- Those who are either chain-free or cash buyers are considered ‘electricity buyers’.
- So too are first-time buyers who have a mortgage that agrees in principle
- With the lowest available property stock on record, sellers can afford to be picky
- Buyers must demonstrate that they are ‘ready, willing and able’ to face any opportunity
- We talk to a buying agent, a property agent and a property market analyst
The recent property boom has seen the rise of so-called ‘power buyers’, who use their chain-free position to out-race their competition.
RightMove describes these ‘power buyers’ as those who have already sold their home, are cash buyers, or are first-time buyers who have agreed in principle with a mortgage.
They seem more attractive to sellers than those who have yet to find a buyer for their home.
The average time to acquire a buyer is currently 37 days, compared to 65 at the beginning of the year.
In general a ‘power buyer’ can refer to someone with deep pockets – the type who can win any bidding war or scuttle a deal.
But cash isn’t necessary in today’s red-hot market, in which stocks are trading at record highs.
According to Rightmove, there are only 16 available properties on average per property agent – this is the lowest availability ever recorded.
Sellers are spoiled for choice at the moment. The average time to acquire a buyer is currently 37 days, compared to 65 at the beginning of the year.
According to Rightmove, there are only 16 available properties on average per property agent.
David Westgate, Group Chief Executive, Andrews Property Group, says: ‘We are still facing market conditions where demand exceeds supply, and there are more buyers than sellers.
‘Demand is particularly strong for homes that have a decent amount of outdoor space, and in more rural areas, most of us are working from home and seeking a better quality of life.
‘Where demand is high, a desirable property coming to market will secure multiple offers, and the seller must decide which offer to take.
‘It can be easy, the highest offer wins. But if that offer comes with strings attached, a lower offer that is unlikely to fall through may be more attractive.’
What exactly is a ‘electricity buyer’?
According to Henry Prior, a professional buyer, a ‘power buyer’ is one who is well prepared, can move quickly and keeps his finances in order.
‘You need to appear before the estate agent to be ready, willing and able. It will be easier to deal with someone they can trust.
‘Ideally you would be a cash buyer, but if not you definitely need a mortgage agreement in principle.
‘You also need to sell your old house or put it under offer or close to exchange.’
A more radical move, according to Prior, is to sell and move into rented housing before making an offer on another property.
‘Being in rental housing suggests that you would be willing to buy your own home and ‘chain free’ as the agents call it – without having to sell the property.’
Why is it so important to be one?
Despite its advantages, the appeal of an ‘electricity buyer’ will largely depend on where they live and the type of property they want.
“In some parts of the country and at certain price points, you’ll be competing with between 200 and 300 other buyers, 40 percent of whom will shop with 100 percent cash,” says Prior.
‘The number of buyers and sellers exceeds by a factor of ten and sometimes much, so it is necessary to reach the top of the queue.
‘We are reducing the normal number of listings by maybe 30 per cent but the number of buyers is higher than normal.’
Beware of asset chains
A long property chain is a property agent’s worst nightmare because there is a very high chance of something going wrong.
Many property transactions rely on a series of buyers and sellers, all dependent on each other to ensure that they can complete their purchases.
If any transaction in the chain is delayed or collapses, everyone in the chain is affected.
Property transactions are also taking longer to complete than before the pandemic.
Previously it took about three months from the time an offer was accepted to the completion of a sale, now Rightmove says the average has increased to four months.
Miles Shipside, director and housing market analyst at Rightmove, said: ‘The worst thing is choosing the wrong buyer because the legal process takes so long to complete.
‘When a series of buyers and sellers are involved, a third of deals are lost, and in some longer chains, when six property sales are involved, nearly 50 percent drop.
‘So in today’s market where there is so little stock available, it’s really not only about persuading a seller that you are not going to fall, but also persuading a seller that you can act quickly. Huh.’
Should you sell before you buy?
Unless you are a first-time buyer or have a lot of cash, it is likely that you will need to sell your current property before buying the next one.
Offerings on properties before putting your home on the market will only end the disappointment.
Even if your property is for sale, if you don’t have a buyer, the seller and their estate agents will not take your offer seriously.
You will be in a much stronger position before accepting an offer on your own property, although those who want to go a step further may prefer to sell before making an offer on the next one.
For this you will need to make frequent breaks, perhaps with friends or relatives who are willing to help you.
Transaction taking 126 days from the time the offer is accepted to completion
Alternatively you could try renting for three to six months, although the hassle, cost…