Estate agents: Would you sacrifice conveyancing referral fees to speed up deals?

Iain McKenzie

Back in June of 2021, Rob Hailstone of Bold Legal Group penned a piece for EYE in which he said that conveyancing is not very high up the list of jobs that youngsters should consider training for. “Long hours, modest pay, responsibility, do not make it a particularly attractive career option.”

Rob quoted Iain McKenzie, the CEO of The Guild of Property Professionals as saying: “Low fees in any profession or business, usually equates to an inferior service.”

Now, in a joint press statement with Rob Hailstone, Iain McKenzie suggests that estate agents should encourage conveyancers that are currently charging low fees to increase their fees, reduce their workloads and get transactions through faster.

With transaction times longer than ever and the market beginning to quieten it is vital that both transaction times and fall through numbers are reduced. McKenzie even suggests that asking for a referral fee could do more harm than good.

“Not only have the requirements that conveyancers have to adhere to increased but also those that estate agents have to comply with. Better understanding and collaboration between the two groups is essential going forward.”

“The conveyancer’s workload has increased dramatically over the last 20 years or so and it would appear that technology has not yet been able to keep pace fully with those increases.

“Until new technology solves the problem, or the pressure on conveyancers subsides, then increasing fees (or not asking for a referral fee), therefore enabling individual transaction numbers to reduce makes sense.

“By increasing fees conveyancers would be able to reduce their workload, it might also keep conveyancers from leaving the sector and perhaps entice more to join the sector.

“While on tour, several Guild Members said that they would sacrifice a referral fee if it meant a faster transaction.”

Rob Hailstone

Rob Hailstone agrees:

“Unless something drastic is done soon, transaction times will get longer and longer. Conveyancing is not the job it used to be 15 or 20 years ago. It is far more involved, complex, stressful, and burdensome. Many conveyancers are not able to process transactions as they would like to for their clients.

“There are several reasons for this, but the main one is that conveyancing used to involve about 12 main steps, it now involves 30 or more.

“Logic says that if your workload per transaction increases (threefold), the number of transactions you can run at any one time must reduce, even if technology is helping in some areas.

“Add to the fact that there are HMLR delays, SDLT advice should only be within the remit of experts, and client and estate agent requests for updates have increased and it becomes clear that the conveyancer’s role is, at times, almost untenable.”

Hailstone recently carried out a survey at The Society of Licensed Conveyancers conference in Derby.

There were over 200 delegates in attendance and two of the questions asked were:

Do you enjoy being a conveyancer as much as you did in the past, and do you think your role is understood by clients and other property professionals?

To the first question 86% of the voters said no.

To the second, 97% said no.

“Surely these issues need addressing?” says Hailstone.

 

Solicitors and conveyancers should charge more

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13 Comments

  1. stillhaveapulse81

    By not doing so you would be failing your client… simple as that.

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  2. Emmersons46

    Wouldn’t it be lover-lee!!

    Referral fees are the killer. For whatever reason referrers wish to control the fee that the Solicitor charges. Developers do it on the promise of lots of work.

    Essentially there has to be a reset.

    The end of Referral fees would be a good start. It distorts the market and is not in the interests of consumers.

    However a more radical and immediate improvement to the process would be sellers having the Title reviewed prior to marketing so that legal issues can be addressed early. Estate Agents could suggest that thus improving the timescale dramatically.

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  3. MichaelDay

    The issue of referral fees is clearly important but if the relationship and understanding between the agent and conveyancer is a good one it is a bit of a “red herring”

    Agents should be doing more than just passing a telephone number across and asking a conveyancer to quote – they should be adding value by selling the conveyancing service to the consumer (ideally on a known and agreed fee scale) and completing some of the collection of information required. During the transaction they should again be adding value through proactive involvement and engagement with all parties to progress the transaction.

    Conveyancers for their part should be prepared to open a file and not wait until a completed chain exists – there is much work they could be doing to get ahead of the curve in a sale/purchase.

    If the relationship and operation runs akin to outlined above, then a referral fee is actually good value for the conveyancer as they will not have to spend time, money and other resources on finding clients and selling their services. Sales progression can be speeded up by agreed contact with agents rather than a piecemeal approach.

    I’m all for agents and conveyancers charging higher fees – if they can both demonstrate the “value add” (faster transactions, less aborts etc) then they will easily be able to achieve.

    Might even see conveyancers aligning their fees with agents – no move, no fee – fixed fees etc?

     

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  4. Ric

    We don’t ask for referrals and make it clear we would simply rather get updates and regular contact but still it is painful, which starts to make me think, if it is gunna be painful, we may as well make some money in the process.

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  5. Highstreetblues

    No. It’s only a small fee, but these days its fast becoming a late payment charge.

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  6. skipdale

    I have said this before on PIE. 1 average probate sale is equal to around 12 / 15 referral fees. Build up a relationship with the local solicitor who responds to your sales progression update requests. Plus you are keeping cash in the local business community. As a bonus I have actually sold a couple of local solicitors own houses.

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  7. forwardthinker

    Our firm doesn’t take referral fees and solicitors we refer are not the cheapest, quick and at least we can communicate with them and have an understanding. Even when the process is taking longer than usual, which is the case when you have a rubbish solicitor involved on the other side or few in a chain.

    Be much simpler if solicitors didn’t take referral fees and structured their office properly to deliver. Like having a progressor. Delayed transactions cause so much grief, stress, inconvenience, money and really affects peoples lives like nothing else I know.

    We’re all under pressure of some sort, but they just can’t seem to get themselves organised it’s ridiculous. Don’t think wholly removing referral fees fixes it. If you’re rubbish at what you do you’re rubbish at what you do.

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  8. aSalesAgent

    I’m fine with a ban. None of the solicitors we refer to pay a fee, but we recommend them nonetheless because they’re exceptional.

    I’m not against agents subsidising their commission per se; it’s having to deal with crap firms that are kept in business by offering incentives which frustrates me. Either reinvest the money into better staff training and systems, or shrivel up and die.

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  9. scruffy

    “The first and overriding obligation is that the estate agent must at all times and in all circumstances act honestly and in the best interest of his client ” “The law is clear and strict that no estate agent may take a secret commission from his agency nor make a secret profit from his position as agent”, both quotes from The Estate Agent’s Factbook.

    I fail to see how any agent can claim to be acting in their client’s best interest if channelling as much of their referral fee earning potential to their chosen provider, on the simple premise, in some cases, that their referral fee offering to the agent is greater than another’s. Paying for business in this way must surely get alarm bells ringing, and staff targeted on referrals will surely only stay in our industry for as long as they can stomach such tedious and odious practices.

    I’m not suggesting that such referral fees are secret, albeit that some agents seem happy to declare that “No referral fees are paid to our agency by Spiv & Shark financial services”  when the agency owns that business !

    In my view a ban is long overdue. There are plenty of ways that agents can diversify their income stream, but placing their reputation in the hands of such providers seems foolhardy in the extreme: and any backlash  that results is probably deserved.

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  10. tim main

    Rob.  Peter Ambrose’s article yesterday and the comments after made me think about how ill prepared buyers and sellers are when they instruct a conveyancer to act on their behalf.  Most will not know the process few will be brief on the process they are starting and less w will receive sensible and regular updates from their solicitor.  We need more explanation and communication about the whole process.  yesterday a sale that took 51/2 months from being agreed to exchange was mentioned by a property professional!  and it was a cash buyer who was very keen to move in and no chain!  I have never heard of a solicitor taking more than a couple of weeks to exchange their own property.

     

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    1. Rob Hailstone

      Can’t agree with this comment Tim. I have never heard of a solicitor taking more than a couple of weeks to exchange their own property. My daughter is buying a flat with complications and has a good conveyancer (and also has me riding shotgun). It will take a long while to proceed. Anyway, solicitors/conveyancers cannot/should not act for themselves.

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  11. stillhaveapulse81

    Scruffy your post, I think was the only one who rightly emphasised that .. the agent MUST ALWAYS act in the clients best interests.

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  12. Alan Murray Conveyancing's voice of common sense

    I think the question of legal fees is a bit of a sideshow in the overall morass that is conveyancing these days. Yes it would be wonderful for fees to be higher, I  remember the days when everyone worked from the same scale fees. Unfortunately the Law Society, in their infinite wisdom and in the name of progress (!) decided to deregulate conveyancing and allow everyone to charge what they wanted, amongst other things. Since then the profession has been on a downward spiral to oblivion.

    I have no doubt there are good, professional Solicitors out there who take the approach proposed above. However I also know of Solicitors worried about a potential downturn of work cutting fees already. And herein lies the problem, it does not matter how high the fees of Solicitor A are if Solicitor B on the other side is a factory taking weeks and weeks to progress a transaction. Such is the proliferation of such unprofessional outfits in chains these days that is where the delays are ad infinitum. Yes Solicitor A is being cushioned by charging higher fees, but he is still having to wait an age to put in his bill whilst he waits an eternity for Solicitor B.

    I would respectfully suggest the Guild of Property Professionals might be better advised to discuss with Estate Agents the fact that their referral fees created these factories and continue to support them. Whilst taking away said referrals would not be a panacea to speed up transaction times overnight, it would go a long, long way towards improving them.

    Although to be fair the real issue that comes to mind with this article, and those Peter Ambrose has written recently, is that we work in a profession without proper regulation. When discussing every issue in the system today, the root cause of the problem can be traced back to the same maladministration. The SRA and CLC are being negligent in their obligations to good firms of Solicitors working their best for their clients, and until those Regulators start to regulate the profession seriously and competently, nothing will improve. In fact things will only get worse.

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