Transaction fall-throughs could be collectively costing estate agents over £80 million in commission fees each month, according to analysis by Gazeal.
The digital platform’s research is based on the government estimate that approximately a third of property transactions fall-through before completion.
According to HM Land Registry figures, there were 105,630 completed transactions in October. Based on Nationwide’s national average house price of £229,721 and an average commission fee of 1%, agents’ total monthly earnings are in excess of approximately £242 million.
However, up to £80 million in commission fees could be lost each month due to a third of transactions falling through.
Recent research from NAEA Propertymark found that the average estate agency branch completed 14 transactions in September. Based on this figure, the average estate agency branch could be losing in excess of £10,000 per month due to fall-throughs.
Stamp duty holiday increases pressure on transactions
The number of potential property transactions has risen sharply in recent months due to the stamp duty holiday, a rise in demand which could continue into the New Year.
According to Zoopla forecasts, an additional 100,000 sales are expected in the first quarter of 2021 as high transaction volumes spill over from the end of 2020. This could result in an additional 33,000 fall-throughs and lost commission for the industry to the tune of approximately £75 million.
“Although overall transaction numbers are up due to the stamp duty cut, many will have fallen through in recent months for a variety of reasons and many more will do as we move into 2021,” says Bryan Mansell, Co-Founder of Gazeal.
“This results in agents doing hours of work without getting paid.”
He says that despite recent news of a Covid-19 vaccine rollout, consumer confidence is likely to remain shaky for the foreseeable future. On top of this, a huge backlog of outstanding transactions puts pressure on longer chains.
“For a housing transaction to go through, a range of components need to come together seamlessly,” adds Mansell.
“This does not always happen, so agents have to face the reality that each branch risks losing thousands of pounds in commission each month due to fall-throughs.”
How can agents reduce the financial impact of fall-throughs?
Mansell explains that agents can increase security for consumers and subsequently protect their own income stream by focusing on ‘getting people moved’ rather than just listing their home on the market.
“Providing reservation agreements is a good place to start as they confirm commitment on both sides and take emotion out the equation.”
“A reservation agreement is a fair and balanced way of protecting transactions in which no-one is punished if no-one is to blame for a transaction falling through. Furthermore, Sellers are encouraged to use reservation agreements as recommended in the government’s How to Sell Guide.”
With over £300 million of property transacted since the spring lockdown, Gazeal’s reservation agreements have been proven to reduce agents’ fall-through rates by at least 50%, which could save agencies thousands of pounds of lost commission each month.
Mansell adds that ensuring properties are ‘sale-ready’ with upfront information such as protocol information forms, title documents, certificates and guarantees, which can reduce the chance of any problems further down the line and protect agents’ pipelines.
“Giving buyers a transparent view of the property before they make an offer can really speed up transactions and drastically reduces the chances of them pulling out at a later date.”
“Quicker transactions which are more secure allow agents to get paid sooner and more frequently, while increasing consumer satisfaction with the moving process,” he concludes.