Modern Method of Auction. This has opened up a wider marketplace by appealing to buyers who will use mortgages rather than being cash buyers like most buying at auction, whilst removing the expense of bridging or auction finance.
To me, there's very clear evidence that upfront information reduces two of the most significant risks in selling property – achieving sale certainty sooner (try saying that three times fast!), whilst greatly reducing the costs when things go wrong.
And with all this in mind, here's my top five reasons why I passionately believe in the power of Sellers Packs:
1. Motivation: When someone puts their home up for sale, they're motivated to get things done, including finding all that useful information that's been put in a "safe place" somewhere. By letting sellers know what information is likely to be asked for once a sale is agreed, you save potentially weeks of back-and-forth whilst they try and find or obtain missing bits of paper.
2. Transparency: A Sellers Pack provides more transparency to a prospective buyer, reducing the chances of them changing their mind at a later date because they didn't know something about a property when they made their initial offer. That saves both parties up to £2,000-£3,000 of abortive costs and reduces the 1-in-3 fall through statistics of selling a home.
3. Product Knowledge: Greater transparency means estate agents also have greater detail on the property they're selling giving both buyers and sellers confidence in them knowing their 'product' better than most. How often have you been shown a property by an agent who knew very little about what they were selling? When selling the most expensive asset someone is likely to buy in their lifetimes, surely we should know that property inside and out and be able to communicate that to someone else?
4. Proactive: Proactive gathering of up-front information allows for any ugly problems to raise their head earlier and be dealt with without the high emotions and frustrations that exist after a sale has been agreed and everyone just wants to get on with it. Dodgy title issue? Why not put the solicitor on the case to resolve it ahead of time? In some cases, this can save weeks, if not months of time, whilst massively increasing the value a property may realise which might otherwise be unsaleable or would have to be disposed of in an auction room to an unwitting buyer at a fire-sale price.
5. Cashflow: Both agent and solicitor can bank their fees more easily and quickly. If appealing to your better nature to get a job well done for your client doesn't motivate you entirely, surely the prospect of getting your hands on your fees far sooner than 22 weeks must be a good thing? Because if you think about it, in business cashflow is king, and if you were getting your fee in 6 weeks as opposed to 22 weeks, that's almost 4 times faster than your competition! As the market slows down, this will literally make the difference between your business thriving or dying. Besides, a Seller's Pack is an additional service which can be sold to a client up-front, meaning the seller has more commitment if they're prepared to invest in their success, and it helps agents (and solicitors), to realise more cash up front to keep their business going.
So why aren't more people embracing Sellers Packs to help more buyers and sellers?
Well, I believe it comes back to the opening comments of this article – people don't like change, and they don't want to do things differently from how they've always been done – particularly if they've been in their role a long time.
People fear change, so naturally shy away from it. But that attitude doesn't help their clients one bit and only seeks to put them under significant pressure with what is already one of the most stressful processes they will ever go through in their lives.
Perhaps it's time for them to hang up their hats and retire whilst letting the new blood – those who are more pro-active in helping their clients achieve sale certainty and move home quickly – take over? After all, despite telling you how good they are, most of these long-in-the-tooth M.S.P.'s have been responsible for contributing to the average time from offer to exchange increase four-fold over the last 20 years.
And I'm not sure that's something to be particularly proud of…
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