The buying and selling process is renowned for being frustratingly slow with many contributing factors and parties involved. When it comes to buying and selling a home, on average it can take around 6 months from listing to completion of sale. Whilst there are differences in the commercial and residential markets, there are some similar challenges and pressures on all parties involved in the transaction to speed up the process. The longer the process takes the greater the risk in terms of economic and market changes and the potential for the buyer or seller to change their minds.
These timescales are expected to be impacted further from COVID-19 as the Government prevents physical house viewings and restricts non essential travel across the country. Mortgages are also being impacted as major banks such as Barclays and Halifax have also announced they can only progress mortgages for existing customers who are purchasing or remortgaging where the loan to value is no more than 60%. How will this have a knock on effect on the market and impact the process?
On the 14th April, we invited property companies, PropTechs, tech investors and service providers to join us (from their homes) for our virtual roundtable to discuss the current challenges in the process, the impact of COVID-19, and explore how PropTech can help address these challenges and keep the market moving. A huge thanks to Kristjan Byfield, Founder of The Depositary on chairing the discussion, and those that contributed (see full delegate list below).
Didn’t get to participate? Watch the roundtable discussion here:
What are the biggest hurdles impacting the speed of the property transactions?
Availability of Data
It’s no secret that sourcing the appropriate data and the processing of that data is a fundamental challenge in both the residential and commercial market.
Whilst some searches and reports such as Groundsure reports, can take minutes, others can take weeks and are not presented in a uniformed or consistent format. Making it very time consuming and costly to digest. Part of the reason for this, seems to be the unstructured way in which the data is stored. Attempts have been made to digitise the data but this has been slow. Only a small number of Local Authorities have digitised their Land Registry local land charges register, despite the push for this to happen. PropTech solutions play a huge part in digitising data. For example, Search acumen – suppliers of land and property data, are digitising PDF’s to Data as part of an online geospatial platform. Globalx are also streamlining the process for conveyancers with ‘Mattercentre’ which seamlessly integrates searches with their conveyancing software.
One of the big questions raised in the discussion was how much of this data is essential and is there some data which could be made redundant? From the 109 questions on a Con-29 form, how much of it is not required? Could conveyancers accept 10 or 12 key answers instead of 109? Whilst there are concerns over the risks this could be present, there may be ways in which we can manage this. One possible answer is to look to the banks/lenders who store lots of data on properties they have financed. Could this data be shared and used to draw some assumptions on the property being sold/purchased.
Outdated business models, processes and attitudes
The consensus across the group was that property data should be provided much earlier in the process and presented when the property is marketed. According to Council for Licensed Conveyancers (CLC) only a 1/3 of the data is made available up front. As searches are conducted generally to identify problems, agents would need to be prepared to market the property with those problems, and sellers would be forced to identify possible solutions to the problems and amend the valuation accordingly.
It’s clear that conducting this level of due diligence early on would be helpful in speeding up the process, and would avoid duplication in the chain. However, it would also mean additional costs for the agents or seller. Whilst we would be talking low numbers in the residential market, the costs in the commercial market would be £100k – £200k. Although, surprisingly, it is not an uncommon practice in the commercial market with sophisticated buyers and sellers.
Whilst agents or sellers would need to spend more upfront, there is an argument to say that this transparency could lead to lower fall through rates and empower agents to decide which properties to spend their resources and efforts marketing. Perhaps this level of assurance for the buyer could even warrant for higher agent fees. Is there a minimum level or due diligence that could be enforced?
Unstructured leases and legal documents
One of the most time consuming parts of the process for conveyancers is reviewing lease documents. These documents are often lengthy and inconsistent in the way they are structured. PropTech can certainly help extract relevant text and financial information from these documents with less than 1% errors, however, conveyancers still need to work through these documents thoroughly to identify any problematic clauses and to establish whether it is essentially a good or a bad lease. How can we create uniformity across the industry? One suggestion is to adopt a similar structure to that of construction contracts which have a standardised structure along with a schedule of alterations.
50-60% of all transactions require finance and the majority of properties which receive financing have conditions. Should the banks/lenders be more flexible with lending and should they be more collaborative in their approach? This was certainly an interesting question raised in the discussion. Banks gather data on lease/rent payments but this does not tend to go towards the individual’s credit rating. If banks used the data they collect, this would not only likely lead to more lending, but this would also speed up the lending process. Will the challenger banks such as Revolut and Monzo, seize this opportunity?
The impact from the spread of the coronavirus has been detrimental to the economy. To what extent, remains to be seen. With many people out of work or furloughed, or uncertain of what the future looks like, the residential property market has slowed down and is now estimated to be performing at below 50% run rate than normal. Sellers are taking properties off the market and potential buyers are waiting as they are unable to view properties and are nervous about making any big decisions . As a result, agents are being forced to cut costs and work digitally to keep the property market going during this time, creating an influx in demand for PropTech solutions.
For more information on the extent of the impact on the PropTech industry, check out our COVID-19 PropTech Impact Report.
How can PropTech help speed up the process?
There are a number of PropTech’s digitising data and making it more consumable such as Datscha, and companies such as View My Chain which allows agents, buyers and sellers to view automated key buying and selling milestones such as searches being ordered or mortgages applied for. This data driven chain management tool helps agents achieve lower fall throughs, faster completions and less wastage.
While these solutions are making improvements to the buying and selling process, the process itself needs to be transformed and all parties in the chain need to be innovating.
Whilst there are similarities between the residential and commercial market in regards to access to data, complexity of documents and contracts, there are some fundamental differences such as the sophistication or knowledge of the buyer, the drivers and incentives to transform the process, and the use of technology.
As a follow on from the Roundtable, we will be diving deeper into the discussion by splitting out the residential and commercial markets into two separate sessions, engaging the banks/lenders and agents. These will be hosted in partnership with the British Property Federation on the 19th and 20th May – stay tuned for more information.
Steffan Davies, AS Watson
Matt Taylor, Clifford Chance
Millie Lewis, Coyote Software
Jonathan Bennett, GlobalX
Dan Montagnani, Groundsure
Michelle Corazzo, Haysmacintyre
Ross Cooney, iamproperty
Tania Bonesi, iamproperty
Anna-Maria Kotciuba, Infabode
William Salter, London Borough of Waltham Forest
Conan Lauterpacht, M7 Structura
Jonas Petrauskas, Oakwood
Philip Farrell, Offr
Christian Woodhouse, Search Acumen
Valentina Shegoyan, Second Century Ventures
Natasha Terrinova, Second Century Ventures
Nathan Toms, Spaceflow
Kristjan Byfield, The Depositary
Sammy Pahal, UK PropTech Association
Gal Farhi, Waveline Investments
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