A short anecdote has prompted us to consider whether or not 'readiness' to buy a specific property necessarily affects your ability to take advantage of weakness in the pound.
Our client is a Swiss national living|renting in London.
Having sourced, of their own volition, the property they wished to buy, our client quickly realised that the investment structures across which their capital had been spread were working against them when it came to demonstrating their commitment to the purchase.
The speed with which they were able to liquidate their CHF denominated assets caused all the stakeholders in their purchase to pause, eventually resulting in their vendor accepting a different mortgage backed offer.
Our client would be 75% cash, true liquid cash - a rare thing in the fast paced marketing driven miasma that is the London property market; submitting an offer can sometimes be as much about PR as cash readiness.
Our client was informed that from the point of portfolio pricing (no less than 48hrs after receipt of the verified instruction to liquidate) it would be as many as 14 working days before funds would be credited to his personal Swiss account.
Given that that funds were not visibly liquid (in his UK GBP account) and due to the vagueness and intransigence of his EAM with regards to a precise date they would be credited, our client lost out on their intended purchase.
However, the ball had started to roll. It is obvious to say, but, our client was not aware of this lengthy liquidation time frame prior to instructing their EAM so to do. So, an important part of their buying process was not considered until rather the last minute.
Understanding that some purchases never actually come to fruition, but, knowing that our client had a fixed foreign currency amount they intended to exchange regardless of the asset into which they might invest the capital, a forward contract was the obvious instrument to recommend.
By buying GBP forward (for the sale of Swiss Franc) our client could confidently work off a definite GBP sum for their negotiations.
Taking a bridging loan to satisfy the deposit conditions would have meant the vendor gets the show of willingness that was lacking in this instance.
Forward buying enables clients to be precise.
Tailoring the forward terms to more than cater for any potential delays to the conveyancing process meant that our client wouldn't have been under undue pressure even if the EAM did not meet their own deadline for liquidation.
As it happened|happens and at our introduction|recommendation the client went on to engage a specialist sourcing agent for their subsequent purchase.
If the client had in fact elected to, the terms and duration of a forward contract would have assisted them in keeping their capital in their Swiss structure until such a time as they needed to push the button and liquidate.
Locking in the rate of exchange using a forward means that our client needn't settle their contract with us until they knew the deadlines of the purchase.
A weakened pound meant that, having already instructed their EAM to liquidate their portfolio, they did not mind exchanging their CHF for GBP at the prevailing spot value, but, the option would have been their to extend access to that favourable rate had the client wanted it.
The moral of this story is that it is never too soon to introduce a specialist broker to your client who has capital overseas.
High street banks do not offer over-the-counter products like forward to their private customers. Therefore, it is unlikely that a would-be buyer is familiar with the concept let alone the flexibility of such contracts.
To introduce yourself or your client to our broking team, simply visit the 'Contact Us' page of the Prime Cap website.
brokers@primecappayments.com | 0203 172 8193 | www.primecappayments.com