Thousands of Sellers and Buyers were on the Contractual journey of buying or selling property, when the doors closed on March 23rd. Thousands of Sellers and Buyers frozen, mid contract, with no idea when they or their chain would start to move again.
Here we are 8 weeks later within a media frenzy of predictions of the lock down lift, how long will this continue, how are the rest of the people in the chain? is the solicitor back? will the value of the property have changed?? How can you even assess whether to proceed or withdraw is the right move?
If you had exchanged contracts pre-lockdown, then it is likely you have now completed on the transaction, or at least agreed a contractual extension. You are now bound by that contract at the price agreed and to fail to complete the sale or purchase now, could find you receiving a significant bill for contract breach.
If you have not exchanged, should you withdraw, or renegotiate?
With a few weeks, at least, still available for consideration, give the following points some thought and make the decision that is the right one for you………….
What will happen to the market in the future?
There are any number of suppliers of Data, all readily available on the web, but remember Data is in the past, explaining in detail what ‘has already happened’ not what will. As with any investment, as your home is, this is no guarantee for the future.
So, what are the facts? This lockdown crept up on a property market, that was experiencing, in happy oblivion, a post-Election boom in the UK, which was brought to a sudden halt.
There is no doubt, there is a pent up back log that will bolster the market initially and maybe even sustain it temporarily. If that sustenance encourages others to enter the property market immediately then this is good news for the longer term.
BUT…. There has been no pipeline building for two months now and it is likely to take a few more months for homeowners to assess their own financial security, their job may be at risk, they may have health issues or have suffered bereavement, so no rush to buy or sell should be expected in our view.
A rise, then a fall, (even temporarily) then another rise, is the likely outcome in the short term of the next 12 months, the second rise being generally caused by an under supply of available properties, as homeowners decide to sit tight.
The unknown issue is how will the ‘new normal’ look? We have all heard the forecasts, that a recession is imminent and there will be job losses, these are facts, there are going to issues in the economy that we have never faced for decades. So, what indeed is the right decision? There will be an expectation of discounting by buyers and sellers will be aware of this. This may indeed, remove some sellers from the market, bolstering prices as the supply of houses takes a step back.
The second half of 2020 is certainly not going to see a property boom, what cannot be estimated is how long before confidence returns, as even in recession, there are still the divorces, the bereavements, the debts as well as the more fortunate at the other end of the scale that keep the market ticking.
Property is a long-term investment. Whether it is a home or an investment, property should be viewed for a medium term of 7 years for most buyers. (Except if you are an opportunistic investor with cash, then that is a different Blog!) Therefore, for most buyers, the short-term fluctuations should not be a major concern. However, your purchase price could be!
What about my Mortgage?
If you are buying a property at the top of your budget, with a deposit using all of your cash and a mortgage at the maximum borrowing from the bank, not only should you reconsider, but you may ‘have’ to… in the Financial Crash of 2007-2009, one of the first changes made by the banks, was the % of borrowing buyers could access, so if you are buying with a 85%+ mortgage, speak to the bank in order no changes take you by surprise. A small deposit of 5-10% also makes you more vulnerable to negative equity.
Should I reduce my offer price?
Only if you must or want to take a chance that they will agree to a reduction. The seller may be ready for you and simply withdraw altogether.
If you feel, the price you had agreed to pay is too high, then it is likely it was already too high when you initially offered, but you will no doubt have felt more optimistic about the future, at that stage.
The value of the property is unlikely to have changed in June/July and even August 2020, so you may struggle to supply evidence of why you have had this change of price, so be honest. Do not hide from the decision, simply offer to step aside, and give the owner a chance to sell his/her property. They may offer a reduction, there are some very sensible sellers out there.