Dale Jannels

Why it's vital for advisers to have a plan B for when cases do not progress as expected

We are entering a time when the property market usually takes something of a festive dip and can suffer from a New Year hangover.

However, this year — as we are all too aware — is a little different. A huge number and variety of property transactions are in the pipeline and, with the stamp duty deadline closing in, many of these are coming under increased time pressure — something which is generating more and more enquiries for short-term finance.

One of the most prominent needs we have seen for short-term finance over the past few months has been for chain-break finance, where the previous property sale has fallen through for a number of reasons. This has been evident for clients moving up the ladder and for those downsizing. Now, this kind of finance is not exactly rare — it has long been a useful solution for many advisers to have in their locker. This is because every single property transaction has its own fair share of issues, complexities, and influencing factors, often ones beyond the control of the buyer. Economic and borrowing circumstances are changing so rapidly that many of these components have been further magnified. And, as we continue to operate in the most challenging of operational times for lenders, intermediaries, surveyors, and conveyancers, it’s little wonder that the reliance on some alternative types of borrowing has been all too evident.

In order to successfully navigate such times, expertise and experience are key ingredients. Many of these chain-break finance cases stem from what you might class as more straightforward looking deals. These often feel like ‘bread and butter’ cases to advisers, but due to shifting market dynamics, many borrowers are being forced into unexpected avenues to save purchases from falling through the cracks.

Many advisers dealing with such transactions are not familiar with the intricacies of short-term lending or the types of alternative finance which can drive a purchase through to completion in a responsible and cost-effective manner. This is not the adviser’s fault. It’s not easy to be a specialist in multiple fields, especially when the lending environment is so volatile with a variety of providers launching and pulling products at short notice. There are also rapid-fire policy and criteria changes to consider which are adding a further layer of complexity onto an already multifaceted lending process.

However, it’s vital that advisers do have a plan B in place for the times when cases do not progress as expected and alternative avenues need to be investigated. Many brokers have never used bridging or short-term finance before and it can be a daunting prospect. This is where having a good relationship with a specialist packager/distributor can be the difference between clients achieving the best possible outcome or simply missing out — something to bear in mind in Q1 2021 when the pressure really will be at full throttle.

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