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Conditional property selling made a comeback in 2019, but is it acceptable today? Analysis

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  • 06/01/2020
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Conditional property selling made a comeback in 2019, but is it acceptable today?  Analysis
Mortgage referrals from estate agents held up strongly during 2019 in many parts of the UK, but brokers saw conditional selling make a comeback.

 

“Referrals have always bubbled away and provide about ten per cent of my own procuration fees and commission,” said Darren Meehan, director at Bright Money Independent Mortgage Brokers in Oxford.

Sales and lettings activity was strong in Oxford during 2019. The city was named the best in the UK for buy-to-let investors in the Aldermore Buy to Let City Tracker, published in December.

However, Meehan said since the emergence of several new estate agencies in Oxford he had seen a rise in conditional sales. This is where the estate agent says potential buyers have to speak to one of their tied mortgage advisers if they want to reserve a property.  

“Some agents are aggressively targeting buyers and using it as a cross-sell opportunity. They say you’re going to have to sign up to this today because there’s a line of people waiting. If you can’t get [in touch with] your broker then you can’t have the house.” 

“I know of an agent who reckons they make more money out of financial services than they do selling houses,” Meehan said.  

He added that his firm generated “quite a bit” of business through search engine optimised (SEO) marketing.

 

Aggressive or proactive? 

Dan Mules, head of mortgage finance at Fitch and Fitch, said First-time buyers dominated estate agent referral business during 2019, including from online sources and a spectrum of bricks and mortar agencies. 

“Agents work in very different ways now,” he added. “Some want any buyer registering with the agent or putting in an offer to be vetted by us to determine if they are in a position to act, whether or not we are doing the mortgage. They want to stress test the buyer to ensure the agent’s time isn’t wasted. It’s a legacy from when the market was super busy and they didn’t want downtime and properties hanging around,” said Mules.

“The more rural or independent agents are more laid back and actually consider that to be quite aggressive,” he added.

 

Quality of referrals

Mortgage Advice Bureau generates “a big part” of its business through estate agent referrals, national sales director Gareth Herbert said. The network saw similar levels of activity during the year as in 2018.

“There’s no doubt that our estate agent partners in the Midlands and North have been very strong on referrals this year. Quite often, if the market hardens, estate agencies focus on other income areas such as conveyancing, mortgages or referrals to prop-tech firms. They’re very good at that. I’ve never seen so much focus on improving the quality of referrals to mortgage services partners,” Herbert said.

The level of referrals coming from estate agencies accounted for “a late twenties figure” as a percentage of overall introductions to the firm. This climbed to 30 or 35 per cent for first-time buyers.

Herbert agreed that first-time buyers often sought screen-to-screen contact initially. MAB partners with HouseSimple and Purplebricks for referrals in the digital arena. However, he added: “When it’s one of the most important investments you’re likely to make in your life, then most customers will take time out and talk about the best thing to do. I haven’t seen that dynamic change even though initially customers like to talk over the telephone.”

 

Conditional selling is ‘very wrong’

 On the subject of aggressive agency tactics, Herbert said: “That’s conditional selling, where they say, ‘if you want to buy that property you must see one of our advisers.’ We don’t see that with our partners. It’s a complimentary service and there to help the customer make the right decision. 

“That’s why face-to-face remains important, irrespective of digitised processes and robo-advice. Customers still value sitting with a professional adviser. We don’t tolerate or would not work with any any agent that tries to conditionally sell. That is something that’s very wrong and needs to be stamped out if it goes on. 

“But I don’t see a lot of it any more. Going back many years ago, maybe so. Not so much any more,” Herbert added.

 

Market expectations high

 Meanwhile, the high end of the London market was slower for agency referrals in 2019.

“Certainly activity levels have been down from branches. It’s down to trading conditions, the property market in certain areas is fairly flat and in others has taken a knock in terms of the amount of activity in 2019. Certainly in prime central London activity is severely depressed, versus the historic highs of 2015 or 2016,” said Shaun Church, director at Private Finance.

He added that while society generally had shifted towards a more digital culture, “at the higher net worth end, a property worth £5m is not likely to be sold online, it’s going to be face-to-face and red carpet treatment.” 

Dominik, Lipnicki, director, Your Mortgage Decisions, agreed that there had been “a sizeable slowdown in the housing market,” owing to prevailing economic uncertainty during the year. “Buyers have been waiting to see what will happen to property prices in Q1 2020,” Lipnicki added.

Brokers appeared to have positive expectations for 2020. Herbert said: “I certainly see pent up demand and customers waiting. I expect more of the same as in 2019, but I do see things changing next year. It depends on many things — base rates, money coming into the housing sector and how quickly these things happen.”

At Fitch and Fitch, Mules was more bullish. “Everyone in branch, and all the competitor brokers we speak to regularly, have enormous expectations for the market to turn in the early part of next year. It’s very evident, because of the political brakes that have been put on the market.

“There’s a sense that as soon as people feel comfortable the world won’t end, the market could go mad,” he said.

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