First time buyers, when is a bargain not a bargain?

The quick answer is when it is a property being sold in the normal way.

Let me explain; just lately, we have received quite a number of enquiries from first time buyers who have evidently found a bargain. What is more, most of them seem to be on the verge of losing it and therefore mortgages and especially valuations have to be arranged yesterday.

Now, don’t get me wrong, we pride ourselves on our efficiency and are often able to get things done in double quick time, but sometimes it is just not necessary. We have even had one instance of a client paying for motorcycle couriers to chase round the country dropping papers of here there and everywhere!

I thought it might help just to clarify what is really happening in these situations, and help put the buyer back where they should be, in control.

The first thing to bear in mind is that if you have found the property in an estate agents window, it isn’t a bargain, whatever the estate agent may tell you. Let’s think about this a little more.

Firstly, the sole purpose of the estate agent is to get the best price possible for his client the vendor. The vendor would, quite rightly expect him to use all the skill at his disposal to achieve this, and it therefore follows that to even offer a property at less than the optimum price, would be negligent, and a failure in his duty of care.

Secondly, in the very rare instances when a property is offered for less than its proper value, it rarely makes it as far as the estate agents window. If the estate agents instructions are (for whatever reason) to sell quickly for a reduced price, they would again be negligent if they didn’t sell the property to the buyer who could complete the quickest. That person is likely to be a cash investor who the estate agent has had previous dealings with and can be confident in his status.

Thirdly, most estate agents are paid a commission based on the price they get for the property. There is no earthly reason why they would sell for less than value and lose out on commission.

So why are you being told “You need to get a valuation within a week or it will go to someone else” or “your offer will only be accepted if you can complete in three weeks” etc?

The answer is simple, it is money! There are rarely other buyers waiting in the wings to steal your bargain from you, and threatening to re-market the property is a bit of a misnomer, as in theory, it should continue to be marketed up to the point of exchange anyway. The fact is that in these difficult times, less houses are being sold and therefore estate agents have three objectives.

Firstly, they need to maximise the income they receive, and this can be most effectively done by encouraging you to use them to arrange your mortgage. First time buyers are more savvy now than they used to be, and are unlikely to be swayed by statements such as it is compulsory to use their adviser, or they are not allowed to pass offers on without checking the financial status of the purchaser. But, they may be tempted to use the in house service when a quick valuation is needed, knowing that it would then be the estate agents responsibility to see it happened. It is surprising how many properties have “valuation deadlines” when offers are accepted!

Secondly, estate agents need to receive commissions as quickly as possible to generate revenue to continue run their businesses, and as they are paid on completion, they want that day to come round as quick as possible. In fact, the same applies to mortgage brokers like us, and we need to make sure things happen quickly as well. Anyone who tries to tell you specialist brokers and advisers don’t have the same speed incentive is pulling your leg.

And thirdly, with falling house prices a hot topic in the news, estate agents want to make sure that once an offer is made and accepted, it completes quickly before the buyer changes their mind.