"Cash buyers are highly sought after as they enable vendors to break the cycle of slow-moving chains, and this means they can negotiate better deals."
There’s little doubt that the property market has slowed in recent months. According to the latest data from the Royal Institution of Chartered Surveyors (RICS), property sales and house prices continued to decline across the UK in January, while new buyer demand and fresh listings were also down.
With many buyers holding back in the hope that they might get a better deal in the future, and the supply of fresh housing stock suffering as homeowners also sit tight, property transactions are stagnating, and the longer a transaction takes to complete, the greater the chance of something going wrong which can cause the sale to fall through.
In this environment, cash really is king. Cash buyers are highly sought after as they enable vendors to break the cycle of slow-moving chains, and this means they can negotiate better deals.
So, how can you create a cash buyer out of an unsold homeowner?
A bridging loan can release the equity from a buyer’s current property, which can then be utilised to speed up the whole process. This puts a purchaser in a much stronger negotiating position, enabling them to have a better chance of winning bids, commanding better prices, and being in a position to act and respond to the vendor’s needs as well as their own.
The entire buying process is made easier and gives the purchaser the ability to regain control of the transaction.
There are a number of considerations. In the first instance, by simultaneously owning two properties, additional stamp duty is payable upon purchase of a second property. This can be claimed back once a buyer is able to sell their current property, they will need to have these funds available to pay the increased stamp duty. A bridging loan could additionally be used to secure funds for these costs if the amount of equity available across the properties permit.
Some clients may also be put off by the rates charged on bridging loans, which can seem high compared to a term mortgage. However, these costs also come with benefits. Bridging is a fantastic mortgage product to provide the best possible outcome for the clients in the quickest amount of time, and when used correctly, a buyer could offset most of their expenses. The power to negotiate from a position of already having finance in place can mean that some vendors are willing to take thousands off asking prices to secure a quick sale.
Additionally, a homebuyer who has taken a bridging loan rather than waiting to sell their property could even get to move into their new home at their leisure following completion. This allows time for any additional works to be completed prior to taking occupation and avoids that highly stressful moment on moving day when they have to juggle the completion of a sale and a purchase and not knowing when they will get the keys for their new home.
