For anyone who has ever bought or sold a property, there’s no getting away from the fact that it can be a stressful journey. Even when working with the best agents, the best solicitors and the best brokers. This has become increasingly apparent over the past 12 to 18 months amidst some turbulent economic conditions and unstable mortgage rates which have served to fuel buyer and seller uncertainty.
For example, looking back at Q1 2023, market analysis by Quick Move Now reported that 55.8% of property sales in England and Wales collapsed before completion. While this figure was inflated due to the severity of mortgage rate movement at that time, even during the more stable lending conditions of Q3 2023, over a quarter (27.3%) of property sales in England and Wales still collapsed.
Of the sales that failed in this latter period, 29% were attributed to buyers getting cold feet and changing their minds about the property. A further 25% were due to the buyer pulling out over legal issues or as a result of a survey report. The remaining failed sales were attributed to chain break, difficulty securing a mortgage, slow sale progress and miscellaneous causes.
Recognising scenarios where speed is critical
Chain breaks remain a challenge for buyers and sellers, and with the market moving so slowly, it’s become increasingly difficult to complete on all links in the lengthier property chains.
This is where the speed element attached to short-term finance can help anyone involved in a chain break scenario to complete their purchase and provide more time for their seller to find a buyer to complete the downward transaction.
Short-term finance is also integral for properties bought at auctions to ensure that the 28-day deadlines can be met. For the rising number of online property sales, this can be extended to a completion timeframe of 56 days. However, this can still prove to be a tight time frame given market complexity and many mainstream lenders still unable, or unwilling, to accommodate such strict deadlines.
Leveraging bridging finance to close deals quickly
With first-time buyer and typical buy-to-let property stock selling relatively quickly due to the shortage of homes on the market, using bridging finance and utilising AVM’s and title indemnity within this process can also be a way to dramatically shorten the completion time frame. Meaning the purchaser can almost act like a cash buyer and put themselves in a more favourable buying position to secure the right property at the right price.
We also have heard reports of an increasing the amount of gazumping, especially in and around London. As a general rule of thumb, the longer a property chain takes to complete, the higher the chance of gazumping. Where there is an increased chance this may happen, especially on a property which may have been acquired for under ‘market value’, short-term finance could be the answer to get the transaction over the line.
Tips for guiding clients through the fast-paced world of bridging finance
For those intermediaries with less experience of the short-term finance sector, collaborating with a specialist packaging partner will help facilitate differing forms of alternative finance. Specialist packagers fully understand which types of application suit which type of lender, their individual criteria demands, the depth of information required and how to deliver it. This combination is imperative from both a speed and certainly standpoint and there is no substitute for experience in this area.
Another important factor in the successful application of bridging finance is using solicitors who are familiar and comfortable dealing with this type of loan. As is having one eye on the plausibility of the exit right from the beginning of the application process.
Speed isn’t always everything when it comes to securing property-related finance but when aligned with understanding, experience and expertise, it can certainly help in a number of property-related scenarios.
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