All aspects of the timing and procedures to be adopted with your sale and purchase need careful planning so speak to us first
Firstly, if you are looking to sell and buy in Scotland you should ensure that you instruct the services of a Solicitor Estate Agent. Solicitor Estate Agents like Neilsons handle all aspects of your sale and purchase in-house including the estate agency, ensuring a smooth process with the transactions and timings all carefully managed and overseen by a Solicitor under one roof.
A question which is put to us frequently from clients who already own a property and wish to buy and sell is “Do I sell first or buy first?”.
The advice here has changed in recent times because of market conditions.
We have had a hot market for some time but the heat in the market has intensified since coming out of lockdown.
Many people have re-assessed their home environment and needs and this has led to an increase in market activity.
The increase in activity is so acute that the market is now entirely dysfunctional. Up until a couple of years ago (circa 2018) the market was seasonal. It would taper off in the lead up to Christmas and in the New Year the rate of pick up activity depended largely on the weather. Snow and ice would prevent or restrict viewing activity and so the market in the winter was relatively slower paced.
Come the spring however, we could count on a huge influx of property coming on to the market from sellers who were looking to sell speculatively. When an offer was received for their property they would offer for another property. Supply and demand equalised and the market was well balanced and functioned as it should.
In contrast to that scenario, we now have a situation where due to advances in technology that progressed rapidly during lockdown in 2020, particularly the 360 virtual property tour, properties are advertised 24/7 irrespective of the weather – or even lockdowns! – and market intensity has increased to the point where on average we are selling properties within 14 days of coming to the market with around 40% of properties going to a competitive closing date according to ESPC.
The intensity of the market for purchasers is such that it could take several weeks or even months before a property is secured due to the competitive nature of the current market. As a result, the practice has grown up of offering to purchase subject to sale.
This means that we have a huge number of properties belonging to clients waiting to purchase. There is intense scrutiny of any new property coming on the market which is then sold very quickly and so the market size is tiny in comparison to previous years. One property is sold and comes out of the market and is replaced by the purchasers’ property.
So, you may say, I should offer subject to sale, that is to say, buy before I sell?
Whilst this is a very common way of proceeding, the problem is that an offer subject to sale is not as attractive as other offers in a closing date situation.
Most popular properties go to a closing date – where offers are received in the morning of the closing date and assessed by the seller with their sales negotiator. This results in a sort of ‘beauty contest’ for Offers. At one end of the spectrum is the cash buyer – the most attractive purchaser. At the other end of the spectrum is the offer from someone who has a property to sell or worse still, has a property to sell in England, which is not yet on the market.
Think of it in terms of banana skins which may trip up the purchaser and prevent the sale from progressing :-
- There are no banana skins between the cash buyer offering and paying the price on the entry date – hence the attractiveness of a cash offer.
- An offer from a first time buyer has one banana skin – they may not get mortgage approval and the deal could fall through.
- An offer subject to sale has three or more banana skins. The purchaser may not get mortgage approval (although this is unlikely second time round); the purchaser has to sell their property and the purchaser from the purchaser has also got to get their mortgage through as well so this Offer carries three or more banana skins. More banana skins can develop however because the purchaser may accept an offer subject to the sale of that purchasers’ own property which would bring several more banana skins into consideration.
As you will see, whilst it is attractive for you to offer subject to sale, it may not be so attractive to the seller and sometimes, even if you put in the highest offer at a closing date they may well go with a lower offer with less baggage attached.
Some clients have no alternative but to offer subject to sale. If that is the case, it can of course enhance the attractiveness of your offer if we have been out to the property and it is ready to go on the market in a matter of days.
Neilsons can prepare your marketing materials and even attach the brochure with the offer you submit, highlighting to the sellers how prepared to sell you are and showing that your home is in good order for a timely sale. This might give your offer the edge over other offers that are also subject to sale.
Some clients minimise the risk then by putting their own property on the market before offering for a property. When an offer is received and missives are concluded then this promotes the attractiveness of an offer to purchase considerably. There would only be one or zero banana skins in your offer. You would try to negotiate a long entry date for the sale to give you plenty of time to purchase a property. Many buyers insist on a backstop date so you are given plenty time to purchase a property but when the backstop date is reached then you must move out into temporary accommodation and if necessary, store your furniture.
One of the reasons the Scottish homebuying and selling system is reputed to be superior to that south of the border is because of the low rate of fall-throughs, often brought about by a lack of speculative sellers. Scottish sellers must invest in a Home Report and surveyors do not offer these on a no sale no fee basis, which means when the seller lists a property for sale, they are genuinely committed to going through with it. They’re not just testing the market to see what they could get.
A further development of this last scenario is putting the property on the market for sale conditionally on purchasing. This procedure is being considered as a concept by Edinburgh Solicitors at the present time and members of our staff are on the working party. Further news on this proposal will follow as soon as available.
A final word on bridging. Bridging through high street banks was a casualty of the 2008 recession where banks were exposed with many bridging loans which blew up when the market at that time collapsed and the sellers were left with two properties with a mortgage and a bridging loan. As a result of this financial disaster high street banks withdrew the concept of bridging and this is now almost impossible to get from your high street bank.
Some finance companies do offer bridging but it should be noted that the set up costs, arrangements fees and interest rates charges are outrageously expensive and not recommended except in extreme circumstances.
All aspects of the timing and procedures to be adopted with your sale and purchase require careful planning, so speak to us first.
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