Pressure on the conveyancing system and property sellers’ increased need for security have led to the creation of reservation agreements as a new product category for the homemoving process.
The transaction technology platform and supplier of reservation agreements Gazeal says the new category it has created solves a range of complex problems for agents and consumers.
Reservation agreements, which are recommended in the government’s ‘How to Sell’ guide, provide buyers and sellers with certainty through a legally binding commitment which requires any party pulling out without good reason to pay a fee.
By setting up a reservation agreement once an offer has been accepted, vendors and buyers can proceed to spend money on conveyancing, surveys and mortgage arrangement fees safe in the knowledge that they have protection in place.
Sellers are under-served by current process
When people come to sell their home, the current process revolves around getting their property on the market rather than providing them with much-needed security.
This leads to an increased risk of fall-throughs, affecting agents’ commission and creating a disillusioned property selling public.
According to government estimates, approximately a third of property transactions fall through before completion.
With an average of around 100,000 completed transactions each month, according to HMRC, up to approximately 33,000 could be collapsing.
This causes agents to lose out on millions of pounds of commission every month, while thousands of homemovers are left devastated when their best-laid plans go awry.
“Understandably, an agent’s focus is often getting the instruction and then launching the vendor’s property on the market. However, more emphasis on getting people moved provides benefits for all parties,” explains Bryan Mansell, Co-Founder of Gazeal and a former agent.
“Being able to tell vendors that you are the safest agency to sell with in the local area due to the processes you have in place is a powerful message that holds weight with consumers.”
He says that as Uber has convinced the public to book taxis from their phones and share rides with others, a rising need for security in the property selling process has created a new industry category for reservation agreements.
“This change in mindset from both agents and consumers has been demonstrated by many of our customers doing away with ‘Sold Subject to Contract’ boards and replacing them with ‘Reserved’ boards,” he explains.
Another tool in the agent’s armoury
Reservation agreements don’t fit into an existing category in the moving process, but they provide agents and movers with increased certainty and a guaranteed way to reduce the chances of transactions falling through.
Once a sale is agreed, a reservation agreement guarantees a meaningful financial commitment by each party. This action protects consumers from gazumping or gazundering and safeguards the agent’s commission.
“Agents currently have a range of products and services to help them complete transactions, including CRM software, prospecting, conveyancing partners, sales progression and so on,” adds Mansell.
“However, a reservation agreement is a new tool in their armoury that helps to progress sales securely, contributing towards faster exchanges and fewer fall-throughs.”
“It’s clear that consumers and agents are at the point where they want to try new things as the moving process is too slow, cumbersome and, in many ways, broken,” he says.
With this in mind, Gazeal was created for estate agents by estate agents. Its ultimate aim is to improve the selling process and facilitate a higher number of successful transactions.
“The last year has shown us just how many transactions there can be, but also how fragile the current process is,” Mansell continues.
“If the market continues to thrive following a successful vaccine rollout, tools like reservation agreements can restore consumers’ faith in the moving process and mark the first step in creating a more effective system of buying and selling properties,” he concludes.