Mark Snape is chief executive officer of Broker Conveyancing
Here’s a quick ‘starter for 10’ for those reading who are already homeowners: how many of you bought the first home you offered on?
Let’s rephrase that to the first home where you had your offer accepted, and you started along the process of purchasing – where you were genuinely invested in buying that home, both emotionally and financially.
For some, moving from would-be to actual first-time buyers might be a relatively smooth process, but the likelihood is that – at the very least – there were obstacles along the way, big and small. I imagine that it ended up costing more money, time and resources than envisaged at the outset.
Looking just at the cost, we can see just how potentially dysfunctional our house purchase process can be. According to recent research from Aldermore, first-time buyers collectively lost more than £400m in the last year alone from purchases falling through. If you break it down, this adds up to £2,912 per first-timer. That’s a staggering amount, and while 50% of those reported that their aborted transaction was down to the unique nature of the pandemic, that is still a significant number of people losing large amounts of money in any ‘normal year’.
Furthermore, Aldermore estimates that as a result of the pandemic, first-timers faced additional costs of £1.67bn, which works out on average at £5,870 each.
Doing the maths, that is £8,782 in total lost, with the added slap in the face that this money, for the most part, can’t be recouped and will need to be found again in the future, when they go through the whole process again.
Just as a final wound, given the return of 95% loan-to-value (LTV) mortgages recently, the buyer has just lost the equivalent of around three-quarters of a 5% deposit on the average house price in the UK, which is £250,000.
That would pretty galling for anyone, but even more so for someone attempting to get into their own home for the very first time – someone who may well have spent a considerable amount of time saving that money, and who may now be placed back way behind the starting grid as a result.
It strikes me as quite remarkable that we could have a process which risks alienating people, and costing them serious money they can ill-afford to lose, the very first time they engage with it. Nevertheles, that’s exactly what we currently have, and it seems all the more bizarre that the house purchase fall-through is perceived as something of a rite of passage that all would-be homeowners have to go through before they ‘earn their stripes’ in order to be deemed ‘worthy’ of buying a first home.
Would we allow this in any other walk of life? The first time your child was allowed to go off to the sweet shop and buy some sweets for themselves, would it be deemed a test of character for the shop owner to take their money and not give them any sweets, suggesting this will make the sweets that much more delicious the next time they were allowed to buy them? Of course not.
Yet here we are, with a house purchase process which pretty much tells its first-timers to expect the worst, and hope for the best, and that should they be lucky enough to buy that first home without it falling through, then they should be grateful.
I’m not sure you could do a much better job of putting people off from ever trying again, and in a way this might be responsible for some of the practices we do see, such as gazumping or gazundering, or the outright suspicion amongst those involved.
The root cause here is, of course, a lack of certainty across the piece. Add to this a fast-paced marketplace such as the one we have now, with huge demand, supply that is not able to keep up, a strong, competitive mortgage marketplace with good lender appetite, and so on, and then with the process we have, you ultimately concoct a recipe where fall-throughs become ever more likely.
There are clearly measures which could be introduced to cut out a lot of this uncertainty, stemming from better provision of upfront information, so that there are no surprises further down the line as we have now when surveys are completed. I’m also aware of a push towards reservation agreements, widely used in the new-build space, which tie in both parties and result in a financial loss for those who pull out, as they have to pay the costs of the other side.
What is also undoubtedly required, and appreciated, by first-time buyers is the presence and guiding hand of the adviser to take them through a process which will be alien to them, and which could – if fate conspires against them – result in severe financial lost.
In that regard, this is not just about taking the client through the complexities of the mortgage process, but the whole purchase process, ensuring that they are represented by quality, experienced professionals – whether the adviser or the conveyancer – who can give them the absolute best chance of exchange and completion, without the nasty fall-throughs that can afflict far too many transactions.