Homeowners paying £765 million too much in legal fees
The typical move for a homeowner will involve legal costs for both the sale of their old house and the purchase of their new one. And if they use a traditional high street conveyancing solicitor then, on average, they’ll pay almost twice what it would cost them if they went online.
This surprising figure comes from a survey by online estate agent HouseHop.co.uk.[1] House Hop conducted an undercover survey of 52 randomly chosen high street solicitors and compared their quotes to those from House Hop’s own panel of online solicitors.
Each solicitor was asked to provide a quote for an identical transaction involving the sale of one property and the purchase of another. The quotes were for average priced houses (since solicitors often base their fees partly on a property’s value).
The result: the average cost (excluding search costs, which are fixed) of a high street solicitor was £1745 compared to a cost of just £895 if you go online. That’s a saving of £850 (48.7%).
With the number of residential property transactions likely to complete this year being around 900,000[3] that represents a potential overpayment by homeowners of £765 million.[4]
So why is going online so much cheaper? Quite simply the internet has thrown open the gates of competition. In the old days there was a virtual “high street monopoly”. Homeowners were forced to choose from a tiny handful of local firms all of whom charged similar (high) prices. Today conveyancing can be done from anywhere in the country and so competition – at least in the online sphere – has forced prices down.
According to John Tighe, the founder of House Hop and a lawyer himself, “consumers can now benefit from online access to firms specialising in conveyancing and who have much lower overheads, the benefit of which they pass on to their clients.” This makes them far cheaper than their high street counterparts who may only do a handful of conveyancing transactions and whose costs per lawyer work out far higher.
This is great news for consumers, but a word of warning: not all firms offering online conveyancing are equal. Some have been described as “law factories” – essentially no more than legal call centres where underpaid (and sometimes under qualified) staff are simply unable to give the kind of service you would expect because they are too busy.
Too busy, it turns out, because the firms they work for sucker in large numbers of clients by offering ridiculously cheap headline prices (£99 is not unheard of). Of course, these prices later turn out to be completely bogus. They don’t include any of the many “expenses” that such firms use to pad out their bills. Nor do they include search costs, registration fees or VAT.
The result is overworked and unhappy staff and frustrated customers who end up with a final bill that is many hundreds of pounds more than they expected and for a second rate service.
So is it possible to benefit from the much cheaper online competition without getting caught out by an online “law factory”? The answer, according to John, is to look for an online firm that meets these four criteria:
1. Find a “conveyancing specialist”
Your solicitor should have an established reputation and specialise (or have a department specialising in) conveyancing.
2. Get a “fixed fee” quote
Never hire a solicitor on a per hour basis. This is how costs skyrocket. And don’t accept a quote that is fixed fee providing that there are no “unforeseen complications”. Such a promise is not worth the paper it’s written on: “fixed fee” should mean exactly that.
3. Get a “complete” quote
A fixed fee quote is no good unless it includes all costs. A favourite trick of dodgy firms (both online and high street) is to give low headline quotes to get your business and then add on lots of expensive hidden extras. Your quote should include all disbursements (expenses) plus VAT.
4. Get a “no completion – no fee” quote
As many as 1 in 3 property transactions fall through, meaning that one of the biggest unexpected costs when moving is additional legal fees.
To protect yourself against this find a solicitor who will work on a “no completion – no fee” basis. That way if you can’t complete you will be spared the legal fees (though you will still have to pay any expenses that have already been incurred on your behalf).
All the solicitors on House Hop’s the panel meet the criteria set out above. In addition they’ve all agreed to maintain a high level of customer service, all are members of the Law Society and all are regulated by the Solicitors Regulatory Authority. They also guarantee that when you get a quote through House Hop it will be cheaper than if you approach the solicitors direct.
As an added reassurance, House Hop make unedited customer feedback on each firm available on their website – feedback that comes direct from clients and so can’t get filtered by the firms themselves.
Click here to find out how much your conveyancing would cost you through House Hop’s solicitor panel.
[1] Survey of 52 high street solicitors for sale and purchase of identical properties (conducted September 2010).
[2] The figures exclude the cost of the following searches: Local Authority; Water and Drainage; and Environmental. The cost of these searches is fixed for any given property since they are set by the local authority and the local water company. Typically, the cost of these searches adds up to around £200.
[3] HMRC website
[4]900,000 x £850 = £765 million
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