The downturn in the property market has forced us all to review our business practices, and companies across the UK are seeking to make the way they operate as efficient as possible. In some cases, not least lenders, businesses also face the challenge of regaining the trust of consumers and driving confidence back into the wider economic system.
Against this backdrop, it is of course vital that the industry works to ensure its own survival. One way of doing this is by working more efficiently through improved processing.
Notwithstanding the current downturn, it is widely recognised that England and Wales has one of the longest average property transaction processes in Europe, with a completion to failure rate of 1:4. This situation can place significant stress upon the buyer and seller alike, with significant costs for the industry. While the current market will recover in time, the inefficiencies inherent in the home buying and selling process will remain, unless the industry and the Government work together to bring modernisation to the sector.
The property industry is unique in many respects – there are so many different parties involved in a transaction, each having its own methods, timescales and motivations for moving quickly or slowly with a property transaction. As businesses, therefore, we are characterised by our interdependence. The need to act collectively and to work above vested interests could not be clearer in the current market.
Let’s get together
The E-Homebuying Forum (EHF) brings together industry leaders who are frustrated with the lack of progress in improving the home buying and selling process. Since the forum was established in April last year, its membership has grown to over thirty companies that span the property transaction from marketing to completion.
We believe that the technology, the commercial nous and the political will all exist to make the process better for consumers and property professionals alike. But the initiatives introduced by the Government – such as home information packs (HIPs) and the Chain Matrix – have not fully delivered on this potential. The EHF believes that this lack of progress has been caused in part by insufficient commercial input in the creation and structure of these initiatives.
With HIPs, for example, the original vision of providing up-front information and greater transparency was laudable, but the Government ended up with a product starved of its prime value – an upfront survey. HIPs now operate within a dysfunctional market and regulatory environment that provide little commercial incentive for innovation or added value. As a result, the majority of the industry and consumers view HIPs as a regulatory burden that delivers minimal benefit. EHF would like to work with the Government and trade associations to repair or replace HIPs, so that they can contribute positively to faster certainty for consumers. The Property Information Questionnaire and Exchange-Ready HIPs, for example, are improvements that EHF supports wholeheartedly.
With all today’s doom and gloom, it is not often that we have a chance to better our commercial prospects, but we have found that the Government recognises the problem and wants to both get businesses involved at an earlier stage and ensure that there is a commercial incentive for us to deliver the desired consumer benefit. EHF is working with the Government and industry groups to encourage development of commercially viable initiatives that deliver faster certainty to home buyers and sellers.
Commercial viability is essential, because ultimately it is the industry – including those in the mortgage industry – that will provide the products and deliver the services that will bring faster certainty to the process. The EHF believes that it represents the ideal interface between the Government and the industry. While it is devoid of business or professional self-interest, it still retains the commercial perspective necessary.
The EHF blueprint
It is undeniable that faster certainty will be brought about through a more transparent and more efficient process, and by ensuring greater commitment to the transaction from consumers. When the EHF published its Blueprint for the Future of Homebuying in February, it set out thirteen recommendations, which if implemented, will bring the requisite transparency, efficiency and commitment to deliver faster certainty.
This blueprint has been created to set out a platform for improving the property transaction process. While born out of frustration with the collective lack of progress to date, the blueprint is very much a forward looking document. It identifies the key ways in which greater transparency, efficiency and commitment in home buying and selling can be achieved.
The blueprint is not a self-interested proposition – either on behalf of a single business interest or, indeed, a narrow group of businesses. The blueprint is also not influenced by a particular property professional (e.g. lender, estate agent, surveyor, conveyancer or search company). The EHF believes that as a group it has developed a unity of purpose, via the blueprint, which transcends self-interest.
The blueprint is a strategic high level call to action for the Government and the industry, which it is hoped will create momentum towards the necessary sanction and traction. This clear message for the sector, and the lending community in particular, is that if you can give the blueprint your broad support, join EHF to help to build the necessary momentum for change.
The blueprint restates some improvements to the process – such as the Chain Matrix, Electronic Funds Transfer and in-principle mortgage offers – that have already been attempted with mixed results. But through achieving consensus, and by the industry developing a unity of purpose, measures which have previously failed through lack of industry engagement or lack of commercial input can be born out.
The blueprint also calls for electronic information exchange between the Land Registry and conveyancers and lenders. EHF promotes and encourages the new Business Gateway and the Land Registry’s adoption of PISCES protocols. While it recognises that lender engagement is sporadic at best, we believe that concerns around security and increasing levels of fraud could increasingly drive lenders’ involvement.
Another recommendation is for the wider use of in-principle mortgage offers. Further to consultation, we believe that DIPs are a useful tool to tell clients roughly what they will be able to borrow before they start searching for a property. This makes it easier to work out what clients can afford and whether they are making realistic choices. It may also be a comfort factor for a vendor when interest in a particular property is high. EHF sees an extension of this to be pre-qualified borrowers. If a prospective buyer can demonstrate their bona fides, both in terms of their ability to afford a property and their ability to proceed, then a transaction can be pursued with greater certainty.
Political engagement
EHF has been engaged with relevant government ministers and industry figures. It has also worked closely with the Land Registry on taking forward the Chain Matrix. Officials from the Department for Communities and Local Government and the Ministry of Justice have been involved with the development of the blueprint and their involvement is valued highly by the forum.
In addition,the industry has a real opportunity to re-shape the home buying and selling process by feeding into the Office of Fair Trading’s recently announced home buying and selling market study. EHF will work closely with the OFT to provide the necessary commercial insight, and representatives will be meeting with the officials conducting the Study in the coming weeks.
We also consider it essential to work in cooperation with industry stakeholders in order to facilitate the delivery of the blueprint. To this end, the EHF will meet with appropriate groups over the coming months to explain the blueprint, to discuss cooperation, and to capitalise upon this significant opportunity to modernise the home buying and selling process.
With the blueprint, the EHF has provided a deliverable vision for the future of homebuying. We will now work to achieve the consensus necessary to make this vision a reality and we call on those in the mortgage industry who are not yet part of the forum to join us. n
