Banks behaving badly

Some of the most common feedback we hear is that the banks are “tightening up”. There may well be a downstream impact of the increased capital requirements the banks have had imposed on them. And there is certainly not the appetite for risk that existed a couple of years back.

We would certainly be critical of the way many “bankers” go about dealing with clients – that they request information in a very piecemeal fashion. Often buyers are under tight DD deadlines, and when a bank doesn’t request certain information, whether it is a valuation or an IEP, right at the outset, it complicates the process for all.

Our experience of late is that buyers, most often smaller clients, are often having difficulty in raising finance. When the property values up, the IEP is acceptable, and other aspects line up, and the buyer still cannot get finance, that probably says as much about their business as about the bank.

What this change in mood and environment does highlight, is that agents need to play a much more active role in shepherding clients through the process. This applies in particular with first time buyers, and smaller clients. Ironically, clients wanting to borrow larger sums don’t face the same hurdles. Or they are perhaps better prepared for the process?

We have seen a number of potential buyers, whether investors or owner-occupiers, not understanding that a deposit of 20% may be adequate for a residential property, but that for industrial 50% plus is more usual. And then that most often banks will want to see business financials, as well as valuations, IEP and more.

Where an agent takes an active part in both educating the client, and then shepherding them through the process, we have seen much better success rates in getting deals over the line. And that involvement illustrates the difference between agents who understand that getting a signature on a Sale and Purchase agreement is often the easiest part of a property deal.