Despite the UK officially being sent into Lockdown due to the global pandemic of the Covid-19 virus, government guidelines state that there is no need to pull out of transactions despite some people’s concerns around this unprecedented phenomena.
It’s certainly not Business as Usual for real estate agents, however, there are actually some benefits for home buyers.
With that said, it’s important that buyers must be able to accept and adapt to the changes caused by the pandemic and know that the time-frame must be adjusted in line with the social distancing rules which have been introduced as a result of the outbreak.
Social distancing will impact house buying in a variety of different ways, however, let’s begin by explaining some of the key benefits.
Benefit for ‘cash’ buyers
Those who are cash buyers, individuals purchasing a property not reliant on a mortgage, will see huge benefits during the Covid-19 pandemic. They are in the perfect negotiating position to take properties from sellers who are desperate to move.
Cash buyers may be able to whip up properties at a bargain price as people will struggle to get their maximum loan sum, whilst those needing to sell a property will be panic selling, putting cash buyers in the perfect position.
Benefit for first time buyers or people purchasing a new home
A first time buyer or someone purchasing a brand new property reduces the chain significantly and due to the issues that have been raised below, means the less of a chain on a property, the easier it will be to purchase a property during this pandemic.
If first time buyers can secure a fixed mortgage on the currently very low interest rates, it would mean they are securing a low mortgage repayment cost for the foreseeable future.
So with that in mind, what are some of the disadvantages of buying a home during Covid-19?
House valuations have been put on hold as a result of the Coronavirus. Surveyors, as a result of immediate law enforcement, have halted physical house valuations. Surveyors are at high risk of not just catching the virus but also spreading it through multiple households which are more than likely to be occupied by families.
As physical house valuations have been halted, this has caused a chain of issues for property buyers.
Not only can they not get a surveyor to conduct a property valuation on their potential home, but it is also affecting the chain associated with the home buyer.
If the home buyer is moving up the ladder then they cannot get a surveyor to their house which maybe stunting them from moving out, or additionally, the people in the property to which they are purchasing cannot get a valuation on their next home and so on.
Property valuation is crucial and a necessary for any property owner as a mortgage will not be distributed by a bank or another entity until the valuation has been done. The property valuation is beneficial for the lender and buyer alike as they will determine any issues and risks associated with buying the property as well as estimating what the value of the property is to see if it’s worth the investment of both parties.
Without the property valuation, the buyer cannot complete their property purchase and so it is likely that properties will be unlikely to be completed during the pandemic, but rather than ‘falling through’ you should just see this as a delay.
Unlike most professions, Law is a very traditional sector and it does require a witnessed signature in order to exchange contracts. Although this is good to avoid forgery, it is not ideal during a global pandemic.
Many conveyancing solicitors, because of the ‘physical signature’, are either significantly delayed or have stopped working altogether as their job requires physical contact with clients for the completion of documents.
Therefore, regardless of whether a home buyer has a mortgage offer or not, an exchange of contracts is unlikely to go ahead without a minimal delay of 3 months of the expected date.
Other issues that may arise with investment rates…
Due to the pandemic, the Bank of England base rates have decreased to a record low and it is now an incredibly good opportunity for investors to capitalise in a property. Unfortunately, however, the banks have also recognised this and are beginning to pull away their ‘Tracker’ interest rate mortgages.
This is something to be aware of which, as a buyer, is a good thing if you can secure a mortgage at such a low rate, especially if you can get it fixed for 2 or possibly even 5 years. However, securing that mortgage maybe more difficult than normal during this period.
Reduced maximum loan sum
Many lenders have reduced their maximum loan sum by a significant amount.
Billions of jobs will be lost and thousands of businesses, small and large, will go bust as a result.
This means that banks and investors will lose a lot of money as a result and so their appetite to lend will diminish.
Investments they have previously made will be at a loss so most will be reluctant to reinvest at this uncertain time.
Those who are in the process of a mortgage application could see their lender being reluctant to lend the amount previously discussed as their affordability changes.
Although some issues will arise as a result of Coronavirus when it comes to purchasing a home, most issues are mainly due to the ‘social distancing’ rules that have been put in place to stunt the spread of the virus.
This will therefore affect house valuations and witnessed signatures. However, this is more likely to just ‘delay’ a sale, rather than cancel it altogether.
There are benefits to buying during this time such as low interest rates and benefits for cash buyers. Therefore, you should not be put off purchasing a property during the Coronavirus pandemic, rather you should just see it as a delay in the process.