The need for speed is paramount in the housing market. At the top end, sealed bids and gazumping are back in vogue. While this is good news for sellers hoping to push up the price of their homes it is bad news for buyers and even worse news for brokers who are paid on completion.
There is a danger that a consultant could spend a lot of time working on a clients mortgage only to end up with nothing for their trouble because that client has missed out on their property. Being paid on completion is a risk.
With gazumping, speed is of the essence. A growing number of lenders argue that automated valuation models are the answer. These enable clients to exchange contracts more quickly than if they rely on traditional manual valuations. Of course, AVMs are great when properties are straightforward or for remortgages, but theyre not so useful when properties are old or unusual.
As Mortgage Strategys cover feature on February 26 explained, the cost of AVMs has also been criticised because lenders charge customers premiums on top of the cost of processing valuations. Such practices have a familiar ring, with lenders already reeling from the Financial Services Authority inquiry into exit fees some of which are far higher than the cost of closing or switching accounts.
But AVMs are different. When lenders have sunk significant investment into their IT systems and are taking on a level of risk, charging customers a couple of hundred pounds extra seems justifiable. After all, if it means the difference between buyers securing the properties they want or losing out, surely its worth a bit extra.
If you dont need to move quickly, fine use the traditional route and save a few bob. But if its essential for your clients to move fast, they should appreciate that it will cost money.
AVMs arent the only option. Brokers who instruct valuations can also significantly speed up the application process. Its a shame that more buyers dont realise this, assuming that all brokers follow the same process.
Clients are the winners. For them, using brokers is a no-brainer. They get advice and their mortgages are approved far more quickly than if they approached lenders directly.
Alternatively, they could put in place a creative financing arrangement that enables them to stand out from other buyers in sealed bid scenarios. And on top of all this, they dont have to pay anything to their broker until the deal is done and dusted.
While sealed bids and gazumping are rife, brokers who work at the hallowed top end of the market simply have to accept that clients will sometimes miss out on properties and they will have wasted their time. But by embracing technological advances and speeding up applications, they may miss out on less.