Sarah Beeny is backing a new service called completing chains, found at www.completingchains.com
Now, I am going to begin by saying I don't understand this model at all and if anyone can explain it in English that would be a great help. Indeed, if Sarah or any of her team is reading, the website does little to allow people like myself to report upon it. Indeed, the 'how it works' page changed as i was writing this post (removed some complex figures and calculations)
The basic principle appears to be that first time buyers can't afford a property (ok, with them so far), it then gets messy and the following is from the site:
'...completingchains works in a really clever way to help estate agents build chains without first time buyers until the very end of the process. At the very last stage once all the buyers and sellers are in place, the chain is matched with a first time buyer. In order to complete the chain the registered agents work together with all the sellers in the chain to release just enough equity to make the first time buyer home affordable and get everybody moving...'
That is it, that is the entire explanation about this revolutionary idea that will save the property industry?! There are of course many questions, but one point that strikes me as a real deal breaker is an element of their idea that appears to underpin the whole concept. They would appear to be inviting all estate agents in the chain to openly share their databases with each other. It is a nice idea, but maybe a few years too soon. Many agents are only just embracing the Internet!
Further, how does this help a buyer who is not in a chain? How many property transactions are in chains, what percentage and what is the average chain length, how will they ever get all estate agents, solicitors, buyers/sellers, mortgage providers in a chain to agree. I can only surmise that this was dreamt up by lawyers, as it strikes me the legal complexities will involve a few contracts along the way.
What I can say is that the website needs some work, both in terms of content and general structure.
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6 comments:
I agree it is confusing although the concept sounds as if it could be of use
It is a very clever idea. It is comparable tothe one featurd in the FT some days ago, where the buyer at the top of the chain buys the property at the bottom. Sarah's idea spreads the burden over all buyers and sellers.
Sarah banks on years of neglect by real estate agents, who never bothered about organising the chain properly.
With regard to your comments on completingchains.com
Whilst reviewing the papers on this morning’s Andrew Marr show, Mariella Frostrup commented that she would “...quite like to know why it is that we continue to live in this way; it is clear that we live in these cycles and that we have boom (periods) and we have bust (periods). Why don’t we change the ethos by which we live instead of acting surprised every time there is a bust “
Fellow guest and revered financial commentator Jeff Randell replied “I do not think it is the ethos but the psychology of that magic interaction between greed and fear – one chases us up the other back down”
It is surprising to me that neither of these two commentators have taken any notice of the articals regarding Sarah Beeny’s new site, reported in the ‘Times’ this morning and the ‘Telegraph’ yesterday.
Capturing the interest of buyers who happen to have a property to sell, in the home they wish to purchase, in order to form the first vital link in a chain is simply genius. If there is no motivation to form chains from the bottom – change the way the sales process works and start at the top as I am certain that the thousands of sellers stuck on the market (Of which I am one of them) are very motivated to initiate proceedings.
Under the current way of doing things, chain formation is reliant on first time buyers coming into the market in order to form that first link and it is no secret that for various reasons first time buyers do not exist at the moment and therefore no one is moving. Lack of movement in the market OBVIOUSLY means that sellers are stuck and facing massive price drops.
By acting in the reverse everyone wins.
There was a recent report stating that month on month there had been 20% increase in sellers coming to the market and 6.8% drop in buyers. On face value this shows a very worrying supply v’s demand imbalance that will of course drive prices down. In my mind however it shows a colossal failing and inflexibility of the current sales process to react to a different market. Sarah’s website recognises that most of that 20% increase in sellers are hugely motivated buyers and immediately liberates them to start looking and to build chains.
Whether or not a chain works together to find money at the bottom of a ready built chain in a decreasing market or at the top in an increasing one, by forming prior to the involvement of a FINANCIALLY qualified first time buyer means that the market place moves forward on the basis of affordability and this could be a big step for estate agents as maturing as an industry and to avoid the ‘Bust’ scenario’s that Mariella commented on this morning.
It terrifies me that we can be chased so easily by the emotions of greed and fear into over spending and eventually financially difficulty.
Finally, I do not think that agents will have to share their data base to form these chains but they will have to work harder to communicate to one another. Any agent not willing to do this should be reminded of their contractual agreement to act in their clients best interest.
Everyone could win with this new scheme – best of luck Sarah.
A little girl is advertising her dog for sale in the street. She is asking £1M for it. A passer-by warns that she won't get that much, but she's determined. When he returns later, the dog has gone and the girl is playing happily with two cats. She has sold the dog, she says. How much for? "1M of course," she replies. "I swapped it for these two cats, and they're worth 500k each". Completing chains is an innovative idea to improve matching supply to demand and good luck for that, but I can't help thinking the sensible first time buyers are going now to just wait for sellers to get on and drop prices. And should people in the middle of the chain really commit to pay overinflated values for the next more expensive property? Let each decide their level of risk with open eyes.
Excellent idea Sarah, I am amazed that in the current economic gloom a television presenter beats the government to what could be an industry saving tool. Keep up the good work.
I am afraid Sarah Beenys concept is lunatic. In recent years the market has become so fragmented that relatively few chains end in a first time buyer. Someone in a chain typically will be going into rental until they can find their dream house, or until the market falls further etc. Chains are extremely short not as a commentator implied due to the neglect of agents, but due to natural market forces - if you foresee a falling market and have the ability to do so; you sell, rent and wait for the market to bottom in order to make the most money. What the underlying principal of completing chains does is to ensure that all of the houses in a chain unaturally maintain their value against a falling market. Thats great except you pay an inflated price for a house which in two or three years time when you suddenly need to sell due to unforseen circumstances, and completing chains has been consigned to history you have to sell your inflated house for a big loss. I cannot see this idea capturing half the properties and a quarter of the estate agents by Christmas as in one article I read. I can however see the originators losing a lot of money if they continue to pursue this folly.
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