In a market which is running ‘hot’, where business is flowing at a significant pace, we might be able to wave this off as a ‘necessary evil’ of our market, but it’s really not acceptable and we should be doing all we can to eradicate as many of these fall-throughs as possible.
In any market, fall-throughs have a real impact, plus they are a major drain on cashflow, resources, mindset, and are perhaps even more significant in a market which might be slowing down, and in which the number of transactions overall could fall off recent highs.
We only need to look at the numbers to see the damage that has already been inflicted, what this has meant to property firms, and what it will continue to mean in the future, if we don’t do something about it.
In 2020, according to property data agency, TwentyCi, over 306,000 property transactions fell through. That was a 12 per cent-plus increase on the figures for 2019, and approximately a quarter of all transactions that did actually complete.
It is a staggering figure and, while we do not yet have the data for 2021, the anticipation has to be that it will be a similar number.
Year after year we are seeing this root problem within our market, and according to the Department for Business, Energy & Industrial Strategy (BEIS) the wasted cost in these transaction fall-throughs is around £230m every year, shared between consumers of course but also every single property stakeholder who is involved in a case.
As mentioned, we can’t predict how the UK property market might continue going forward. What we do however know is that the number of fall-throughs tends to stay consistent – in other words, it tends to be around a quarter of completed transactions, which means the impact in a market with lower transactions could be actually greater.
Given this scenario, the importance of cutting the number of fall-throughs for every single consumer and property market stakeholder is vital.
Upfront information will cut wasted time and speed up cash flow
We continue to work on ways to do this, including offering pre-sale information. Upfront information will reduce the amount of wasted time on fall-throughs, plus – significantly for all firms involved in the transaction – it will speed up cash flow while keeping the number of completions as high as possible.
We only have to work the numbers to see the positives that could be generated.
Estate agents are a good example, but this is as equally relevant for advisers. For agents, it takes a transaction approximately 22 weeks to complete from the offer, which means their pipeline turns 2.4 times a year.
If we could get transaction times down – utilising upfront information and with much more certainty involved for all parties – then we could get a sale to completion every eight to 12 weeks. Meaning the pipeline increases to between 4.3 to 6.5 times a year, plus you don’t have the wasted resource and costs that come with working on a case which has a one in four to one in three chance of being aborted.
At the moment, we are leaving too much too late in the process and then somehow being surprised when information – which should have been available weeks prior – is presented and it is not to their liking, or indeed shows that they can’t use or enjoy that property as they previously thought they could. Hence, the decision to pull out.
As the year progresses, we may well see a different pace to the housing market, particularly in terms of purchasing. Let’s make every property case we work on count, dramatically reduce aborted transactions, and increase all stakeholders’ cashflow and profitability as a result.
