Did you know that nearly a third of all house sales collapse during the conveyancing process? The main reasons are issues flagged in the survey and issues with the mortgage. Unfortunately I know this first hand having had a particular property fail during conveyancing four times. Each time I was hit with costly conveyancing fees and had to restart the sales process leaving perspective buyers suspicious. Nothing was wrong with the property, the issues were with the mortgage lenders and the ability of the buyers to secure a mortgage for the particular property.
Frustrated by my aborted sales, this final instalment explores how the process of buying and selling a property could be significantly improved – the method of sale, the exchange of contracts, completion and even the registration of title with the land registry – all parts of a complex chain which could be optimised by the blockchain.
Many an evening out has ended walking along my local high street looking at agents’ windows full of property listings. In our online focussed world I wonder how our high streets will look in a decade. Evidence suggest that transaction volumes are too thin to support all the agents and those who don’t adapt unfortunately will fail.
The future, in my opinion, is towards an online auction type model. Still in its infancy here in England a couple of auction houses, such as Bamboo Auctions and Allsops, are experimenting with online auctions. Full legal packs are prepared in advance and final bids are binding. I can also see a move away from an exchange period altogether to just an instantaneous exchange and completion.
The very process of producing a legal pack could one day be done with the click of a button. All the information is there – land registry, financial databases, managing agents etc. A full homeowner’s survey could be like a vehicle MOT where the homeowner has their house surveyed prior to listing and the result is logged on a database. If any issues are flagged the owner can undertake the required works, which will be updated in the database, or leave for prospective buyers and priced accordingly. (I discuss commercial lending here which could also apply to mortgages.)
Listing a property for sale would be as easy as completing an online form. Data would auto-populate from the various databases even running AML/KYC checks and title ownership instantly. The legal pack is populated and ready for review by the solicitor of the prospective buyers for advice only rather than raising queries.
The reserve, guide price and preferred auction time are set by the vendor, perhaps with the assistance of a sales consultant, and the bidding begins. All bidders must go through the online AML/KYC process upon registration and the blockchain prevents them from bidding above the level at which their mortgage has been pre-approved.
Let’s imagine that the auction has been a success and produces a winning bid. As soon as the auction system registers that winning bid it triggers the transaction between the lender and the vendor transferring the funds to the vendor while simultaneously triggering the transaction for the buyer’s contribution from the buyer’s electronic wallet to the vendor. This transaction is then automatically updated in the land registry database. It just all happens live and automatically. A unique barcode is generated for the successful buyer to enter their new property.
I’m not predicting the end of agents completely because we all need some human interaction, especially when it comes to showing a property and guiding prospective buyers through an open home. While many companies have popped up offering virtual reality home tours, these are great for pre-screening, but nothing really beats walking through a home and getting a true feel for its nuances and the surroundings.
The same can be said for solicitors. It’s great to have the capability to instantly produce a contract and pack. But I for one am not fluent in legalese and require the services of a good conveyancing solicitor to translate the documents into plain English and flag potential issues, restrictions and covenants. The whole point with blockchain is not to do away with people, it’s to streamline the mundane tasks vulnerable to human error. This streamlining results in more efficiencies within our businesses which, over time, should create cost savings.
Of the three challenges I’ve highlighted this week – planning approvals, commercial debt raising and property transactions – it’s the sale and purchase of property which I think will be the first to benefit from blockchain technology. The first step towards this is more estate agents offering online auctions. It’s a bit like shoe shopping online 15 years ago – we were initially so fearful about entering our credit card details and yet now we buy with one click, paying instantly with PayPal without a second thought. While this is not yet utilising blockchain systems, once the technology is available property transactions could be as pain-free as buying shoes. We already start our property search online, soon we will complete it online too.
I was going to add a bonus fourth article about how construction could benefit from the blockchain but I found this article by Dave Hughes which is more comprehensive than anything I could write. Worth a read to see how even the human-heavy construction industry could be optimised by the blockchain.
Thanks to the thousands of people who have read my musings in this three part series across LinkedIn, Facebook, Twitter, Property Tribes and my website. I appreciate all the feedback and discussion these articles stimulated. As you can tell I’m no proptech expert – my nine year old had to teach me how to use my new phone – I am an optimist who looks forward to being an early adopter of new technology. The end goal is to have efficient systems carrying out the tasks I despise leaving me free to build inspirational homes.