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Mortgages    5 Comments

Here’s the final part of our ultimate first time buyers guide – here we’re dealing with what happens once you’ve found the property and agreed a deal with the seller

Found it! – When you’ve agreed a deal:-

On the face of it you can relax now – you’ve agreed a deal so that’s everything sorted then isn’t it? – – Surely you’ve just got to do a bit of paperwork and everything’s done?

Sorry, but the answer’s no. You may have agreed a deal in principal but it’s a fundamental point in English law that neither party is committed to this deal yet. So both you and the seller could pull out without any reason and there’s no comeback on either of you. Before you have a heart attack please rest assured that most deals will carry on to completion on the terms agreed initially, but I’m afraid you’ve got a while to go before you can relax.

At what stage do I need a solicitor?
NOW! Ideally when you were sorting out the cost of moving house you will have got figures for the conveyancing (Click here for free conveyancing quote). At that stage you would probably have an idea of which solicitor you feel you can work with. Your solicitor’s role in all this is to safeguard your interests when buying the property – they are there to make sure you don’t buy a load of trouble (but if you insist that you’re happy buying a load of trouble then the solicitor will make sure that you do this with your eyes open)

If you’re going to use us then we would recommend instructing us to act at an early stage – even before you’ve decided on the property to buy. As we do no move, no fee, you’ll not lose out by doing this – even if you don’t go ahead. At the point at which the sale is agreed with the seller, the Estate Agent will normally ask for your solicitors details anyway so it’s handy to be able to give them to them.

If you haven’t already instructed your solicitor to act then do it now. They’ll need a fair bit of information about the property – address, price, sellers details, sellers solicitor details, how they can get hold of the HIP on the property, and so on. This will all help them to start the conveyancing

Conveyancing – what’s that all about?
Conveyancing is the legal process of passing ownership of a property from the seller to the buyer. The seller has their own solicitor (it can actually be a solicitor, or a licensed conveyancer, or you can even do it yourself – if you’re mad as a box of frogs that is), and the buyer has theirs.

As an overview, the seller’s solicitor gathers together a load of information about the property – in order to show that the sellers own it, and that the deeds to the property are all in order with no legal problems. They put this information (together with some other documents called searches) in the Home Information Pack for the property (Click here for our Home Information Pack Beginners Guide).

When a buyer is found this information is supplied to the buyers solicitors. They then look through this information and also do some other checking (using things called searches), to make sure that the property is OK for the buyer to buy. If the buyer is having a mortgage then the buyers solicitor will normally act for them as well. Finally the two sets of solicitors sort out the handing over of the money for the property, and registering the buyers solicitors as the new owner of the property.

I’ve written a guide to conveyancing and included that below

Mortgage – getting that sorted out
Although you’ve previously (hopefully) had an indication of the sort of amount you can borrow, you now have to make a formal application for a mortgage offer. A mortgage offer is a formal document from the mortgage company saying that they will lend you X pounds for the purchase of Y property for Z price. If you’ve used an independent Financial Adviser (or IFA) to advise you on the mortgage to go for then they will normally sort out getting the application submitted. At this stage you’ll normally have to pay the mortgage valuation fee, and possibly an arrangement fee for the mortgage (sometimes the arrangement fee is paid later). You may want to have something more than a basic valuation carried out – have a look at the “Survey – do I need one?” section below in relation to this

When you make your application to the mortgage company they will firstly follow up with your employer to confirm that you do actually earn what you said you did. If you’re self-employed they will normally want to see accounts and may require a report from your accountant (your IFA should be able to advise you on what’s required). They will also request a valuer to carry out the valuation on the property. Once all that information has come in they will do some internal processing and eventually send out a mortgage offer to you and a copy of it to your solicitor.

Survey – do I need one?
I mentioned a mortgage valuation fee above – if you’re buying a house with a mortgage then the mortgage company will insist that at the very least you have a valuation prepared (at your expense). Although you are paying for this report, it is being prepared for the mortgage company, not you (although you can see it). As such, they are basically just reporting on what they consider to be the value of the property, and any obvious defects on the property.

For most properties the valuation will be fine for you as well. However if you’re worried about the state of the property itself then you might want to pay more and go for a more in depth survey. Here you’ve got two options – a House buyers report and inspection, and a full structural survey.

House Buyers Report and Inspection:-
This will cost quite a bit more than the valuation but will usually run to 10 sides or more, and will usually make it sound like the house is falling down. They can be useful in giving you a plan of what works you ought to carry out on the property over the coming months and years, including which items are more important/serious. Normally you should be able to direct the surveyor to particular things you might be concerned about to make sure he/she spends enough time looking at them. These reports can be useful but are usually scary to look at – if you’re aware of that before you look at it then it’s not so bad.

Full Structural Survey
If the House Buyers report and inspection makes the house sound like it’s falling down, the full structural survey can make it sound like it’s already happened! It’s basically like the house buyers report on steroids and will go into great detail. For most house purchases this would be overkill.

Guide to conveyancing
This part of the guide is taken from our website – if you want to view it on the website then click here for the conveyancing beginners guide. The version on the website has a jargon-buster built into it which explains in detail all the technical terms used (such as Title Deeds or Searches)

– Step 1 – We will firstly contact the seller’s solicitors and ask for details of how we can get hold of the Home Information Pack (or HIP). This contains the local authority and water searches. If the property is in a mining area we’ll have to request a mining search as well. Searches are simply a list of questions about the property that are sent to the local council, the water authority and the Coal Authority. When we get a copy of the searches from the HIP we’ll have to make sure that the searches are OK for us to use (they have a shelf life of around 6 months and we’ll need to make sure they haven’t ‘expired’. If they have run out then we’ll need to request fresh searches). The HIP will also contain a copy of the title deeds. We’ll also request the Sellers solicitor to let us have a contract, and questionnaires filled out by the seller.

– Step 2 – The only other thing we will need before we can proceed is a copy of your mortgage offer (if applicable). Once we have all of the relevant documents, we will ask you to sign the contract. If you are just buying then we will ask you to for a deposit as well (you will be told how much is needed), but if you are buying and selling then this will generally not be needed.

– Step 3 – We will go through all the above documents with you (either in the office or by preparing a plain english report for you to read at your leisure) and explain any problems there may be with the property. Once you are satisfied that there are no major problems, then you are ready to exchange contracts.

– Step 4 – Once the buyer and the seller are ready, a Completion Date (the “moving date”) is agreed. We then exchange contracts (this means swapping the contract signed by the seller for one signed by the buyers – together with a deposit provided by the buyers). Once contracts are exchanged the contract is binding and neither party can withdraw without incurring massive expense.

– Step 5 – On the Completion Date, we hand over to the seller’s solicitor the remainder of the purchase money and in return receive the transfer document and the title deeds.

– Step 6 – We must then within twenty-eight days arrange for the payment of stamp duty (if appropriate) and, within two months of the completion date, apply to register the buyer’s ownership at the Land Registry.

A word about chains
The above 6 steps set out the procedure for one transaction – one seller(s) selling one property to one buyer(s). What normally happens however is that the sellers are themselves buying on from someone who’s also buying on – and so on until you get someone who’s selling but not buying another property (e.g. they are emigrating, or have already bought their other property or any other reason). This group of transactions is known as a chain.

If there is a chain of transactions, steps 1 to 6 above need to happen for every single person within that chain. The complication comes from the fact that the exchange of contracts bit (which is the first really important step – it’s when everything becomes binding) has to take place for every party in the chain on the same day at the same time – logistically this can be a bit of a nightmare. The other problem is that every party in the chain will have to agree upon the completion (moving) date. Normally this all takes place on the same day – so that in a long chain of 5 or more parties they will all be moving house on the same day.

The hassle of being involved in a chain comes from the fact that each party in the chain will have their own set of priorities and attitudes – one may be in a hurry, one may now be bothered, and one may be unable to move before a certain date (but hasn’t told anyone that yet!). It’s not unusual to see clients to sign contracts and then phone up the chain to see how close we are to exchange, only to find that the person at the top or bottom of the chain has only just started their transaction. Everyone in the chain then has to wait until they’ve caught up before it can go ahead.

As buyers it’s worth your while trying to find out how long your chain is at the outset, and what stage each party in the chain is at. The Estate Agent should be able to do this at the start – it’s in their interest to know this information as well. It’s good to find this information out as early as possible so you don’t get any nasty surprises later on. There’s nothing wrong if you phone up each of the parties in the chain – if you can all stay in touch throughout the transaction it can help to speed up the process of agreeing dates for moving etc – but don’t agree anything without confirming it with your solicitors first.

At some stage near to completion it’s a good idea to meet the sellers and get them to show you how to work the boiler, thermostats, where the main water stopcock is, main gas tap, main electrical supply switch, and so on. It’s not the end of the world if you can’t do this but it’s nice to know it in advance

After it’s yours – moving in
At the end of the conveyancing process you’ll finally get the keys to your new house. This is a very exciting time (and can also be a bit scary!).

If you weren’t able to go through stuff with the sellers before completion then it’s a good idea to find out straight away where the main shut-off is for the water, gas, and electric – should something go wrong it’s no fun looking for this stuff in the dark with a water or gas leak!

You might want to suggest to the sellers that they redirect their post to their new house – they can do this by telling the local post office – it costs a small amount (can’t remember how much – £30 or so) and lasts for a year I think. It’s worth you mentioning it to them so you’re not continually getting their mail and having to forward it on yourself. This service is useful to them and useful to you.

On the day you move in it’s a good idea to take readings from all the meters and let the suppliers know. The sellers should have done this but it’s easy to forget. You then need to contact them and let them know that you’re taking over the supply – they’ll have their own procedure for switching this to you. You might also want to switch utility suppliers at this stage – it can often save you money. www.moneysavingexpert.co.uk has a good section on this.

You now need to let everyone know your new address. Don’t forget to let the council know as well – you’ll be liable for council tax from the date you move in.

Before unpacking your stuff – put the kettle on and have a nice cup of tea and a biscuit – you’ve earned it. You probably won’t have to do all this again for a few years – the average person moves every 7 years.

I hope this guide has been useful to you – if you’ve got any questions about it by all means pop them onto the form at the bottom of the page and I’ll answer them as soon as I can

Cheers

Mark

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Viewing properties    No Comments

Here we go again! This part deals with the next stage – you’ve found some properties that you’re interested in having a look round – where do you go from here? Read on….

Looking around houses or flats

After all your research you’re going to have a number of properties you want to look around. This is new territory for most people and can seem a bit weird and awkward. Sometimes you’ll just be accompanied by the Estate Agent and the house itself will be empty, but more often than not it will be the seller who shows you round their own home.

Tips for viewing properties
It’s important to bear a few things in mind before you go on these visits.
You are going to walk around a stranger’s home. Whilst you do need to consider whether the house is what you want, be polite. If you do eventually strike a deal with these people your lives will be intertwined with theirs for a very stressful period in each of your lives. You don’t want to irritate them at the start. Also it may be they later have to choose between you and someone else offering the same amount. If you’re the one who laughed at their bathroom suite and pulled a face at the state of the kitchen then it doesn’t take a rocket scientist to work out that they’ll probably prefer the other people.

Don’t go alone. Although sometimes this is unavoidable, wherever possible take someone else with you. There is the safety aspect of course, but I’m thinking more about the ability to discuss the property with someone else when you leave. Who to take with you? If two of you are buying then you should both go and see the property together. If you’re buying alone then a friend or family member would be useful.

Come back with someone who knows what they are talking about. If you’re interested in a property it’s a good idea to come back with a builder friend, parent, DIY nut to give you a second opinion. We saw a house we liked and took a builder friend round. He pointed out the roof was rubbish, and the walls were damp – things we had no idea about before speaking to him. A surveyor may spot these things for you later on but it’s a good idea to be able to weed out the bad properties yourself at an early stage without having to pay surveyors

Photographs – I’ve found it very useful to take my own photos when walking round a property – when thinking back later it can be hard to remember the layout (or even which property it was!) and your own photos can help with this – a camera phone is fine for this. However you must make sure you ask the owners first if they are happy with this and explain why you want to do it– if they aren’t then don’t push it – you’re a guest in their house

Speak to the estate agent. How long has the property been on the market? Have many people viewed it or not? Has the price been reduced? Have they had any offers yet? In all this be very aware of who you’re speaking to – if you’re in the estate agents office talking to the negotiator he wants to get someone to buy the property. That’s not to say they’ll be lying but just take it into account who they are.

Speak to the sellers – it’s a good time to ask questions that might help you to get more of a feel for the place. Also from a social viewpoint things can sometimes get a bit stilted and awkward, and having a few questions up your sleeve can help to get them talking about the property. Things I’d normally like to know include:-
o How long have you lived here?
o What are the neighbours like?
o What’s the area like?
o Why are you moving?
o Have you found somewhere else to buy yet?

On asking these questions you are really just trying to find any potential problems – such as that they are moving because the area has gone to the dogs, their neighbours are a nightmare. Again when hearing their answers you’ve got to make a judgement call on it – it all helps you to get an idea of their position.
o Are carpets and curtains included?
Carpets and curtains are one of those things that can cost a lot and (usually) have to be custom-made for the property itself. Whether or not you want to pay anything extra for them is up to you – even if you don’t like them it can be nice to have some sort of covering in the property giving you time to wait until you can afford to replace them with ones that you like. Sellers often over-value what they think they are worth – going on what they paid for them as a base value. If carpets and curtains are not included then it may be worth asking if they’d be prepared to throw them in. It’s one more thing that can be brought into negotiations later on if you’re interested in the property.

(altogether now..) “Fallink in luff again, vot am I to do”
Sometimes you come away from a house and you absolutely love it – this really depends on the sort of person you are – some people fall in love with property and to others it’s just a place to live. I fall into the first category and can easily get carried away. And it’s exactly that – getting ‘carried away’ – that you want to avoid.

When you come away from the property you really need to analyse why you love the property (or if ‘love’ is a bit strong, why you really liked it). When we bought our first property we did this all wrong. Looking back on it we bought the property because the sellers made us a cup of coffee and sat down and talked to us about the house. Seriously that’s why we chose the property. We viewed 2 houses that evening, both 2 up 2 down mid terraces, and in the next streets to each other. The first one was empty and the agent showed us round. It smelled a bit damp (all empty properties will smell a bit damp because they usually haven’t been heated properly), but it had a good sized dining kitchen, and it had central heating. The second one had stone cladding (which we hate – sorry if you’ve got it – it’s just personal opinion) but it was warm (because they’d had the fire on – it didn’t even have central heating) and they made us a cup of coffee. It was also marginally more expensive.
If we’d sat down and analysed what we thought of the two properties in terms of what they had to offer I’ve no doubt we would have bought the first one. But we didn’t and basically bought the second one because of a cup of coffee.

So please learn from our mistake and if you’ve fallen in love with a property, try and analyse why this is so, and make sure you’re buying the best property for you, and not because someone made you a cup of coffee. Viewing on a sunny day can show a property in a great light, and conversely viewing on a damp foggy evening can make many houses seem dreary (especially if they are vacant and lit by bare light bulbs)

How to negotiate on the price
OK so you’ve found a property in your price bracket, in the area you want to buy and you want to make an offer – what do you do next? Well it’s up to you really. There’s nothing to stop you discussing price when you’re in the house with the seller. That really depends on your personality and theirs. If you’re not comfortable going the whole hog and negotiating then you can ask them if they are open to offers on the price. From their response you can get an idea of how low you can go.
Most people do their offers and negotiations through the Estate Agent. There’s no rule that says you have to do this but it’s more comfortable to most people.

In deciding what offer to make you should take into account all the information you’ve gathered so far :-
– what houses are going for in the area (and by the way in relation to this you can actually find out what they actually sold for – not just asking prices – you can try www.houseprices.co.uk www.hometrack.co.uk – both give you the information very quickly – some other sites require registration and jumping through hoops before they tell you. When looking at these make sure you’re comparing like for like though – the property may be in the next street but it could also be twice the size of the one you’re interested in)

– Any work needed on the property – for this you’re going to need a ballpark figure for what you think needs doing, and take that into account in your offer. So you can say, for example “ We know the asking price is £245K but we reckon the damp proof course has failed, a couple of rooms need replastering and the roof needs some repairs. Because of all those things we want to offer £235K”. The danger of this approach (linking your requested discount in to specific works) is that the sellers say they can get all the work required done for £4K so if they sort those things out will you increase your offer to £241K. There’s nothing that says you have to link a lower offer in to actual works – you can just offer a lower price.

– The information you already know about the seller – if you know it’s been on the market for a while and that they are selling to move their child to another school and they’ve found the one they want to move into and it’s June and they want to be in the new house before the start of the new school year in September – then they may be desperate to sell – so they may take a lower offer. On the other hand if you know they’ve already had two offers slightly below the asking price which they’ve rejected then you know it’s probably not worth you doing the same.

– What’s included – carpets, curtains etc. If you want them to be included then you’ll need to make that clear when you make the offer – otherwise you can beat the seller down and reach agreement only to find them later coming back and saying they want another 2K for carpets and curtains
– What you can afford. Bear in mind you may well be entering into negotiations here so if the house is at the limit of what you can afford it’s probably wise from your own point of view to be offering less – you can always then increase your offer and still be within your budget. If you start at your maximum then you’ve nowhere to go. If you do this (make the lower offer first) then also psychologically the seller has moved you up a bit. There are no real rules on this – some people come up with a take it or leave it offer and some keep coming back for more (or less!).

There are a couple of points in your favour though:-
1. You’re a first time buyer. You are like gold dust in the property market. Most other people looking round will also have a property to sell and therefore they can’t actually do anything about buying until they have sold their own property. You on the other hand can move as soon as they can.
2. The Estate Agent must communicate any offer you make to the seller – even if it’s a stupid one. So whatever you offer the Estate Agent needs to let them know about it – if the estate agent says ‘I don’t think they’ll go for that’ then that’s fine but they’ve still got to put the offer to the seller to get their instructions

Don’t be afraid of making a stupidly low offer – that’s the advantage of making your offer through the estate agent – it takes the emotion out of it. Even if the seller is insulted by the offer, the estate agent will normally explain to them that even though it’s low it’s still an offer, it’s from a first time buyer, and you may be prepared to increase.

Conversely if you make a stupidly low offer don’t be surprised when they say no. You can always then increase your offer. In the example above of a property where they’ve already rejected 2 offers just below the asking price you’ll probably be wasting your time in doing the same (Never say never though – the other two offers may have been from people who weren’t yet ready to move – you’re a first time buyer).

What happens here really depends on so many things – the attitude of the seller, the marketplace, the particular type of property, the area, and so on. Until you ask the question though, you don’t know the answer – on a property we bought in the early 1990’s the previous buyers had pulled out because of a defective roof (which the seller was having to get sorted out). The sellers had already moved down south because of their job and so were keen to move. We actually didn’t know any of this but made a low offer – which was accepted straight away. If we hadn’t made the offer we wouldn’t have got the property.

At some stage in all this you should eventually get the call saying that the sellers have accepted your offer – you’ve got a deal! So we move onto the next stage. That will be covered in the final part of this blog – part 3, coming next week.

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