The property market in England and Wales remains one of the slowest among comparable markets. Money Saving Expert estimates that buying a home can take anywhere between 12 weeks and eight months for most transactions. Compare this to the US, where it takes approximately 1-2 months, or New Zealand, where it can take as little as 3 weeks, and it is fair to say the process across much of the UK is inefficient.
Every property professional has experienced a transaction progressing well, only for incomplete documentation or concerns over a buyer’s ability to proceed bringing the sale to a halt. The result is usually further delays and additional costs, and in some cases, this is enough to collapse the sale entirely.
The scale of the problem is significant. Failed property transactions cost sellers around £400 million every year and up to £1.5 billion across the wider UK economy. With 1 in 3 sales falling through, reducing these delays has become a priority for the government.
In June, the government announced reforms designed to make the homebuying journey faster and more transparent. Upfront property information, digital processes and earlier commitments between buyers and sellers are all part of the proposals.
At the heart of these reforms is a simple principle – better information should be available earlier on in the process. So, this poses the question: could better due diligence could help solve the UK’s transaction delay problem?
Delays often come from a lack of information
Questions around identity, proof of funds and anti-money laundering (AML) requirements often surface after an offer has been accepted. Each additional enquiry adds another pause in the process.
For example, a buyer has an offer accepted, but proof of funds isn’t reviewed until a few days later. If done manually, this can take up to a few weeks depending on document collection and case complexity.
Once the solicitor requests evidence, it becomes clear that part of the deposit is coming from an overseas account which requires enhanced due diligence. The transaction then stalls while additional documentation is gathered, putting the sale at risk.
In a lot of cases, concerns only emerge after significant time and money have been invested by all parties. The longer gathering vital information takes, the more disruptive the outcome, especially if the buyer cannot proceed as a result.
Due diligence should be a top priority, but it often isn’t
Despite the risks of working with bad actors, the industry still views due diligence primarily through the lens of compliance. As such, it’s often considered time-consuming task, rather than a time-saver.
However, proper due diligence identifies unproceedable buyers far earlier. As a result, it prevents late-stage surprises that would collapse the sale, such as AML concerns or identity discrepancies. Additionally, it reduces the amount of back-and-forth between parties as all the information is gathered upfront.
Good due diligence doesn’t slow transactions down. It speeds them up by ensuring issues are identified earlier, allowing for the appropriate actions to be taken.
But this is only true if the right processes are in place
For a lot of businesses, identity verification and AML processes are an administrative burden that deliver a negative customer experience.
Providing documents and answering compliance related questions can feel like yet another hurdle in an already complicated process for customers. The frustration is understandable, particularly when buyers are asked to provide the same information multiple times to different parties within the transaction.
This is why the focus needs to shift towards optimising the process, making it both faster and more user friendly.
Technology is where due diligence becomes a competitive advantage
Traditional manual processes often involve a lot of admin, with each step introducing further risks of delay or error.
Digitalising tasks such as identity verification, AML screening, monitoring and risk assessment reduces the time it takes from days to minutes. Crucially, it helps agencies to establish a far clearer picture of risk much earlier in the transaction than they could manually.
Digital solutions can also be expanded not only by volume, but by functionality. Identity verification, KYC, bank account verification and Source of Fund checks can all be conducted digitally. As a result, not only will transactions be faster due to better due diligence, but so will the due diligence process itself.
Better due diligence is just one piece of the puzzle. However, it can address one of the most preventable causes of failure. As the industry moves towards greater transparency and digitalisation, agents and solicitors that embrace technology to support due diligence will be in the best position to succeed.
Learn more about how Creditsafe can support your due diligence with our end-to-end platform that unifies KYC checks, AML screening and ongoing monitoring.
