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Ambitious government paper targets conveyancing and other property transaction pitfalls

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  • 23/10/2017
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Ambitious government paper targets conveyancing and other property transaction pitfalls
The Department for Communities and Local Government (DCLG) is asking how best to tackle gazumping and other significant issues within the home buying process.

As part of a review of the property buying process, it is also asking how digital technology can be better used, the improvements the conveyancing and lending sectors can make and where new build sales can be sped up.

The Improving the home buying and selling process call for evidence also questions whether referral fees between estate agents and mortgage brokers and conveyancers should be exposed or even banned.

 

21st century conveyancing

Conveyancing came under significant scrutiny from the paper and is closely linked to increasingly digitising the buying process.

The DCLG said it wanted to know how competition within the sector could be improved and that its aim was to deliver a conveyancing process fit for the 21st century.

This was highlighted by 40% of buyers and sellers it surveyed feeling that the exchange of contracts was delayed and where a delay occurred, they were likely to blame the conveyancer for the other party.

It noted that most consumers would be unlikely to use their “usual conveyancer” and would instead rely on a recommendation from friends, the internet, or a suggestion from a lender or an estate agent who may then receive a referral fee.

“We would like consumers to be able to make a more informed decision when they select their conveyancer based on levels of service and customer satisfaction and we would welcome views on how this can be made possible,” it said.

“We also want to use this call for evidence to explore how competition in the conveyancing sector could be improved, for instance allowing conveyancers to signal their level of customer service, speed and efficiency to the market,” it added.

Key questions asked by the government included:

  • What should industry do to help consumers make more informed decisions when selecting a conveyancer?
  • Would there be an advantage to encouraging buyers and sellers to use the same conveyancing provider? If so, how could it work, without creating conflict of interest problems?
  • How would a predominantly digital conveyancing process affect home buyers and sellers?
  • What should the government do to accelerate the development of e-conveyancing?

The government’s move supports a prediction by then Council of Mortgage Lenders director general Paul Smee that the government would focus on the conveyancing industry.

 

Lenders and new build

This theme of speeding-up the process continued, as the government asked how other parts of the home buying and selling process could be improved through better use of digital technology.

And it also identified the role of lenders in the buying process.

DCLG said it wanted to explore ways in which the mortgage application process could be sped up, without exposing lenders to additional risk of default, and give greater certainty to consumers over whether their application would be successful.

This encompassed the new build sector for which the government asked whether the short amount of time to exchange contracts made it difficult for buyers to arrange finance from their lenders and whether anything could be done to help with this.

 

Gazumping

Another issue highlighted was that of gazumping and other issues, which lead to the collapse of a purchase.

The DCLG research found a contradiction between buyers and sellers in this matter, with buyers being particularly concerned.

Only 1% of sellers whose transaction failed reported that they accepted a higher offer from another buyer, while 13% of buyers whose transaction failed cited gazumping as the reason.

The paper noted that there was a range of options already available to increase the commitment to completing a transaction, but that these were likely to be largely unknown.

Half (50%) the buyers and 70% of lenders would be prepared to enter into a legal commitment, it found.

“We believe that the routine use of these types of agreements would help to reduce the failure rate of transactions,” it added.

As a result, it asked how government could increase commitment to a sale between buyers and sellers, how should it best tackle gazumping?

The consultation will run until 17 December and can be responded to through an online survey or by emailing the DCLG.

 

Scourge of the market

Council for Licensed Conveyancers (CLC) director of strategy Stephen Ward said: “This is a very positive and encouraging step by the government.

“The key areas they have identified for improvement in the home buying process, are areas that the CLC has been exploring with conveyancers, law-tech providers and other stakeholders for a while now, so we are pleased to see that the baton is now being picked up more widely.

“We urge all conveyancers to share their views and ideas through the call for evidence, and we hope this exercise will give prompt both new and established law tech providers to bring innovative solutions to the market to help transform home buying.”

Emoov founder and CEO Russell Quirk also welcomed the plans and noted that gazumping was the scourge of the property market which was facilitated through a draconian, archaic conveyancing system.

“The law needs to change to ensure there is a contractual obligation and to protect home buyers much earlier on in the process. One common misconception is that gazumping is the work of the agent in order to secure more commission on a property. However, this practice is often orchestrated by the seller and without the support or encouragement of the agent, although they take the blame.

“These property market fall-throughs cost £1bn per annum in wasted legal and survey costs, money that could be better spent elsewhere in tackling the housing crisis,” he added.

Communities secretary Sajid Javid said: “We want to help everyone have a good quality home they can afford, and improving the process of buying and selling is part of delivering that.

“Buying a home is one of life’s largest investments, so if it goes wrong it can be costly. That’s why we’re determined to take action to make the process cheaper, faster and less stressful.

“This can help save people money and time so they can focus on what matters – finding their dream home. I want to hear from the industry on what more we can do to tackle this issue.”

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