Sales falling through at much higher rates than previously thought, says new study

| Marc Shoffman

Almost half of sales fall through within the first four weeks of an offer being accepted, new research claims.

Data from a Post Office Money report found that 44% of sales fall through within four weeks of an offer being agreed – the figure is far higher than those usually quoted, normally on a scale between 25% and 33%

The analysis also found that sellers are waiting more than 100 days for their properties to sell, with time on the market up by a week over the past year.

Analysis of listings data on Home.co.uk by Post Office Money – based on  when a property is advertised for sale and until it is listed as under offer, or sold subject to contract, sold or removed – found it takes 102 days to sell on average.

The figure, based on activity in the 90 days to last month, is seven days longer than in the same period of 2017.

Properties in Edinburgh and Glasgow sell fastest – at an average of 39 and 48 days, with Blackpool taking the longest time, at 131.

The data forms part of the lender’s Rate of Sale report, developed with the Centre for Economics and Business Research.

It also uses analysis of TwentyCi data by Gazeal – which provides software to create legally binding offers – and found that most sellers get an offer in under three months, but fall-throughs seem remarkably high.

The study says 35% of sales fall through in the first three weeks when searches take place.

Altogether, 44% of sales fall through within four weeks, when there have been surveys.

The Gazeal figures also claim that one in six consumers experience gazumping, with buyers in Sheffield most likely to be a victim of this (35%), whereas buyers in Blackpool were the least likely at 6%.

Ross Hunter, a spokesman for Post Office Money, said: “Properties are taking slightly longer to sell but this doesn’t mean that interest in moving up the housing ladder is waning.

“At Post Office Money, for instance, we have continued to see a rise in mortgage applications and approvals in the last year.

“First-time buyers have actually increased by 12% across the market in the last year alone, encouraged by the reduction made to Stamp Duty costs and mortgage innovation.”

Steve Dawkins, of Gazeal, added: “Most people know that getting an offer on your home is only the first hurdle in the process of selling your property.

“As the market has remained competitive, the trend for gazundering and gazumping is rife – where previously agreed offers are later broken by one of the parties involved.

“This has left 65% of all buyers and sellers worried about whether they will make it to completion following an offer being accepted.”

EYE would be very interested in your take on these claims.

City

Avg. Time to Sell (October 2018)

Median time on the market, % change YOY (Oct 2018)

Avg. House Price, August 2018

Edinburgh

39

0%

£256,999

Glasgow

48

-4%

£136,353

Stoke-On-Trent

68

-3%

£111,328

Bristol

69

19%

£282,624

Northampton

70

5%

£213,284

Swindon

71

13%

£217,213

Manchester

73

10%

£177,594

Nottingham

75

6%

£141,294

Sheffield

76

-1%

£162,363

Birmingham

77

-4%

£183,362

Maidstone

81

15%

£299,051

Leicester

82

4%

£170,577

Derby

82

8%

£159,430

Southampton

83

7%

£208,661

Plymouth

84

-3%

£177,972

Norwich

85

13%

£202,449

Southend

85

13%

£276,711

Portsmouth

86

16%

£213,498

Cardiff

88

2%

£210,975

Leeds

88

3%

£183,651

Reading

88

11%

£301,616

Cambridge

90

13%

£442,986

Luton

92

20%

£239,582

Hull

93

-2%

£112,869

Lincoln

95

-1%

£149,987

Swansea

100

-13%

£147,949

Brighton

102

17%

£366,270

Carlisle

105

1%

£142,099

Newcastle

106

-2%

£165,359

Liverpool

106

2%

£131,811

Belfast

111

-16%

£125,386

Middlesbrough

120

2%

£112,781

Oxford

125

12%

£420,797

London

126

11%

£486,304

Blackpool

131

-2%

£107,518

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22 Comments

  1. MarkRowe
    November 16, 2018 at 07:05

    Let’s face it, it’s always been around a third so the only real reason this could have increased is because of the increase of online agencies. It’s quite obvious.

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    1. ArthurHouse02
      November 16, 2018 at 07:37

      I agree completely. When you pay someone whether the house sells or not, they obviously dont have a vested interest in “pulling out all the stops” to get the sale through. Bearing in mind (despite having had vendors buy through both PB and Emoov) i have never once had a call checking the chain, it is hardly surprising that their sales fall through and this then effects other families trying to move as well.

      Unfortunately people dont seem to consider this when parting with their £1500.

      Report
  2. Property Poke In The Eye
    November 16, 2018 at 07:06

    Offers not being vetted properly by agents.

    In most cases it’s third party  mortgage brokers confirming their client is good for the money even without seeing full documents for the client.

    Back in the days a quick call to your mortgage broker would get you a yes or no on basic details the buyer told you. But now you need to see all income and outgoings before you know exactly what someone can borrow.

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  3. Nick Salmon, M.D. Property Industry Eye
    November 16, 2018 at 07:26

    I very rarely comment on stories but on this occasion it might be helpful to the discussion. Some of you will remember the Sellers Pack/HIPs debacle in which SPLINTA played a part.

    In June 2003 we submitted a memorandum to the then Office of the Deputy Prime Minister (ODPM), which is now the Ministry of Housing, Communities and Local Government.

    Part of that memo dealt with the government’s ‘Key Research’ into the home buying process – which underpinned their argument that a Pack was necessary if the purported 28% average fall through rate was to be dealt with.

    You can read the entire memo here: https://publications.parliament.uk/pa/cm200203/cmselect/cmodpm/751-ii/751w23.htm At para 19 is the bit about why sales fall through.

    As I read today’s story I cannot help but think that little has changed…  

    19.  THE PACK IS INCAPABLE OF SOLVING THE PROBLEMS

    19.1  Referring to the Government’s own research SPLINTA contends that the Home Information Pack is incapable of dealing with the overwhelming majority of the stated causes of failed transactions in the home buying process.

    19.2  In Key Research it was found that there are 13 main reasons for sales and purchases failing:

    Failed Sales:

    Change of financial circumstance—11%

    Could not get mortgage—8%

    Could not sell own home 8%

    Buyer decided new house too large or small—5%

    Chains/completion delays—14%

    Failed Purchases:

    Adverse valuation survey—30%

    Seller withdrew to sell to someone else—14%

    Buyer gazumped or another cash offer accepted—14%

    Unfavourable survey—13%

    Unacceptable delays—11%

    Seller would not negotiate terms or price—10%

    Seller withdrew as no longer wanted to sell—6%

    19.3  It is the ODPM position that “43% of abortive transactions are the result of a failed survey”. It can be seen from items 6 and 9 in the table above how that figure is derived. However it is profoundly misleading because, as quoted above, the word “survey” is used in both items. In reality item 6 should have been set out in Key Research as “Adverse Valuation Inspection”. Lenders’ inspections are not the same as any form of structural survey. The lender’s inspection is only required to protect the interest of the lender.

    19.4  The ability of the Home Information Pack to deal with the stated causes of failed transactions is highly questionable. At best it would deal completely with only Item 9—an unfavourable survey. It could arguably influence Items 5 and 10. 19.5  Unfavourable surveys apparently account for 13% of all failed purchases. However if this figure is set in its proper context it is not nearly so high as might first appear.

    19.6  If the national fall-through rate is accepted as being 28% of all transactions, the 13% of failures due to an unfavourable survey is in reality the cause of under 3.64% of all failed transactions.

    19.7    The enormous additional cost, bureaucracy and disruption that will result from the Home Information Pack is out of all proportion to its efficacy in dealing with the real problems of the home buying and selling process.      

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    1. Bless You
      November 16, 2018 at 07:48

      Should have something  if house is over 30 years old.  Trouble with hips was connells etc sought to control the market with them as well. Offering free but vendor had to stay with them forever…. oh a bit like purple shitzz

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      1. Bless You
        November 16, 2018 at 07:52

        14 for gazumping? MAYBE we a bit more honest in heaven but I think I ‘ve had a gazumper about once in last 20 years… 

        Report
        1. Nick Salmon, M.D. Property Industry Eye
          November 16, 2018 at 08:04

          Don’t forget Bless You, that all these ‘statistics’ were government figures and based on a very small number of analysed transactions. Back in the day we took them all with a large pinch of salt because they were being used to promote a policy.

          p.s. Thinking about it, something has changed since those days. There are more agencies around today who perhaps are not so interested/capable of carrying out solid sales progression.

          Report
          1. MarkRowe
            November 16, 2018 at 08:16

            That last paragraph, Nick – Spot on.

            Report
        2. P-Daddy
          November 16, 2018 at 11:13

          You must work in Blackpool then Bless You 🙂 it doesn’t seem to happen there…but all the naughty buyers are in Sheffield apparently with 35% of sales gazzumps! No mention of gazzunders though. We have had this happen three times in the last couple of months and by London based buyers! They have been sent away with a ****** nose, but they have left chaos and expensive bills for nothing and in the case of the third one who was from Hong Kong, they ended up having to pay more as the client and agent weren’t for turning! This is definitely an issue though.

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    2. Peter Ambrose (The Partnership)
      November 16, 2018 at 07:54

      That article brings back memories, Nick. My only comment on these statistics is, as a company who spends quite a bit of time trying to understand fall-throughs (typically caused by delays) it is very easy to get these types of calculations wrong especially when it comes to timescales and trends. Marking fall-throughs and the month in which it happens is actually much more complex than people typically think.  Giving percentage figures like the above research is actually quite tricky – in short – when a deal falls through you have to make a decision which month to count it against – the instruction month or current – no easy answers but very easy confusion!

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  4. Bless You
    November 16, 2018 at 07:44

    Hate to be ageist but over 70’s can’t seem to buy a house without pulling out twice or only talking to family members a day before exchange. Time we fined them or took £10 deposits from them. They are a different level… brexit lovers

    Report
    1. Robert May
      November 16, 2018 at 08:02

      I cut my teeth in heaven’s waiting room, I can honestly say I  never once  experienced such problems with older purchasers.  I had one die after agreeing a purchase and a couple that became estate sales after the vendors unexpectedly jumped the queue but nothing  like you’re describing.

      Report
      1. smile please
        November 16, 2018 at 08:11

        We have had our share of fall throughs from the gray pound!

        Report
        1. Bless You
          November 16, 2018 at 14:06

          Iam including grey sellers as well roberto may, . They like  to put house on market and take off once youve found a buyer.  bless them….they fought in the war..oh ,wait no they didnt .

          Report
  5. smile please
    November 16, 2018 at 08:09

    Yes there are some buyers or sellers that pull out but some agents are also too eager to tie a sale up.

    Just yesterday we received an offer on a property above commercial. Neg has just joined us (and is doing very well) but was tieing up the sale without checking the deposit or lender. All because the buyer had an agreement in principle.

    I told him to hold back, find out who the lender was and the deposit. He looked puzzled as he thought his check was enough.

    Transpired the she did have an AIP for enough but the lender would not lend 95% above commercial, so buyer popped in saw our mortgage adviser and we found the right lender.

    Some agents high street or mainly online would have just put the sale together 6 weeks later it would fall through when the mortgage did not appear and probably just look for another buyer!

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    1. Mark Walker
      November 16, 2018 at 09:31

      This is Estate Agency worthy of the name.

      Report
  6. Room101
    November 16, 2018 at 08:11

    When the pay anyway models are the ones footing the ladder and sending swathes of FTB and 1st time movers into the market place ill-informed, under prepared and with no incentive on their part to complete, this doesn’t come as a surprise.

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  7. J1
    November 16, 2018 at 09:23

    If it is true that on-line only property advertisers (let’s not call them Agents) have a higher fall through rate, then that would potentially be the most damning headline ever to affect the no sell pay anyway mob!

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  8. Old Sage
    November 16, 2018 at 09:45

    I suspect the greatest fall through rate is with corporate firms setting targets for naïve negotiators, desperate for a share of commission without undertaking the due diligence and not thinking through the consequences for the client.

    Report
  9. aSalesAgent
    November 16, 2018 at 09:53

    “Analysis of listings data on Home.co.uk by Post Office Money – based on  when a property is advertised for sale and until it is listed as under offer, or sold subject to contract, sold or removed – found it takes 102 days to sell on average.”
     
    Sorry, do the figures in the table give the time it takes from being listed online (for sale) to sold stc, or is it from sold stc to sold (i.e. exchange of contracts)?

    Report
  10. Commentator91
    November 16, 2018 at 11:54

    COMMENT REMOVED – PROPERTY INDUSTRY EYE TERMS & CONDITIONS #6. Users posting comments on the site may not post direct hyperlinks to other websites and especially may not do so by use of their username. Users may not use comments to promote a service or business.

    Report
  11. Andrew Stanton
    November 16, 2018 at 22:55

     
    HOW MANY SALES ACTUALLY GO THROUGH ? IF YOU LIST 10 INSTRUCTIONS, DO YOU SELL STC 7, AND EXCHANGE ON 5.

    On a related point, how many sales actually go through, from my own observations of over 30 years of selling property, having personally marketed about 6,0000 properties, typically the norm for sales is 74% of properties taken to the market, get sold subject to contract and then 30% fall through, giving a net figure of exchanged sales of around 48% to 53% depending on the market conditions.

    I think the kicker here is – if you as a client are paying upfront on a non-refundable basis £1,345 on average to an online agent like Purplebricks, and you have only a 50% chance of getting sold, then that online agent has a duty of care to tell you the risk.

    Some clients might be up for the risk, but others might prefer the security of no sale no fee, which is why 1.5M properties were marketed by traditional agents in 2017, and only 100K were marketed by online brands.

    ARE THE CONVERSION FIGURES DIFFERENT FOR ONLINE AGENTS ?

    In 2017 only 6 online agents managed to get over 1,000 new clients to market their properties with them.
    These were Doorsteps, Yopa, Purplebricks, E-moov, Tepilo, House simple.

    There are a number of other online agents but they do not have a mass appeal, for instance Nested, have 134 properties in total on their books with 24 sold subject to contract an 18% conversion. (RM).

    Taking a snapshot from Rightmove 13/11/2018, so about a 6 month span of activity, Rightmove showed: – 

    Doorsteps, had 2,054 properties listed, 1,321 for sale, 733 under offer not exchanged, 28% conversion of listed to sold subject to contract. So 3 out of 10 listed sstc.

    Yopa, had 5,501 properties listed, 3,539 for sale, 1,962 under offer not exchanged, 35% conversion rate.

    Purplebricks, had 37,531 properties listed, 21,142 for sale, 16,389 under offer, 43% conversion rate.

    E-moov, had 2,504 properties listed, 1,696 for sale, 808 under offer, 32% conversion rate. (Now merged with Tepilo & Urban)

    Tepilo, had 1,740 properties listed, 1,162 for sale, 587 under offer, 33% conversion rate.

    House simple, had 1,140 properties listed, 763 for sale, 341 under offer, 30% conversion rate.

    What most of the online agents have in common is that they charge an upfront fee or a fee payable in 10 months, even if the property does not sell, unlike the no-sale, no-fee model of traditional agents, so at the conversion rate of for sale to sold, I think there is a lot of clients who have paid for a service ‘getting sold’ which they never achieve.

    Also, collectively there were 1.5M properties marketed in the last 12 months, and only 100k were marketed by online agents, so though the media loves to talk about cheap fees and online agents, in fact the general public are using the traditional approach.

    The bottom line is always the bottom line, so for instance Doorsteps, sell your home for £99, well if you have 2,054 clients at £99 paid upfront that is £203,346 of income, (income not profit) and that £203,346 will not cover the costs of running that company, if it did they would not keep getting a new round of fundraising. In a little over a year they have had two rounds of crowdfunding and have received in excess of 1M. They will soon burn through this, as the true cost of a sale is twenty times their £99 offering, have a look at their first year accounts.

    Purplebricks, sold 11.5% of itself for 125M, and I applaud this, but Purplebricks has never made a penny profit. (47M loss over 4 years)

    E-moov and Tepillo were in a merger some months ago, and right now they are looking for a buyer – and their CEO recently admitted that it cost over 2K to sell a property, whilst at the same time saying E-moov only charged less than 1k … Perhaps that is why they have burnt through millions of investors money, subsidising each sale with your own money is not the best way to generate profit.
    Estate agency is a contact sport, buyers and sellers like the ability to have experienced and not so experienced but willing and contactable sales staff who can guide them through the tribulations of moving.

    Hatched, one of the oldest online estate agents, purchased by the Connell group and closed down a few months ago, summed up online estate agency very well, they did not doubt that you can sell property using an online agency, it as just that the price to capture potential clients was far higher than the cost of selling them online.
    Now if the Connell / Sequence group owned by the Skipton building society have closed their online agency Hatched as it never made a penny, and yet they are likely to make a combined profit this year or around 65M plus, perhaps traditional agency is not dead. After all Hatched was a mature business model, older than most and it failed.

    Remember all agents are online agents, it is just some have bricks and mortar assets, their offices and high street locations, and others have no offices just large piles of cash which they burn through to remind the public they exist with television, radio and internet advertising. Some agencies are built upon decades of trading and some agencies are built upon repeated crowdfunding and share options, covering their cost base.

    Thoughts?

     

     

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