Property purchasing specialist, HBB Solutions, has revealed the eye-watering sums of money that estate agents are losing out on in a single year due to the number of sales that fall through before completion.
HBB Solution analysed the annual number of fall through prior to and during the pandemic, as well as the average estate agent fee lost per sale, before looking at what this loss equated to across the entire sector.
The research shows that in 2019 prior to the outbreak of Covid-19, some 272,768 property transactions fell through before reaching completion.
With the average property costing £230,612 and estate agents charging an average fee of 1.28% (Not including VAT), that’s a loss of £29,52 per fall through – totalling £805.2m in lost income.
In 2020, during the initial year of the pandemic, the estimated number of transactions to fall through increased by 9.5% to 298,680, with the average house price also climbing to £237,227.
At the same time, the average estate agent fee reduced to 1.26% (£2,984). But despite this lower fee, the estimated industry loss due to fall throughs totalled £891m – a 10.7% increase on the previous year.
Despite the impact of the pandemic easing in 2021, a similar trend has materialised. It’s thought as many as 326,091 transactions fell through last year, a 9.2% annual increase and a 19.5% increase on pre-pandemic levels.
The average estate agent fee again reduced to 1.18% but with house prices climbing considerably (£259,239), the average fee per transaction also climbed to £3,059.
As a result, the nation’s estate agents lost out to the tune of £998m in fees as a result of transactions falling through before completion – that’s almost £2.7bn in the space of just three years.
Managing Director of HBB Solutions, Chris Hodgkinson, commented: “Unfortunately in the UK, a transaction falling through before completion is a commonplace occurrence and one in five sales alone will be lost due to the chain collapsing. When you also add the other pandemic complications that many have faced during what has been a tough few years, as well as the increased volume of transactions spurred by the current property market boom, then it’s hardly surprising that the number of sales collapsing has climbed considerably since 2019.
It can be as gut wrenching for those facilitating the sale as it is for those buying or selling the property. Having spent months on end working tirelessly to reach the finish line, they have no choice but to watch their hard work go to waste and their potential income evaporate.
It’s this uncertainty that we’ve worked hard to remedy by providing guaranteed sales solutions and chain repair to help steady the ship in times of crisis. We’re able to purchase within as little as a week to ensure that a sale doesn’t fall through and while we will do so for a marginally lower price, many agents are more than happy to take a slight hit on their commission rather than fail to produce for their seller.”
Note: VAT is paid to the government by estate agents and not counted in this case as ‘lost fees’ so the average fee not inclusive of VAT was used.