Agents worried about low instruction levels, high fall-through rates and the growth of online competitors should forget the “spray and pray” approach of panel-managed conveyancing.
Instead, they should concentrate on getting more deals through – and more quickly than the average, which has now risen to 16 weeks between offer and exchange.
Peter Ambrose, who founded independent conveyancing firm The Partnership, said: “We spend a lot of time talking to estate agents and the most common feedback we get is that they are frustrated by how long deals are taking, the difficulty involved and fall-through rates.
“The actual figure for the number of deals that fail is understandably difficult to pin down – it’s not something an agent will want to publicise.
“Indeed, recent accusations about the completion rates of ‘online-only’ agents definitely has a whiff of glass houses and stones about it.”
While the Government puts the fall-through rate at 35%, Ambrose says the general consensus is that it is somewhere between 28% and 35%.
He said: “This, when given the downward pressure on agent fees and reduced transaction levels per branch due to increased competition, makes revenue generation even more challenging.”
So what do agents do?
One of two things, according to Ambrose.
They either choose the ‘additional revenue stream’ approach and sign up to referral-based providers – conveyancing panel managers.
Or they focus on getting deals through more quickly – “As every agent knows, delays kill deals”.
It is no secret that Ambrose – whose firm directly employs all its own conveyancers – does not like panel managers.
The problem, he says, is that because they pay referral fees, they have to watch their other costs. They do this by exploiting technology, increasing workloads or employing cheaper staff, including off-shore companies – or all three.
“The usual outcome is higher caseloads being run by inexperienced case handlers, resulting in the frustration of poor communication and slower transactions,” he says.
So, how slow is slow?
According to Ambrose, the average time between acceptance and exchange is now 16 weeks, up from 12 weeks a few years ago.
This figure is likely to get worse.
“For agents competing with ‘online-only’ agents who are charging clients in advance, the ‘complete more deals’ approach will be key in demonstrating their competitive advantage.
For example, with a fall-through rate of 35%, agents will get seven cases through for every ten instructions. Reducing the rate to 20% will mean an additional sale will go through – with likely average commission at around £3,000.
But, says Ambrose, higher completion rates are usually achieved by a speedier process – and this means using firms which employ properly trained lawyers in sufficient numbers to be able to respond quickly, and which have invested in technology.
“Of course, this can only be achieved by charging legal fees that sustain employment levels and investment, which are typically incompatible with the panel managed ‘spray and pray’ model.
“It seems the choice is obvious.”
Of course, he would say that, wouldn’t he? But do you agree?