Desperate Measures Taken By Prospective Homebuyers

Who would have thought post-COVID-19 would see a huge burst in homebuyer demand. In the USA, unemployment has risen by 15 percent, and the UK is propping up businesses with yet another extension of the furlough system. Each month the furlough scheme costs £15bn according to the University of Nottingham.

UK

The debt is building, and the numbers are simply mind-blowing. With an estimated total cost of £80bn by October 2021, the UK furlough program is not the only support provided by the UK Government. To avoid mass unemployment and mortgagee sales, businesses are also being propped up with their loans underwritten by the Govt. As a result, the banks had to offer mortgage repayment holidays and suspend interest on credit.

All these measures are unprecedented but considered vital to avoid a Great Depression. Not seen since the 1930s when global unemployment was in the mid 20 percent range and global GDP was down 265, its memory is still haunting Governments hence the measures being taken to it ride out the slump and give initiatives like the housing construction a chance to boost economic activity.

One UK initiative implemented to get the wheels of commerce turning is the Stamp Duty holiday for homes selling for less than £500,000. It’s been hugely successful, with homebuyers scrambling to get a house and thus on the property ladder. Property investors have also taken the opportunity to add a property or two to their rental portfolios. DailyMail UK reports there are 13 buyers for every property listing.

Gazumping

Prospective homebuyers are taking desperate actions so they can get their offer in and hopefully accepted. However, gazumping is happening, and it’s frustrating homebuyers who have verbally had their offer accepted.

Gazumping is legal in England and Wales, where either party can pull out until the sales contract has been signed and exchanged between the two parties. This creates a lot of nervous waiting for homebuyers in a demand-driven market. The estate agent presents the offer to their client, the seller, but there’s no rushing to get it signed, which leaves the opening for another buyer to put forward a better offer and have that accepted, which does seem unfair, but it’s legal.

Estate agents work for the sellers, and they are paid a percentage of the sales price, so if a prospective buyer is gazumped by another buyer presented by the estate agent, he or she stands to get more commission.

Actions Taken To Avoid Missing Out

With so much demand, prospective homebuyers are doing all they can to secure a property while interest rates are low and there’s the stamp duty holiday.

Put Forward Best and Final Offer

Estate agents realise gazumping can result in a no-sale for them if the better offer is from a buyer they haven’t put forward to the seller. Therefore a sale is better than no sale, so prospective buyers are encouraged to put forward one offer, and it is to be their best and final offer.

Move Quickly, Be Flexible

While price is important, the offer that seals the deal may include a faster turnaround time, where the contracts are exchanged within a few weeks. Some buyers are doing this to ensure they can move fast because they are renting or staying in their caravan!

Quick turnarounds are not always desirable, so prospective buyers need to find out the seller’s position. The seller may not have anywhere to move to, so your offering to settle within weeks may be a turn-off and, with it, a lost deal. On the other hand, some sellers want a long settlement period, so they have time to remain in the property until they find another home.

Ambulance Chasing Real Estate Agents

Desperate times require desperate measures, so the saying goes. Nevertheless, prospective buyers are not averse to following real estate agents to locate new properties for sale and get a look in before their competition.

Buyer’s Agent

Engaging a buyer’s agent to locate a property is a popular move by busy homebuyers. The ideal buyer’s agent would be part of an Estate Agency to know when estate agents have new prospective property listings.

Supply Is Coming

Demand is leading the surge in desperate measures, including gazumping and following agents, but it won’t last forever. Commitment to massive construction of new homes will eventually curtail the homebuyer frenzy of activity.

Across the Ditch – USA

The USA also sees record numbers of homebuyers in the market. Since the pandemic, it’s likely renters have felt insecure in their accommodation and have taken the necessary action to get on the property ladder with a home they can call their own.

From Pew Research

As of the fourth quarter of 2020, 65.8% of households own their homes, up from 65.1% a year earlier.

More older people have returned to homeownership, and there was a notable increase too for families with low incomes. In addition, low interest rates and foreclosure moratoriums are giving USA homebuyers confidence amidst tough economic times.

New Homes Construction

In the USA, it could be said that they are building their way to economic growth with a surge of new homes construction which are mostly single-family homes.

From Marketwatch:

Permits for single-family homes increased nearly 5%, while authorizations for multifamily development dropped by almost 4%.

Other property types that are popular new builds are duplexes, triplexes and quadplexes.