Did you know that 1 in 5 property transactions are currently delayed due to error? I didn’t and what’s more, these errors can cause delays of up to 1 year. In today’s show we talk to the Chief Executive for GlobalX Legal Solutions, Peter Maloney.
Kevin: I was staggered to read the other day that one in five property transactions are currently delayed due to an error. In some cases, these errors can cause delays of up to one year, causing a lot of unnecessary stress to consumers trying to buy or sell a property.
Property transactions are one of the last major financial transactions to become digital. Most rely on two agents meeting face-to-face to exchange checks and other important documents. However, it is expected that 85% of settlements will move online by 2019.
This is all due to the introduction of some e-conveyancing software at Property Exchange Australia. Brisbane-based GlobalX Legal Solutions is a major sponsor of this. They’re pretty much at the heart of the change. I’m talking now to the Chief Executive for GlobalX Legal Solutions, Peter Maloney.
Peter, thank you very much for your time.
Peter: Good morning, Kevin. Thanks for having us on.
Kevin: Peter, what does this actually mean to the industry? Firstly, let’s go back. I mentioned that there are about one in five property transactions currently delayed, and we talked about worse-case scenario of up to a year. What’s the average delay?
Peter: That’s right. A recent study conducted by PricewaterhouseCoopers and PEXA revealed that approximately one in five property transactions were delayed. There’s a whole range of reasons for why property transactions are delayed. There could be errors in documentation, there could be insufficient settlement funds, or either of those parties just may not be ready to settle on the predetermined date and time.
Kevin: But what is the average delay? What are you experiencing?
Peter: On our side, because we’re obviously one of the largest property settlement agents in Australia, normally, most failed settlements are resolved within the following week.
Kevin: Does it vary state to state?
Peter: No. That would be the standard across the entire country.
Kevin: Tell me about the costs associated with these changes in converting it all across to an e-transaction.
Peter: The costs are largely in the transition from paper-based conveyancing through to electronic conveyancing. The costs are largely borne by the practitioner, not so much the consumer. The costs involved are around the transaction costs for lodgment of documents with the land registry and lodgment of documents that will enable financial settlement to take place.
For the practitioners – it’s quite open and public information – the cost of a property settlement on a single title transfer is $106.
Kevin: Is this being supported by the practitioners? Are they encouraging this?
Peter: Undoubtedly so, Kevin. We’ve just wrapped up a series of workshops all around the country. They were attended by somewhere between 150 to 200 people in every state. The practitioners have moved past the requirement for the sales spin or the cycle of what is PEXA, and they’re now firmly into the educative stage. Approximately 15% of all practitioners are already signed on, and I think as of the last count last month, there’s been about $2 billion of property transactions already flowing through the PEXA platform.
Kevin: The system is already working, so why will it take until 2019 to get it fully introduced?
Peter: Look. It is transitional. It does require all parties to a property transfer to be a subscriber of the PEXA platform. That’s not only the solicitor acting on behalf of both the buyer and the solicitor acting on behalf of the seller, but it also requires the financial institution – so the incoming mortgagee and the outgoing mortgagee – to be subscribers of PEXA at the same time.
Like anything, this process is a network effect. It requires the adaptation of the system across the broad network, and that’s just going to take a couple of years for it to take effect.
Kevin: When this does come into full effect, will both the paper and electronic conveyancing still be available?
Peter: Yes, they will. That’s probably the most important thing for all buyers and sellers to know. The way property is settled in Australia will continue to have a hybrid offering of both manual settlements processes, which is in place today, and the electronic processes.
It’s important also that some of the property settlements that occur don’t fit the electronic model, so there are some exclusions under the electronic model that won’t take effect.
Kevin: What about verification and identity checks? I guess, as always, the difficulty when you go online with any of these things is that you’re exposing yourself to a lot of unscrupulous people.
Peter: That’s right, Kevin. Verification of identity is new to the process of conducting a property transfer, but it is also one of the greatest safeguards in the process.
For property transactions that are conducted electronically, the practitioner must verify the identity of the buyer or the seller, depending on which party they’re operating on behalf of, and that complements the pre-existing rules that exist in Queensland around verification of identity from the mortgagee perspective.
Around the country, what all land registries have been committed to doing and have successfully rolled out is the alignment between the requirements of the electronic conveyancing platform, and they’ve made that retrospective for the paper process.
So for the consumer, as opposed to having a different process for electronic and a different process for paper based, there’s simply now one process that will require the consumer to have their identity verified prior to being able to transact in the property or to be able to facilitate a transaction electronically.
Kevin: Well, certainly a step in the right direction. Peter, thanks for coming on and telling us about that, and all the best for the future. Peter Maloney from GlobalX Legal Solutions.
Thanks for your time, Peter.
Peter: Great. Thank you, Kevin.