I recently attended a seminar on the topic of mortgage fraud. The presenter illustrated a graph showing the Northern Ireland property index for the period from 1985 to 2008. What was interesting from the graph was that during the period from 1985 to 2005 there had been a continual regular property price increase year on year. As we all know, from 2005 to 2007 there was a property price boom and from approximately June 2007 to date there has been a property price crash.
This graph coincides with what I believe has been a significant change in the way residential conveyancing has been conducted in the last 25 years. Although anecdotally it was suggested that gazumping was a major problem in the property market, from my own experience from 1985 to 2004 gazumping was a very occasional event. I have never been sure as to the reason for this but I have always suspected that the stability and gradual increase in property values on a year on year basis has helped to suppress a gazumping frenzy.
When the property boom came most solicitors, although pleased with the increase in their conveyancing fees, were unhappy with the appearance of widespread gazumping. This put considerable pressure on conveyancers when they had the added difficulty of trying to persuade greedy vendor clients to honour their original agreement and not accept a higher offer. The incidents of gazumping during the property boom escalated enormously and it was a common complaint amongst conveyancing practitioners. It put a considerable strain on solicitors acting for the purchaser as they needed to check title and have contracts signed virtually as soon as the documentation had arrived to make sure there was no delay. If there was any delay the vendor would use this as their feeble excuse to accept a higher offer. The purchaser client would also take considerable risks in ensuring that the contract was unconditional and would take a view on certain matters that they would not have accepted in a normal stable, or buyer’s, market.
By the time we all had adapted to these extra pressures the property bubble had burst and like a Disney roller coaster valuations were on a steep slide. Not long after this purchasers sought their revenge on vendors by gazundering. We had many transactions where the vendor waited indefinitely for a contract and the purchaser reduced their offer with no valid reason. For vendors’ solicitors they had now to deal with nurturing the sale and trying to get an acceptable contract signed from the purchaser. Like the gazundering the conveyancer had to develop new skills and great patience in their endeavours to try and complete the vendor’s sale.
Conveyancing since May 2007 has been more difficult than at any time in the last 25 years. The volume of transactions that fail to complete after agreement has been reached has escalated enormously. Whereas in the gazumping days contracts were signed by purchasers immediately, now it can take months before a contract is signed by the purchaser.
Both the gazumping and gazundering phenomenon have been engineered and created by the frenzy that the public have embraced in the recent property boom and bust escapade. Most solicitors however have been unable to control these developments or their clients’ expectations.
What of the future for the conveyancing practitioners? I felt sorry for the recent public
chastisement of the politician who indicated that there might be signs of a recovery. Certainly in the property market in the first three months of 2009 there appears to be a slight increase in activity levels particularly for those properties below the £250,000 Stamp Duty Land Tax threshold. This is encouraging and if the lenders start to lend as they did pre 2004, on sound criteria, then there will be a continuation of the increase in property transactions. Let’s hope that there is less “self certified”, “interest only” and “high loan to value” lending.
There has been one positive in all this upheaval. I have noticed an improvement in the way transactions have been dealt with recently. There is a greater willingness between the vendor, purchaser and their respective solicitors to work together to complete the transaction in a normal fashion. There is a willingness to resolve difficulties rather than to use difficulties as an excuse to either reduce the price or sell to another party. This co-operation should be encouraged and commended, as we sometimes need to be reminded, that the main objective is to complete the transaction to everyone’s satisfaction. Hopefully we are returning to the pre 2004 market and this can only be good for everyone.