New government initiative – are they trying to solve the wrong problem?

We knew that the government were going to look into the house buying and selling process, so we weren’t surprised to see it hit the headlines this morning on the BBC.

However, we were a little bit disappointed to see the focus on “gazumping”, a problem, that frankly, we see very little of these days.  Ask any estate agent about issues caused by buyers fighting over properties, and you’ll see a look of wistful wonderment as they try to remember the last time this issue raised it’s ugly head.

Suffice to say, the problems with the house buying and selling process today are far more to do with the time that transactions are taking and the resulting increase in failure rates that this causes.

The suggestion that the government has made that sellers should provide more information up front is not unreasonable.  Indeed, anyone who knows anything about the selling process knows that it makes complete sense for the seller to provide as much information up front as possible.  This obvious issue was intended to be addressed by Home Information Packs (HIPs) that were introduced and then scrapped ten years ago by the then Conservative government.

We are of course highly amused that the current Conservative government wants to get more information up front, but, as in the last election, they certainly don’t want to mention the word HIPs anytime soon.

Reducing the time to obtain information about a property will be helpful, there is no denying that, but the key problem in the process is the time it takes to resolve issues and get all parties to exchange.  This is a difficult and rather opaque area to analyse, but anecdotal evidence from discussions with many estate agents suggests that online and high volume conveyancers do impact the speed and likely outcomes of transactions.

In our experience, we know that the number of cases that a lawyer works, has a significant impact on the outcome of a transaction.  The more cases, the longer the transaction time.  This number of cases is directly related to the fees that are charged for the work.  The lower the fee, the more cases each lawyer needs to work on – it’s very straightforward.

Fees paid to lawyers can be low, and are often determined by how the lawyer obtains the work in the first place.  There is a significant industry of conveyancing middlemen, companies that have been setup purely to refer work to lawyers from people such as estate agents and mortgage brokers.  They take a handling fee themselves for passing on the lead and also pay the referrer a commission.  Indeed, in a recent article in The Mirror newspaper, there is an example of a case where an agent was paid over £600 in referral fees to an agent using one of these companies.

The increasing use of these companies mean that the lawyer will not receive the full legal fee that is charged to the consumer.  The proportion of fees that the consumer pays to the introducers and the middlemen can be shocking.  Our solicitors have first hand experience of fees as low as £350 per case, when the client is paying nearly double that to the introducer.

If the government is serious about addressing problems in the house buying and selling process, they need to look at why conveyancers have such high caseloads and investigate the impact of low fees on a transaction and the role of these middlemen.