By: Tim Bennett
23.08.2018
23.08.2018
In the third video of his short series, Tim Bennett explains how the property buying process works and points out some of the pitfalls to avoid.
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Property buying basics – part 3
Having looked at the different types of mortgage in Part One of this short series and then some of the jargon in Part Two, we can now turn to the process itself. There are several stages to buying a property in the UK and each one comes with potential headaches.
The overall process
Getting your hands on the keys to a property can seem like a distant dream when you begin the home buying process. However, with a little bit of planning and lot of persistence it needn’t be too much of a slog. To get across the finishing line, you will need to clear three major hurdles;
Let’s take a quick look at each of these in turn.
Offer and acceptance
This stage sounds simple enough but actually things can still go wrong. As a buyer, your first challenge is to find a property that you want to buy and then make an offer on it. This offer may be;
- At the asking price (the price the seller wants)
- Below the asking price (typically in a quiet market)
- Above the asking price (in a very busy market)
There is no right answer as to what price you offer as a buyer – it requires a bit of judgement. The key thing is not to get carried away and overbid. At the same time, trying to get too much of a discount on the price of a property that you really want may not work out either. The estate agent you are buying through should be able to offer you some guidance here.
You might think that once your offer has been accepted, you are well on the way. Well, sort of. Sellers do not have to go through with a deal at this stage as there is no formal contract in place. Therefore as a buyer, you need to get cracking with stage two as fast as you can to hopefully keep the process moving along.
Searches and surveys
Buying a property is an expensive and time-consuming process in part because of the various checks that a buyer should carry out, and that they are also obliged to pay for. Local authority searches will uncover hidden nasties in the form of planning consents given to build a major road outside your house, or the fact it isn’t connected to the main sewer! Meanwhile a survey will focus on the property itself and how sound, or otherwise, it may be. There are three levels of survey, at varying levels of cost;
Although it will cost you more money, if in doubt go for a full survey. That’s because the cost of fixing a major structural fault later will usually far outweigh the cost of uncovering it early in the process and at a point where there is still scope to negotiate on the price of the property.
Mortgage application
I took a more detailed look at mortgages in Part 1 of this series. Here, I would just like to differentiate between two types of mortgage offer. First there is the “agreement in principle”. This is worth sorting out early as that way you can activate the more detailed process quickly once you know which property you want to buy. The second stage is the mortgage offer itself, without which you can’t move forward in the home buying process. Your lender will carry out detailed checks at this stage on your ability to repay the loan – the more preparation you can do in advance the better. Before you even make an offer on a property, it’s a good idea to have chosen a lender and gained their agreement in principle plus get all of the paperwork they will subsequently need ready.
Exchange and completion
This is the final hurdle and it comes in two steps that can often be done fairly close together by agreement between the buyer and the seller.
Exchange of contracts between a buyer’s solicitor and the seller’s seals the deal – at this point the purchase is legally binding and a deposit is transferred to the seller’s solicitor. This is negotiable, with 10-15% of the purchase price being fairly typical. Completion sees the balance of funds being transferred, the title deeds being updated at the Land Registry (the government department that keeps a record of who owns what) and the buyer finally getting their hands on the keys to the property. At this point, you can open the fizz!
Costs – a summary
Buyers should only embark on this complicated process with a full grasp of the potential costs. They can be summarised as follows;
The big one, that can add thousands to the overall cost, is stamp duty. This government tax is paid by buyers at a rate that is determined by the size of the deal;
Make sure you have budgeted for this in advance, plus the other various costs and fees you will encounter through the process.
Final hints and tips
One of the keys to getting the property you want is being persistent. And for that to happen, you want someone working on your behalf to keep the process moving. That someone is a solicitor and it pays to pick a good one;
Even good solicitors need chasing sometimes so don’t be afraid to pick up the phone and check progress at each stage. Also make sure you agree a fee up front and understand under what circumstances you may be asked to pay more – the fewer surprises the better in this process.
If you would like to discuss any of the points raise here, please contact an Investment Manager or Wealth Planner.
If you would like to discuss any of the points raise here, please contact an Investment Manager or Wealth Planner.
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