I met with a friend today, someone else within the industry.
We were talking all things estate agency, as well as having a bit of a moan about a few things.
One of the things we discussed was commitment, from buyers.
One of the things wrong with this industry (well, there is more than one, but lets focus on one) is the lack of commitment.
The average a homebuyer will spend 30-60 days shopping, 14-60 days from contract to completion, you could be looking 10+ weeks) there is so much time for buyers to change their mind, or see something better…. or the situation generally change. thats in america!
in the UK, it is much much longer than this. i would say the average (based on our current pipeline) is around 10 weeks. so 70 days…. in 70 days alot can happen. redundancies, break-ups, deaths… you name it, it could probably happen during this time.
now, im just talking from “offer acceptance” to “exchange of contracts” there is next to no commitment from any party. meaning a buy could ‘pull out’ and change to another property with hardly any costs… which is wrong.
ok, if we get to exchange of contracts then they are committed but its a bloody long time until we get to this part.
don’t get me wrong, its not all buyer. i have encountered sellers removing their home from the market for a multitude of reasons. so its a two way street.
so whats the solution?
easy. give both parties something to lose.
its as simply as that, if both parties were to deposit an amount of money into a ring fenced account. whereby should they pull out of the transaction the “pot” if you like goes to the party who stuck with the transaction.
Now granted you have to be fair, so if things flag up on a survey that wasnt disclosed, or the back disagree with the valuation then there has to be a level of flexibility. BUT it gives a good sign of commitment from both seller and buyer from day one.
does it work?
my fall through rate ‘was’ 31% at one point. since adopting this method its dropped to less than 5%.
buyers are more committed and therefore stop looking at other properties. sellers are more commitment and ensure they do everything possible to move on.
so how much?
well this varies on the area of which you operate in, as it will often depend on the locality and general affordability. for example somewhere with the average price of 350,000 will likely have an higher average wage that somewhere of a average price of 200,000.
i feel £1000 is fair.
that way, its not bankruptcy level but it will certainly cause some damage if it was lost.
that would mean both seller and buyer deposit £1000 into a client ring fenced account which will be refunded to both parties on exchange of contracts.
IF the seller pulls out then the buyer gets the full £2000, the same as if the buyer pulls out (providing its not survey related) then the seller gets the £2000.
Now, granted, its not going to make up for the emotional side of things, but its more as a deterrent than a reward.
I personally feel, with the market how it is, this is the way forward. ive seen some huge success from it BUT, what do you think?