Due Diligence

Saga

Anyone got a very rough guesstimate of the frequency or cost-rate per service delivery engagement resulting in a failure by professionals contracted/asked to carry out due diligence for house sales?

For example:
(1) Frequency: a buyer should expect that for 5% of sales where a structural survey is paid for, the survey fails pick up on a fault;
(2) Cost-rate: a buyer should expect that for 1% of sales where a structural survey is paid for, the survey fails pick up on a fault that costs between £5K-£10K to remedy post-purchase (cost-rate £50-100 per purchase);
(3) Frequency: A buyer should expect that their conveyancer will fail to carry out a thorough enough search 5% of the time;
(4) Cost-rate: A buyer should expect that their conveyancer will fail to carry out a thorough enough search 1% of the time leading to a future sale valuation/price 25% lower than would otherwise be expected (cost-rate 0.025% per purchase).

I suspect the above are too specific, so as a very very rough guess, what proportion of sales go to exchange where some professional (mortgage broker/advisor, lender, conveyancer, valuer, surveyor, builder/tradesman et al) fails to do their job properly resulting in financial loss for the buyer?

NB: When I say doing a proper job, I'm not saying superhuman find out every last detail about the property that could possibly exist to the nth degree, but carrying out thorough (breadth and depth) tasks in an efficient and timely manner that goes well beyond the minimum standards expected for that profession.

[Deleted User]

https://www.propertywire.com/news/uk/number-of-home-sales-falling-through-in-england-and-wales-up-steeply-at-end-of-2018/

The top cause of unsuccessful property sales in 2018, some 30%, was the buyer changing their mind and pulling out of the purchase, while 19% of failed sales were due to the seller receiving a higher offer after a sale has been agreed.


The research also shows that 16% of failures were due to a survey issue causing a buyer to pull out of the sale, 13% were caused by difficulty securing a mortgage, 10% were where either party felt that the sale was not progressing while 9% were caused by a chain collapsing and 3% due to the buyer wanting to reduce their offer after the sale had been agreed.

How much of this can be avoided? Probably quite dependent on how reasonable each party is in negotiations and how tight everyones finances are.
The bits that could be avoided before spending money:

13% due to buyer being unable to secure a mortgage. The agents should be doing robust checks in to the financial situation. Not just seeing an AIP and cracking on as that AIP may be invalid for the type of house they are buying. How many agent speak to the brokers to check the deal is secure? How many see proof of deposit rather than just an AIP? I know very few around me bother to ask for proof of anything.

The survey issues thing may just be that the price couldnt be renegotiated so it had to collapse.


I think you will get a few anecdotal stories here but not sure how much reliable data there is around reasons for deals falling through. People also have the habit of telling a story rather than the truth to convince themselves they have done nothing wrong

SmashedAvacado

(3) Frequency: A buyer should expect that their conveyancer will fail to carry out a thorough enough search 5% of the time;

This one should be 0%
The buyer should expect their solicitors to do everything required. if they fail to do so they are liable.


If you're asking about the likely incidence of negligence (ie when they fail to do this) - its probably really high - but the real question is that whether their failure actually leads to any sort of loss. Failing to get a search that reveals nothing is not going to cause loss.

Thrugelmir

SmashedAvacado wrote: »

This one should be 0%
The buyer should expect their solicitors to do everything required. if they fail to do so they are liable.

Except the conveyancer never vists the property in person. Onus is also on the purchaser to listen to what their conveyancer says and examine carefully all documentatation supplied. Easy to blame others. When there's been a lack of due diligence.

davidmcn

I don't know actual figures but I would guess far fewer than 5% of transactions involve any identifiable professional negligence by solicitors or surveyors, and very low numbers where that results in significant loss.

(not sure quite what you mean by "not carrying out a thorough enough search" - there are various types of search, and will also be examples where the search results are faulty and the solicitor is blameless)

SmashedAvacado

Thrugelmir wrote: »

Except the conveyancer never vists the property in person. Onus is also on the purchaser to listen to what their conveyancer says and examine carefully all documentatation supplied. Easy to blame others. When there's been a lack of due diligence.

Talk me through where they are required (by convention or for example CML instructions) to attend the property? They're not. So that's not something they are required to do...

Even though the statement that they never visit the property is also wrong. You may never have gone on a site visit - but plenty do.