Press Release ‘Estate agents need to know and react if a property sale comes with a hidden delay’.
Do estate agents have an obligation to find out whether the reason a vendor is selling their property is due to a divorce or partnership split? According to Paul Offley, Compliance Officer at The Guild of Property Professionals, the answer to the question depends on whether this could ultimately impact the transaction and potentially cause delays.
“It goes without saying that agents are required to do their due diligence and find out who the owners are who are consenting to the sale of the property, but does the reason behind sale matter? It does if the reason could have an impact on the buyer’s decision to purchase the property,” says Offley.
He adds that there have been instances where a sale had been agreed and solicitors had been instructed, but it had come to light that the sellers were going through a divorce and the financial agreement between the sellers had not been finalised. As a result, the sale was delayed, and the buyer was unable to move at the date they needed to. “The buyer claimed that they were unable to wait the length of time it would take to get the agreement finalised, and if they had known at the start it would be a potentially protracted sale, they would not have proceeded. As a result, they wanted to withdraw from the transaction and were seeking to cover the costs which they had incurred in terms of mortgage applications, solicitors, survey costs, etc,” Offley comments.
Is that a reasonable claim? Offley says that in terms of Consumer Protection from Unfair Trading Regulations 2008, a consumer would need to demonstrate that there was a piece of information missing, which would have materially impacted their decision to go with that transaction. Only a court would be able to decide whether the claim would be successful or not, but it just goes to prove that more and more people are using that legislation to try and recover costs or make a claim against the agent.
“What steps can agents take to ensure they are covering themselves against such claims? As part of an agent’s Anti-Money Laundering (AML) assessment, they need to assess the risk of the transaction and one of things they would look at is the reason for the property being sold. If the agent knows the property is being sold because of a divorce or partnership split, then it is worth taking that a step further and establishing whether there is anything they could possibly result in a delay to the transaction. This won’t necessarily help with AML but will help agents avoid CPR claims,” says Offley.
He notes that another thing to consider is the buyer’s time scales. “When agreeing a sale with a buyer it is worth asking whether they have a strict time scale they need to complete by. While agents can’t be involved in setting those time scales, it will provide some guidance with regard to certain time constraints buyers may have,” Offley comments. “Establishing a reason for sale and how that could impact the transaction, will ensure that all parties are aware of all the information they require to make an informed decision, while ensuring that agents are protected from any potential CPR claims,” he concludes.
The Guild of Property Professionals (The Guild) is a network of over 800 of the best independent estate agents from across the UK. The Guild is a sign of professional excellence that agents can use to differentiate themselves from their competitors and assure clients that they will act with knowledge and integrity to achieve results, the three core values of The Guild. To allow agents to perform a superior service, The Guild offers marketing, business and technology services to its members.
Recent property data shows that the average agent is now agreeing far fewer sales on a monthly basis than at anytime in the last two years, and the time between instruction and a sale being agreed has increased by over 20%. So not only are agents being hit by pipeline sales decreasing, they are also seeing market activity grind to a halt. Many agents point to the fact that the cost of borrowing has increased so rapidly that new buyers have been squeezed out.
Another factor that is hindering fresh sales is that many properties having increased in value by between 17% to 23% regionally in a two year period, ending in autumn last year, and this spike in value has made it very difficult for First time buyers to get a deposit together for.
Seasonally, August tends to see a dip in sales as holiday season is in full swing, but the tapering off of market activity happened some weeks earlier this year, causing a number of agencies to shutter some of their branches to strip out business and operational costs, so they are in a better shape to trade through a difficult 2023.
Some major Lenders have in recent days offered slightly better lending terms for those requiring a new mortgage, but the fiscal sentiment at the present time is that these tiny cuts come ahead of at least one if not two hikes in cost of borrowing coming from the Bank of England in coming months.
Whilst agreed selling prices are not yet lower than in the recent past, it being more a case that it is just asking prices being trimmed to tempt the buyers, if the present downward velocity of the market continues, Q4 could see properties being sold for less than they were last year. Which really would change the dynamic of the whole marketplace; as things stand there are strong indications that completions for the year may be around 900,000, down from 1.24 million in 2022, a very bitter pill for the 16,000 agencies that are trying to do business.
Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.