Estate Agents will know that sales are a little more complicated when it comes to selling a leasehold property compared to a freehold property. In order to avoid the pitfalls of a leasehold, and the subsequent headaches caused by their seeming complexity, it is vital to match the right client with the right seller and have a sharp eye over sales progression.
To achieve this, simplicity is key; finding estate agent software to tackle the challenge of leasehold properties so you don't have to.
Freehold vs Leasehold
For those not in the property business, the difference between freehold and leasehold ownership can be confusing.
Leasehold Properties: A leasehold is where you buy the right to live within a building for a set number of years (usually amounting to a great many - a maximum of 999), rather than actually owning the property itself.
Freehold Properties: A freehold is outright ownership, where the freeholder owns the property and the land that it stands on in perpetuity.
An Estate Agents Challenge: the Leasehold Property Sale
The issues with selling a leasehold property for a client can come when the lease length starts to get a little shorter, a problem which never arises with a freehold.
Firstly, many mortgage brokers will not give a mortgage on a house that has less than 70 years to run on its leasehold agreement, which means that it can be a real struggle to find a buyer, and then even more of a struggle to get them to follow through with the purchase.
Secondly, the buyer may wish to extend their lease length beyond the lease agreement but may have complications and difficulties when reaching out to the freeholder - another obstacle in the way of completing your sale. This process can be off-putting for the buyer when solicitors have to contact the freeholder, which itself can be a challenge if they are managing many properties.
To complicate it further, there are also several types of leases, certain responsibilities leaseholders to agree to, and buyers will have a landlord and often a property management company to contend with. The owner of the lease may have to pay service charges to the landlord and agree to terms and a lease length set by the freeholder, in which restrictive covenants within the lease agreement may be of putting for the buyer. For example, many freeholders do not allow pets to be on the premises, which can be a deal breaker for many clients.
Furthermore, service charges cause many disputes between landlord and leaseholder which can often result in solicitors mediating and negotiating a settlement.
Quite frankly, for a buyer, leaseholder contracts are a bit of a minefield and one that is often avoided if at all possible.
The Challenge for Estate Agencies
Due to implicit complications in buying and selling these properties, the buying process naturally takes a little longer. More solicitors are involved, a longer conveyancing process takes place and there are more discussions with mortgage lenders to be had. The longer the transaction for the client, the less likely the estate agency is to make a sale. Unfortunately, that is the hard truth.
View My Chain have demonstrated that the longer a sale takes to be tied up, the more likely it is it will fall through. Unfortunately, View My Chain’s data also shows that on average it takes 18 days (16%) longer to complete on leasehold properties. Therefore, it doesn’t take a genius to see it is more likely that the sale of a leasehold property will fall through. So we have a problem.
Yet in many parts of the country, leasehold properties are commonplace. In a statistical release estimating the number of leasehold dwellings in England in 2017-18, studies found that 18% of English housing stock were leasehold homes, two thirds of which were leased by flat owners.
The golden question then; how are freeholders managing to maintain just under a fifth of the housing market, find leaseholder interest and find reliable mortgage brokers willing to invest in a leasehold?
The benefits of a leasehold are appealing to a particular demographic, where potential buyers are happy to pay ground rent and service charges, liaise with a landlord and agents, and ultimately lease a freehold.
The Marriage of the First Time Buyer with the Leasehold
With a new wave of first time buyers knocking on estate agents doors, or alerting your email notifications, landlords are recognising the potential of this demographic when it comes to finding leaseholders for their freehold property.
With the dream of owning their own homes, millennials and new first-time buyers can benefit from buying a leasehold which is more financially achievable in the current financial climate post COVID-19.
Furthermore, recent reformations recommended by the Law Commission, all leaseholders may request their lease to be extended by 990 years and the freehold must make lease sales void of any ground rent. This comes after concerns that freeholds had an uncapped inflation of ground rent on new-builds, leaving leaseholders with nothing.
While ground rents are disappearing, a freehold is tied into their commitments to providing maintenance to communal areas and it is becoming increasingly apparent that a good relationship between leaseholders and freeholders is central to sales progression and a positive ongoing relationship.
Therefore, for buyers searching for a middle ground, leaseholds offer people purchasing their first time home a point between complete ownership and renting, i.e. they still have someone to call when the roof starts leaking. Their service charges allow them the security that the freeholder is responsible for the upkeep and maintenance of the land and communal areas.
With leasehold interest rising, it is vital that any agency wishing to increase their sales progression for this demographic must lessen the transaction time of sales and use estate agency software to keep up with the modern buyer.
Giving the Leasehold a new Lease of Life
The freehold can be off-putting for buyers and sellers alike. However, a professional agent can match the right freehold to the right leaseholder and begin to see sales increase. But often, a multi branch estate agency have many plates to spin at once and potential leases fall through.
Not if View My Chain has anything to say about it.
How Does Estate Agency Software Avoid the Pitfalls of the Leasehold?
Give the buyer greater autonomy
Track Sales progression
Reduce time to completion date
Being a hybrid estate agent means that prospective buyers can browse your properties at leisure, with their client log-in interface. Software which considers your buyers top priorities and desires whilst searching for properties compiles their data into a search match percentage, indicating which properties are best suited to them, saving your agency time and valuable resources.
Secondly, View My Chain alongside Rezi Anytime allows agents to track sales progression using software that gives real-time updates on the status of your clients application. Estate agent software can minimise the time taken to completion date by offering live sales tracking, prompting the client to complete paperwork, sign documents and bring that completion date closer. Sales progression tracking can also be facilitated through checking the status of your buyer's solicitor's progress, eliminating the stress of legal processes even further. The agency need not waste valuable time prompting clients when software can streamline this operation.
How Can Estate Agent Software Help Your Agency Sell More Leaseholds?
Estate agency software can make the difference for agents when selling a leasehold property as agents can demonstrably mitigate the risks presented through the sale of leasehold properties by utilising View My Chain’s technology.
It takes 18 days extra to sell a leasehold house, and View My Chain speeds up completion time by 17 days – it’s not difficult maths, and so it shouldn’t be a difficult decision.
Book a demo to see how your leasehold selling capabilities can be enhanced using software that was built by estate agents for estate agents.
