House buying is an emotive business. First-time buyers, desperate to make a purchase, are vulnerable to old tricks designed by some agents to ramp up the Fear of Missing Out (FOMO), and leading to rash agreements.
Viewings all held at the same time on a Saturday afternoon kicks off the feeling of panic. Buyers seeing a queue of other people waiting at the door become convinced that everyone else is richer and more financially agile. Some agents have reportedly introduced the VIP Viewing Club, offering previews and priority treatment if viewers spend some time with their mortgage brokers. This approach distorts perceptions of value from the outset, with repercussions all the way down the line to the lender.
Even when an offer is accepted and the asking price met, purchasers can find themselves being asked for an additional payment to take it off the market, giving borrowers a false sense of reality and distorting buyers’ perception of a property’s value.
The Office of Fair Trading has been clear in its guidance on this matter, and everyone acknowledges in principle that it is improper for anyone to put pressure on buyers to proceed in this way. Yet in the hot-house of the market, the very real fact of undersupply is tempting first-time buyers to reject the better deal they know they could get in favour of a speedy sale that reduces the risk of gazumping.
Investment clubs and communities encouraging ‘creative financing’ away from high street lenders are on the increase. ‘No money down’ seminars are all over the internet, with organisations promising to invest in people, not credit ratings.
The lending industry is aware of these pressures re-emerging and we can expect to see regulators and lenders alike tread carefully to avoid making a difficult situation worse. Unless we deal with the problems of undersupply, it could come back to haunt us all.