Bridging loans offer useful tool for chain-breaking buyers

It has been a positive start to the year when it comes to new property listings. The latest figures from Propertymark, the estate agency trade body, shows that in March the average agency saw 10 new instructions, more than double the level seen just a short while ago. Nonetheless, supply remains historically low, with average branches having just 22 properties for sale, compared to 84 registered potential buyers.

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Jason Berry | Crystal Specialist Finance
28th April 2022
Jason Berry
"After all, if a buyer can remove themselves from the issues of a chain, they can stand out from the competition and potentially even save cash through a more attractive purchase price."

This ongoing shortage in property for sale has been accompanied by an increase in the number of cash buyers.

New data from Hamptons has suggested that the number of cash buyers has jumped sharply this year. It found that so far in 2022, almost three quarters (73%) of buyers were chain free. Compare this to the 69% of sales from chain free buyers in 2021 and just 65% back in 2010.

One of the big appeals of a cash buyer is that they are chain-free, and as Hamptons noted, the current lack of stock in the property market actually makes being a chain-free buyer even more appealing. The reality is that the shortage of potential homes to buy makes it more challenging for movers to line up their purchase with their sale. This is obviously minimised when dealing with chain-free buyers, since there is no reliance on other transactions going through at a specific point in time

Being chain free offers further benefits to buyers, beyond simply the fact that they can move quickly; in some cases it means the ability to negotiate a better purchase price.

The Hamptons research found four in five sellers accepted an offer from a chain-free buyer who simply matched, rather than outbid, an existing offer from a potential buyer with a property still to sell. This is up markedly from the three in five recorded back in 2016, while on average it was found that vendors accepted offers of 2.5% less from chain-free buyers in order to enjoy an easier sale.

The appeal of chain-breaking

Given this situation, it’s understandable for would-be buyers to think carefully about the benefits that may be on offer by chain breaking.

After all, if a buyer can remove themselves from the issues of a chain, they can stand out from the competition and potentially even save cash through a more attractive purchase price.

Of course, most buyers do not have large savings pots to turn to in order to do this, which is why bridging finance can prove such a useful option. Bridging is an excellent, flexible form of property finance for any buyer looking to move quickly but it can be incredibly useful in chain-breaking situations. Deals that may have looked close to collapse, on account of buyers down the chain dragging their heels, can be rescued by the sensible application of a well-timed bridging loan.

As a result, borrowers not only avoid the added expense of having to start the selling and buying process all over again, but also the considerable heartbreak and stress that such a situation would result in.

Moving quickly

One of the big selling points for bridging loans in these situations is just how quickly the finance can be accessed. Within just a few days the borrower can have the funds at their disposal, allowing them to rescue a troubled deal.

This timeframe is unmatched by other areas of the mortgage market, but relies upon a certain level of expertise. Put simply, a broker who only deals with the occasional bridging case may struggle to find the right lender for a case within such a short period.

That’s why it makes sense to partner with bridging specialists who may have access to exclusive products, as well as the experience to recognise the best possible lenders for a specific case, no matter how complicated the circumstances may be.

Housing chains are only likely to come under further strain this year given the ongoing shortage of property. As a result, it’s crucial for brokers to have a plan in place for accessing bridging finance for clients who want to explore their chain-breaking options.

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