In much the same way as the crash slowed down the average length of time for a property transaction, the recovering market in Dublin in recent months has seen transaction times reduce hugely. There are a number of reasons for this, namely; cashflow – professionals are getting busier and need to fund additional resources; competition – buyers, particularly investors, who have struck a good deal in a rising market want to secure it; to reduce the likelihood of the deal falling through; also, there are so many more cash buyers in the market at the moment and most tellingly, because there are plenty more transactions to deal with. This is a good thing, although it might not feel like it. It makes every party and player more focused, more efficient and more committed to closing. But it does make it feel like more of a sellers’ marker than a buyers’ market at the moment.
So, what can a buyer do when they source that elusive ideal property, negotiate a good deal and then find themselves waiting for months due to unreasonable – and sometimes unexplained – delays? The short answer is that they can do very little; they choose to wait or walk away. Outside of the Capital, there is rarely a reason to wait. In most areas, ready buyers will have their pick of bountiful in volume (if not beautiful in style) houses and apartments. It is difficult to reconcile waiting for months when there are so many eager sellers. This is the decision facing one home-buyer in County Cavan at the moment. In a county that has seen less than 500 transactions in the last year (admittedly, that was a jump up from 320 in 2012), she made an offer on a bank-owned house back in 2012. At that time, there were two other bidders involved that resulted in the property price increasing from below €50,000 to almost €90,000 – that’s a big jump for a relatively low-valued property. It is entirely irrelevant that the house was once valued for a sum in excess of €300,000. In any event, the highest bidder proved not to be a credible purchaser and the house remained unsold for a further year, much to the understandable frustration of the underbidders. Last September, a full year after making her original offer, the buyer in question was given a second bit of the cherry, so to speak. She was given the opportunity to secure the house but at the price of the previous highest bid. She wisely refused, not just because the higher price was not reflective of real market value but because she could simply not afford the higher price. She was then and remains today the only interested bidder. The estate agent acting has apparently advised the selling bank that the offer is a fair and reasonable reflection of the market and still the bank refuses to act. They have not accepted or rejected the offer. They have effectively sat on the offer for the last five months and kept the buyer in a state of limbo. Should the intending buyer move her attention and intentions to another property? Almost certainly. But will she? I suspect not as she has effectively fallen in love with the house – the single most destructive thing that can happen to any house-hunter. No-one has a crystal ball but best forecasts would lead me to believe that this lady can achieve better in this particular area in 2014. Supply levels are high and demand is not expected to increase.
If this situation arises in Dublin, and it does, the opportunity cost of the delays are much more quantifiable. Prices are rising, demand is strong and for the next 18 to 24 months, supply levels for family homes are only moving in one direction – downwards. Waiting for several months for any seller to decide whether they are in the game at all is definitely not an option. Unfortunately, the likelihood of a delay is not so clearcut. Just this week, I learnt of a family purchasing a property from Nama (presumably through an estate agent but I am not aware of this). They sale-agreed their new home before Christmas but became anxious when they started to experience delays and then saw the ‘for sale’ sign removed from the garden rather than just marked as ‘sale agreed’. It now transpires that tenants in the house are refusing to leave, which makes it difficult for the conveyancing solicitors to determine a closing date. Over-holding on a lease is generally a civil rather than criminal issue. The intending buyers are now facing that awful decision, do they wait or walk away. The implications of walking away include the difficulty finding a new property, potentially paying more and missing the opportunity to compete this current purchase, which may be resolved next week or next year. The implications of waiting mean taking a gamble on the above or possibly being thrown back into the market in another six or twelve months – where bubble conditions for the Dublin residential market are expected to continue. Will they end up paying much more for less, or will they be priced out of the market altogether? Unfortunately, there is no right answer. Personally, I favour certainty. Of course, this raises a bigger question about whether home-buyers, and first-time buyers in particular, should even be trying to do business with receivers and banks (as sellers). From the value point of view, yes, they should have access to the same opportunities but in reality, can they afford the risk?