Roly Matthews, Director at the Hinchley Wood office
The Times has reported how 1 in 5 chains are now collapsing. The Express recently covered how Britain’s property market is ‘paralysed’ by a broken system. With so much noise around chains, Roly Matthews, Director at our Hinchley Wood office, explains what’s happening and provides his four top tips on how to keep the property chain fully intact.
Managing a typical property chain is a delicate dance. As an estate agent, it’s our job to ensure that neither the buyer or the seller steps on each other’s toes and that the sale concludes satisfactorily.
However, in today’s climate, whereby interest rates are rising frequently (the base rate has increased a staggering six times since December), it’s making life all that more difficult for those looking to make their next move. It’s also putting added pressure on the individual links that form the chain. But what exactly is happening?
There are two key factors. Firstly, demand continues to outstrip supply. Secondly – and arguably more importantly in the context of chain management – the speed at which the base rate is going up effectively means that the goal posts are being moved each time the Bank of England (BoE) makes an announcement.
For instance, a mortgage offer, or an agreement in principle, generally lasts for six months. Imagine that you’re a buyer who’s received a mortgage offer for your next dream property from a lender. You’re all set – except the chain above you is incomplete or has taken a long time to do so, and your six-month offer is about to expire. And then the BoE raises the base rate again, which means that the lender is likely to want to review their original offer based on your affordability in line with new rates – a move that could put the chain in jeopardy.
Of course, there’s nothing you can do about rising interest rates. But there are things that you can do to strengthen the chain and optimise your position within it. Here are my four top tips.
1. Use a whole of market mortgage broker
For many, going to the lender directly feels like a sensible option. But it’s not. Whilst one meeting with a lender might open up the doors to their mortgage products, one meeting with a mortgage broker will open up the doors to several lenders’ products. Not only that, but it’s their job to manage your application, which may include liaising with the lender in the event that your mortgage offer is about to run out – or simply alerting you to the fact that it might be time to apply elsewhere. Don’t underestimate the time a good mortgage broker saves. Moreover, the value they add in keeping a chain running smoothly is significant.
2. Choose a good solicitor
Cheaper doesn’t always mean better. As a buyer or seller, ask your agent to recommend two to three solicitors. Ideally, a solicitor should be located in the same region as your appointed estate agent and the area in which you’re looking to live. Not only does that help ensure that you receive a regionally relevant service, but also there’s a better chance that the relationship between estate agent and solicitor will be strong. Where agents recommend solicitors from far afield, if could be that the incentive to do so is a referral fee, which is often at the expense of good service. In our experience, this results in poor communication – and poor communication can be a breeding ground for anxiety.
3. Be open (and honest)
As estate agents, we’ve seen it all when it comes to buying and selling a property. As a result, there’s nothing that we can’t deal with if buyers and sellers are open and honest about any problems they encounter or changes to previously discussed timelines. When people withhold information or aren’t honest about problems in the chain, such as financing for example, it’s the equivalent of swimming with one hand tied behind your back. Our advice is always be honest about your situation – even if it radically changes during the process. It’s much easier for estate agents to manage a chain armed with all knowledge in advance than having to address issues retrospectively.
4. Beware the redemption penalty!
There’s nothing like the prospect of losing money to make people change their mind. So, before you commit to a certain timeframe, make sure you’re aware of any penalties associated with ending a mortgage early. If, for example, you’ve been pushing to get a deal over the line by the end of August but you find out that the redemption penalty for ending your mortgage before 31 October is £17,000, it’s likely that you’re going to want to revise your timeframes. Having sight of this before you set targets will help you and the other people in the chain work towards deadlines that are reasonable – and not costly.
If you’re looking for a Surrey estate agent that can help you navigate chains during this interesting period, or to arrange a valuation of your property, contact the Grosvenor Team.