Now we’re well into the second month of the year, we have reached a crucial point in the ongoing plans to improve the homebuying and selling process to make it cheaper, quicker and less stressful.
Last year, the Ministry of Housing, Communities and Local Government (MHCLG) indicated that there would be a trial of standardised Reservation Agreements taking place in Q1 2020.
The idea is to get buyers and sellers to enter into an agreement in which they would formally agree to the sale of a property with a financial commitment at an earlier point in the process.
As MHCLG currently prepares to take its final report to ministers with the aim of getting them to give the Reservation Agreement trial the green light, here's why I believe those in Westminster and agents working on the frontline of our industry should get behind the initiative.
How did we get here?
It has become apparent in recent years that the moving process in this country can be slow, cumbersome and highly frustrating for all parties.
The government estimates that the average transaction took approximately 18 weeks in 2018, while each year 25-33% of all transactions fall through, cumulatively costing consumers up to £270 million in wasted fees.
This led to the formation of The Home Buying and Selling Group (HBSG), boasting a membership of over 120 organisations, including agents’ trade bodies and the major portals.
One of the leading ideas of the HBSG is to introduce Reservation Agreements to help provide consumers with more confidence and certainty, with the ultimate goal of speeding up transactions and reducing fall-throughs.
The current proposal for a standardised Reservation Agreement will see a conditional agreement made upon the information available at the point of acceptance of offer, with both parties expected to pay a deposit - likely to be in the region of £1,000 each - which they may lose if they breach the terms of the agreement.
Figures from the industry show that something like this is needed to encourage a more positive outlook for consumers.
According to research by Quick Move Now, the principal reason for transactions collapsing (34%) in 2019 was buyers changing their mind.
Meanwhile, reallymoving's figures back this up, showing that buyers and sellers changing their minds was the reason for 29% of fall-throughs last year.
Some 67% of consumers the website spoke to said they felt Reservation Agreements would have helped them.
It's clear we have a problem with commitment and the fact that the current legal system allows people to walk away from a deal the day before exchange should be overlooked no more.
Why do we need a Reservation Agreement trial?
As with all pilot projects, this will be a time for ironing out issues and kinks. Potential problems with Reservation Agreements raised so far include whether consumers would be able to raise an additional £1,000 and how a 'reasonable clause' to pull out of a deal could be defined.
The HBSG has done some fantastic work so far, but we're now at the point where we need to see some of their ideas put into practice to find out how effective they could be.
Some agents have reported that they already use Reservation Agreements successfully. For example, JOHNS&CO in London says Reservation Agreements have helped to get its fall-through rates down to nearer 20%.
A pilot on Reservation Agreements would help the industry to see if they work in different parts of the country and with different consumer demographics. Any feedback can then formulate a future standardised Reservation Agreement which helps all parties involved in the property transaction.
What can agents do to help?
It's certainly in an agent's interest to support the Reservation Agreement trial. As you know, when transactions fall through, the reality is you could have spent hours of your time working on something for which you will never get paid.
As an industry, we need to be open to seeing if Reservation Agreements can work and then move forward with other aspects of improving the moving process.
The latest HBSG update says that the industry and consumers are split on whether Reservation Agreements could be a success. However, it makes sense to wait for the results of a trial before formulating our final opinions.
An agent's role in the ongoing project to improve the homebuying and selling process will be to educate consumers and provide feedback to those in power.
It was interesting to see recent MHCLG research which suggests that first-time buyers are less keen on Reservation Agreements because they are concerned about adding complexity to the process and would prefer to maximise their options.
Meanwhile, experienced buyers and sellers are more positive about Reservation Agreements because they believe increased transparency reduces complexity. They also tend to favour a mandatory scheme.
It will be important over the next few months for agents to discuss the pros and cons with clients, explaining how greater transparency and certainty can not only speed up the moving process but reduce the chances of dreaded gazumping and gazundering occurring.
That's why whatever your reservations about Reservation Agreements at this stage, it's vital the industry comes together and supports the trial to see if they could become an effective part of the moving process for many years to come.
*Nat Daniels is the Chief Executive Officer of Angels Media, publishers of Estate Agent Today and Letting Agent Today. Follow him on Twitter @NatDaniels.