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Asking prices at record highs but it could take six months to complete your purchase

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Figures from property search portal Rightmove released this morning point to new record highs in asking prices, which are now on average 5.5 percent higher than the same time a year ago. As of the beginning of October, the average asking price was £323,530, an increase of 1.1 percent from £319,996 in September. It’s worth bearing in mind, however, that these are asking prices, not sold prices.

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Nonetheless, as a result, Rightmove are forecasting that annual house price growth will hit a peak of seven percent by December.

That’s the positive news. If you’re selling a property, of course.

The potentially not-so-great news is that there is such a significant processing backlog as property lawyers, mortgage lenders and surveyors grapple to clear what’s believed to be over 300,000 property transactions which were placed on hold during lockdown, together with the ‘mini boom’ in sales agreed since the announcement of the Stamp Duty Holiday scheme in July, that buyers who have their offers accepted from this month onwards may find that they don’t actually complete on their purchase before the end of March next year.

In practical terms, such is the build-up that those agreeing a purchase from this week onwards may miss out on the savings currently available and have to find the full amount of tax payable on their purchase if they complete from April 1st, 2021 onwards.

With buyer demand remaining undiminished since the summer, the time from offer to completion is now extending far past the usual 12 to 14 week average.

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Asking prices have hit record highs – but backlog means there may be a 6 month wait to complete (Image: Getty Images)

Although the latest Rightmove report suggests that the average time to sell has reduced to 50 days – apparently the fastest time on record – let’s be clear here, that’s the time elapsed between when a property is first listed for sale and when the seller accepts an offer – not the time it takes between when the offer is accepted and the transaction completes.

As Tim Bannister, Rightmove’s Director of Property Data commented: “Not only is the time left to sell and legally complete before the 31st March Stamp Duty deadline being eaten away by the calendar, but more time is also needed because the sheer volume of sales is making it take longer for sales that have been agreed to complete the process.”

Tim went on to caution: “Sellers and their agents should therefore be wary of being too optimistic on their initial asking price, as whilst activity levels continue to amaze there are some signs of momentum easing off from these unprecedented levels.”

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Managing Director of Enness Global Mortgages Hugh Wade-Jones observed: “The one downside to such monumental market activity is the frustrating situation many buyers are finding themselves in at the back end of the transaction process.

“Having had an offer accepted in extremely hot market conditions, it’s now taking months on end to see that offer move through the legal process to completion.

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“So, while many agents may find themselves in the extraordinary position of having more stock sold subject to contract than they have for sale, the ratio of actual homes sold is probably telling a slightly different story.” 

Hugh concluded: “As a result, the reality of market conditions is probably a tad more muted than we are being led to believe and so while the time it’s taking to list a property as sold may have accelerated, actual sale times aren’t particularly quick.”

James Forrester, Managing Director of Midlands based estate agents Barrows and Forrester agrees: “While the time to accept an offer is incredibly quick at present, the time required to actually complete and secure a Stamp Duty saving is not.

“Therefore, those entering the market now are unlikely to complete in time to secure the saving and as this reality starts to filter through to homebuyers, asking price growth will cool considerably.”

The big question is, of course, what’s driving this surge in demand? Surely, with such an uncertain economic backdrop, one would be expecting buyers take a far more cautious approach?

Tomer Aboody, director of property lender MT Finance, explained: “The Stamp Duty stimulus, along with cheaper than ever mortgages, means that more people have greater confidence to take the plunge and buy a home.

“There is also a desire to act quickly before a potential widespread deterioration in people’s credit ratings due to looming uncertainty over job security caused by the pandemic.”

In practical terms then, what can sellers do to help speed the process along? Simply put, this is all about getting your legal paperwork ready before you accept an offer.

Instructing a property lawyer at the same time you put your property on the market will undoubtedly contribute to a quicker completion.

In an ideal world, you’d have your Sales Pack ready in advance, as it can take a few weeks to prepare. Then, the day after you’ve accepted an offer, your Solicitor can send across the necessary documentation to your buyer’s solicitor to get the ball rolling.

Asking prices have hit record highs, but where are the least affordable areas in the UK? (Image: NC)

However, if you wait to instruct your legals until you accept an offer, then you’ve built anywhere up to a months’ delay into the process, before you even start.

No one enjoys filling out forms and digging out paperwork, but you’ll have to do it all at some point, so why not give yourself the best chance of moving quickly and do it as soon as possible?

If you’re concerned about incurring legal costs before you’ve secured a buyer, bear in mind that most conveyancing firms only ask for a nominal amount up front to open up your file, and many offer a ‘no sale no fee’ policy, or at least a discount on legal fees incurred to the point that the transaction is terminated.

For buyers who are still yet to find a property and start the legal process, it’s a good idea to calculate the amount of Stamp Duty you would pay if you do miss the 31st March deadline and include this in your overall moving budget. If you are able to complete on your transaction in good time and don’t need it, then it’s a bonus.

In other words, plan for the worst and hope for the best.

Follow Louisa on Twitter: @louisafletcher

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