FR: How has the conveyancing market changed in the wake of MMR?
Our analysis of Land Registry data shows the conveyancing market was significantly more subdued in the first quarter of 2015 than at the end of last year. Tougher rules – including the MMR and further tightening of lending criteria since then – have visibly slowed the transaction process.
Sentiment has also been weaker than it was a year ago, partly owing to uncertainty around what was supposedly the most unpredictable election in a generation. As a result, the average conveyancing firm recorded just 57 transactions during Q1 2015: down from 58 a year earlier and down 14% from 67 in Q4 2014.
However, there are reasons for cheer given that mortgage lenders have grown more familiar with the MMR rules and will be striving to hit their targets during the remainder of 2015. With a growing employment rate, low inflation and an eagerness to lend more, the conditions are in place to deliver a more prosperous second half of the year for the conveyancing market.
FR: How important do you think the online experience is for brokers – do you think it is gaining significance in the industry?
It’s important to think about the end customer’s tech needs first and then work our way back to intermediaries and other suppliers. The future lies in providing customers with the same ease and convenience in securing a mortgage as they have at home when accessing their bank accounts. Customers will expect a level of service where they can scan, upload and send their documents to a broker from an app on their smart phones.
They may also assume a broker or representative will be available via online chat and that updates on their mortgage application can easily be sent to them via SMS.
Certain tech developments to better facilitate and expedite applications need to be addressed by both lenders and brokers. Brokers are investing more in their systems, but they also have expectations from lenders; for example, according to the latest IRESS survey, brokers want to be able to scan and attach application proofs, a service provided by under half of all lenders surveyed. Brokers also want lenders to provide an automated up-to-date case status.
Given the size of certain lenders, this might be an enormous task, of course. The search industry is, for example, filled with search companies labouring with the baggage of old legacy systems. Solicitors and conveyancers are also known for their traditional approach, but many are keen to move on and find ways to improve. Search Acumen was set up to facilitate this through the innovative use of the latest technology to engineer more ‘intelligent’ search products, which make the conveyancing process more streamlined. We believe this is vital to help ambitious firms keep pace with the changing tide.
FR: Do estate agents still have the upper hand in securing the conveyancing business?
Estate agent referrals are an important source of business,but the relationship is often fraught with resentment and grievances, partly because estate agents enjoy the lion’s share of transaction fees. Estate agents also feel conveyancers often stall the process with their lack of communication, resulting in a collapse of the sale and the estate agent’s commission.
Whether this will continue into the future is questionable. High street estate agents are currently facing huge disruption in their own market as online estate agents seize greater market share. We’re also likely to see dynamic new business models emerge as the end-buyer takes greater control of the house sale. In the meantime, the role of due diligence in the property transaction remains indispensable – giving conveyancers a more prominent place at the table.
This doesn’t mean conveyancers can sit back and wait for the next wave to shake up the property industry. Smart high street solicitors should be looking for ways to improve relationships with estate agents by reviewing their systems and processes to speed up transactions and sharpen their offer. This could include looking for more tech-savvy suppliers, replacing old legacy systems or investing for growth by introducing new legal management software.
FR: The number of conveyancing firms active in the market continues to fall – why do you think this is?
Traditionally, conveyancing has been a very fragmented industry: the top 1,000 firms accounted for about 70% of the market last year while 4,000+ firms fought over the remaining 30%. This includes firms that do conveyancing on a smaller scale and solicitors that may take on a conveyancing case as a one-off. While the top five firms doubled their market share from 3% to 6% between 2007 and 2014, the same period saw 1,862 firms exiting the market.
Ad hoc conveyancers wereamong those to disappear during the recession, while other firms merged to achieve better economies of scale and efficiencies. Despite the rise in transactions, 204 more firms dropped off the radar last year as well,a strong sign that these trends are continuing as the densely populated market evolves and becomes increasingly competitive. Specialist bulk conveyancers are providing a big challenge to the survival of high street solicitors. Conveyancing remains the lifeblood of many legal practices but they are having to work harder to protect and grow their position in the market.
As the market picks up and transactions grow in volume, the Darwinian effect will see the bigger firms routinely handling large volumes. Any business with ambitions to compete cannot leave their survival and growth to chance. Honing internal systems and processing and improving their client offering is essential to stand out from the crowd.
FR: If you weren’t in financial property, what would you be doing?
I see myself as an entrepreneur and business builder first and foremost. I was originally an academic – teaching psychology and conducting research for the Prison Reform Trust – and financial property is where the opportunity arose out of nowhere.
At the publication launch of the research, I struck up a conversation with a lawyer, who also happened to be a trustee of the charity. He told me over a glass of wine that he was impressed that I wasn't getting paid to do the research. What he had overlooked, of course, was that, as a wannabe academic, published research is gold-dust. As my college was closed for the long summer break, he asked me whether I would like to do some "outdoor clerking" for him. I agreed and it wasn't long before he asked me to do a "personal search".
Back then, there was no such thing as a private search company. Personal searches were undertaken in very small numbers by the clerks or solicitors working for the conveyancing firm concerned.
I knew nothing about conveyancing, as I was living in a council flat at the time. He brushed away my ignorance, blithely declaring that I just had to take some forms to a local authority.
I completed the form by hand as there were no computers back then and made my way to the conveyancer's offices. As I handed the forms to the lawyer he said, "Wow, are you back already? You know it’s the devil's own job to get anyone to do these bloody things". Opportunity knocks; academia shelved; new industry created.
