Local Authority Search Business

loveandlight

We are thinking about buying a local authority search agency. Do you think that this will be a good idea as I've been reading about e-conveyancing and HIPS, which has made me unsure about us buying this type of business in case all these changes puts us out of business before we have even got going!!:o

Thanks in advance for your advice.

JasonLVC

Are you buying a franchise from one of the leading firms such as PSA?. If so then you should be alright as these are established players in the market.

However, you are right to be cautious as HIPS will likely force the consumer to go to a one-stop shop which will likely be estate agents or solicitors. Now, if you can get a local contract with one of those professionals then you're laughing, but if not you'll likely find it difficult to get into what is a quite crowded marketplace.

Searches can be labour intesnive and time consuming and the profitability comes from performing huge numbers of searches coupled with total reliability and speedy turnarounds. Councils are increasingly making their database accessable electroncially but they are not all there yet so also depends upon where you are in the world.

The way these search firms works is that they have deals with solicitors who when they are conveyancing will come directly to you for the searches rather than go to the local council. You then go to local council and do the search (fee is about £8 - fixed in law). The search takes 10-15 minutes and then you prepare a standard report back to solicitor. Solicitor charges £150 and the profit is split between you/solicitor usually. Customer is happy.

Same sceario works with Estate Agents who will usually have a preferred solicitor (and get a referral fee from such).

That means this business is all about networking and relationships rather than direct sales to the house buyer - it'd be difficult to catch them directly unless you went online, but already there are some online firms (and big global ones at that) already offering this service.

I'm not trying to put you off, but HIPS could go either way. If it goes they way it is going now, I wouldn't touch a local search business with a barge pole. If they stall HIPS or reduce it's functions then local searches can still be very profitable.

(I'm ex local land charges officer for a council and so understand the market place to a degree - we'd be very busy wiht different firms coming all the time accessing the data)

loveandlight

Originally posted by JasonLVC
I'm not trying to put you off, but HIPS could go either way. If it goes they way it is going now, I wouldn't touch a local search business with a barge pole. If they stall HIPS or reduce it's functions then local searches can still be very profitable.

Thank you sooooo much for your very helpful reply JasonLVC.:beer:
The business is already established and has been running for many years. With this in mind, do you still think that if HIPS goes the way that it is now, that I should keep away from this business even though its established, or just the ones that require you to start them up from scratch?

JasonLVC

Ultimately, only you can determine whether you want to invest in this business or not.

Bottom line is that an established business will stand a better chance of survival than a new start-up now. You need to enquire with the vendor as to what contracts he has in place, with whom and the length of those contracts - if at all and estimate the value of those contracts.

You'll need to factor in that if HIPS goes down the one-stop shop route, you'll need to be closely aligned with a solcitior or estate agent in order to benefit, otherwise you may find yourself sidelined. However, local searches are labour intesive and so if your pricing is right (in the overall scheme of the HIP cost and what cuts each contributor to the pack wants/gets) then the business should still be viable.

One other question. Why is the current vendor selling?. Does he fear HIPS or does he simply lack an element of risk taking that you are more prepared to?.

Encantador

Probably of no help whatsoever but I looked into this business a couple of years ago. At that time it was being sold (the concept), on the suggestion that solicitors were having to wait weeks for a council search and would pay for it to be done quicker.

When I checked with my local council, they said all searches were completed within 7-14 days, this made the service a lot less viable. It might have just been that my council were ahead of the game.

JasonLVC

These franchies came about from very slack councils and a killing was made. Since then councils have improved a great deal but the damage/reputation has already been done, plus these firms entered into agreements with solicitors so even if the council turns a query around in 24 hrs, solicitors still feel they get a better service from the people they are contracted with.