November 2017
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A £677,600,000 a year home-buying rip-off? And lots of happy surveyors and solicitors?

The expensive mess

There are about 1,100,000 homes sold in England and Wales each year. Of these around 28% of sales (308,000) fall through. The main reasons for sales falling through seem to be things like adverse surveys, gazumping/gazundering, incompetent/lazy solicitors and chains breaking down.

The average cost of a collapsed sale is around £2,200 per potential buyer.

So, multiplying 308,000 failed sales by £2,200 loss per potential buyer we arrive as a figure of £677,600,000 paid out to surveyors and solicitors by potential home-buyers for absolutely nothing in return. Without this wasted £677,600,000, our surveyors and solicitors would be an awful lot poorer.

Having just been through the process of buying and selling a home in England, I was shocked by how inefficient and poorly designed the process was. And I was particularly struck by how the current system seems designed to make surveyors and solicitors rich at home-buyers’ expense.

Well,’ you might think, ‘Mr Craig. If you’re so smart how do you suggest things should be changed?’

In fact I do know how things should be changed. I know this, not because I’m smart, but because I’ve bought and sold homes in Denmark where probably less than 1% to 2% of sales fall through.

The key issue distinguishing buying a home from buying a car or a washing machine or a new smartphone with a gazillion functions that you’ll never actually use is that you don’t know the condition of the home until weeks after you’ve made your offer. Moreover during the two to three months (or more) that your survey and searches and other paperwork are done, either you or the seller can walk away.

You  might walk because you’ve found somewhere better or changed your mind about moving or unsuccessfully tried to gazunder the seller or failed to sell your home or been unable to raise the mortgage or whatever. Or the seller might walk because they’ve received a better (gazumping) offer or changed their mind about selling or been unable to buy the home they wanted etc etc.

All this creates months of often nailbiting uncertainty for buyers and sellers and lots of welcome extra work for surveyors and solicitors.

Trust a surveyor?

Moreover, as I’ve found, you can’t trust a surveyor’s report in England and Wales. Most surveyors will only work with you once in their lives. But they’ll work with local estate agents hundreds or even thousands of times in their careers. And most will get much of their work from being recommended by local estate agents. So, surveyors will be reluctant to point out too many faults in a property as, if they get a reputation among estate agents for being ‘difficult’ and causing lost sales, they soon won’t have much work and won’t be able to pay their mortgages and their children’s private schooling. Therefore, you can expect any survey to be strongly biased in favour of covering over faults to ensure the sale goes ahead.

Trust a solicitor?

As for solicitors – the word ‘incompetent’ is far too polite to describe the way they manage many home sales. Important papers are lost, they’re usually far too busy to be contacted, weeks can pass before they show any sign of activity and if there’s something they can bungle, they most certainly will.

The easy solution

Let’s look at how homes are bought and sold in Denmark:

Firstly, it is the responsibility of the seller to produce a Home Information Pack which includes a survey and other necessary information. This Home Information Pack is provided to all potential buyers immediately they contact an estate agent about a property.

‘Ah ha,’ you might think, ‘if the seller provides the Home Information Pack, then it will be biased in favour of getting the sale’. Good thinking, Sherlock! But the Danish system includes checks and balances to prevent this happening. When you make an offer and that offer is accepted, a contract is made and neither buyer nor seller can walk away. As part of that contract the buyer and seller each pay 50% of the cost of ‘Ejerskifteforsikring’ (Change of Ownership Insurance). This  Change of Ownership Insurance covers the buyer for anything that wan’t found out during the survey and searches done when the seller commissioned the Home Information Pack. So, if it is later discovered that there is subsidence or an airport being built in the back garden of the property you’ve bought, your losses should be covered by the insurance you and the seller have paid for.

Trust a surveyor?

In the Danish system, you can trust the surveyor’s report. Why? Because if any surveyor repeatedly covers up faults which later lead to claims on the Change of Ownership Insurance, that surveyor will soon be boycotted by the insurance companies and soon be very poor indeed

Trust a solicitor?

Because the contract between buyer and seller is established immediately the offer is accepted, however much the lazy or incompetent solicitors make a hash of things that won’t really affect the process too much and won’t lead to the sale falling through.

Why not improve the process?

“If the Danish system is so much better,” you may ask, “why not just adopt the Danish system in England and Wales?” And that brings us back to the title of today’s blog – the dreadful English and Welsh systems with biased surveyors, incompetent/lazy solicitors, broken chains, gazumping and gazundering, multiple surveys for each property, several solicitors working for potential buyers for each property and all its other delays and duplications produces an extra £677,600,000 each year for our surveyors and solicitors.

That’s money they’ll fight tooth and nail to keep flooding into their bank accounts at the expense of property buyers and sellers.

It’s a pity no mainstream media journalist or property expert has thought to mention how easy it would be to revolutionise the way properties are bought and sold in England and Wales. It’s a pity no journalist or property expert has dared to rock the surveyors’ and solicitors’ lucrative boat.

It this a rip-off? Yes it is!

Islamic shampoo ads

Oh, and in case you were wondering (as I often do) how shampoo companies advertise their products in Muslim countries where it’s illegal to show women’s hair, here’s the answer. Good grief!

6 comments to A £677,600,000 a year home-buying rip-off? And lots of happy surveyors and solicitors?

  • John Fields

    Thank you Mr Craig.
    A good blog.
    Could you do something on Binary Trading.
    No one in authority seems to care about the
    fact that the crooks in this industry are
    taking a large portion of people’s savings.
    They openly advertise in the media and
    nothing is done.

  • Chris

    Whilst I would not try to defend our system which is open to gazumping and other unsettling practices, it makes sense to instruct surveyors and solicitors/conveyancers who are not connected to or recommended by the vendor’s estate agent. Also, home buyers’/sellers’ insurance is available for small premiums.

  • Stillreading

    Have you heard of the latest deplorable practice, where buyers of new-build houses (often first-time buyers and rather more trusting and less cynical than we older folk) are being coerced into using for the conveyancing the vendor’s own solicitors, rip-off merchants who are clearly acting on behalf of the vendor, any one of the several national well-known developers? These new-builds are not in fact freehold, which one normally expects when buying a house (as opposed to a flat) and are quoted a small, quite acceptable, ground rent – say a thousand or so a year, increasing very moderately over the years. They are told they have the option to purchase the freehold for a few thousand pounds when they can afford it, in a few years’ time. Then they have saved up they find, those few years down the line, that the freehold has been sold to a third party, purely for profit, and what they were under the assumption they could purchase for a few thousand pounds has escalated to tens of thousands, a sum they will never be able to afford. In effect, they never bought their own home, they bought only the right to live in it for a certain number of years. This would never have occurred had the purchasers employed their own, independent, hopefully competent, solicitors. As it is, they were told they “had” to use the vendors’ solicitors, who effectively sold them down the river. Thousands of people are now occupying houses they will never truly own and which, because of the escalating ground rent, they will never be able to sell.
    Welcome to rip-off Britain folks.

  • NoMore

    That particular jig may soon be up StillReading as Nationwide have said they will no longer offer mortgages on new build leasehold houses where the ground rent is set to double every 10 years. Taylor Wimpey have also set aside a fund to cover expected losses from converting excessive ground rent increases to more acceptable terms.

  • Twi5ted

    Australia uses a standardised contract supplied by the real estate institute for the relevant state that sets out everything that Is included. The estate agent supplies the contract and then this is sent to a solicitor who complete the conveyancing which is often pretty simple as most titles are clear. The contract can still be subject to survey or other caveats so its not always completely binding but completion is often 28 days after signing the contract.

  • Baroness Bonkers

    Chris refers to the current dirty little practice(which has been happening since 2008/2009)of estate agents and also financial advisers (i.e. the great (in my humble opinion)leeches of the property market, demanding a bung to recommend a conveyancer to a home buyer/ seller. This bung is politely referred to as a “referral fee”. This is no mean amount of money. It is widespread.
    The UK’s highest volume conveyancing company based in Leicester and owned by MyHomeMove, make no secret of their paying these bungs – look on their website. They even offer a tailor made referral fee where the recipient estate agent or financial advisor can name their own bung and it is achieved by an increase in the Premier Property Lawyers’ fees, so the poor punter, who should be notified of the bung (ha ha)pays higher legal fees so the lovely estate agent or financial adviser can make more money. Do you like the idea of your elderly parents being exploited by their lovely financial adviser?
    That bastion of respectability Legal & General has something called the Mortgage Club – see the Legal& General website – which, last time I looked, drew the attention of the country’s leeches to this little opportunity and had adverts from conveyancing outfits, not solicitors, offering their wares and their bung details.

    Justreading points at another very worrying trend, that of the introduction of new home buyers to a “wonderful, efficient, experienced etc etc” solicitor/conveyancer, so you do get a high proportion of the buyers on a new site using the same conveyancer. Is that good? It is for the builder who can effectively control the sale as the buyer’s conveyancer is “on the hook”, it is good for the conveyancer as the new business pours in with all that lovely money. Is it good for the buyer? No. Would you like to be represented by someone who won’t dare to question or upset the provider of the stream of paying punters? Heaven forbid that the conveyancer failed to mention the Japanese Knotweed on the site or that it is probably not a good idea to sign a 125 year lease for that lovely new flat or house because the ground rent doubles every ten years!

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