Purchasing a house is expensive – but also one of the safest possible investments that can be made. Many buyers, whether first-time or repeat, will have specific criteria that must be met for them to consider purchasing a specific property. Younger families, for example, will want safer neighbourhoods, good schools and work opportunities close to their ideal home, while retired couples will seek quieter neighbourhoods with easy access to shops and leisure facilities to enjoy their retirement. Business-minded individuals may instead seek areas with high potential for growth and development with relatively low-cost properties and high foot traffic for their businesses to flourish, even from home.
Research the property
Purchasing residential properties requires an extensive amount of research before even visiting the property in question. You will need to determine your price range, the current state of the neighbourhood, the crime rates in the area that a potential residence is located in and whether the property itself meets any of your criteria.
Remember that whilst purchasing your ideal house is the objective, it is also a large investment on your part and those poorer areas or underdeveloped/rundown properties will adversely impact its price should you wish to sell the property and move in the future. It will also cost more to renovate the properties from any faults that you may find, such as damp or structural damage, and to ensure that it does not happen in future.
You will also have to visit the property sometime in the future if, at first glance, the residence seems to be everything you have wanted. You will need to point out anything that seems odd and to question the owner about any issues with neighbours, such as boundary disputes or if anything looks out of place that you have not been aware of from images alone, such as deterioration from when the photos have been taken or any changes that have been made in the area. Once you have identified all possible issues (if any) then bring these up to the seller and see what they have to say.
If you are being sold the property by an estate agent, it is important to underplay how much you are willing to spend – this will give you greater room for negotiation when you are eventually making an offer to the seller.
The ongoing costs to look out for are:
- Council tax – As seen in the renting section, you will also be paying for the council tax. The amount you will be paying will be based on the value of your property and the number of people living in it. You will still have the option to choose to pay it every month or yearly, according to your preference.
- Leaseholder fees – If you choose to buy a leasehold property, you will also be responsible for paying the lease of the land. The average leasehold cost is between £150 and £450 depending on the type of property you buy.
- Insurance costs – It would be advisable that you also take out a building and contents insurance to protect your property and possessions against damage in case natural disasters or an accident occurs. By paying towards insurance costs, should any accident happen, you will be able to recover the full cost of rebuilding your house from scratch and any possession that may have been damaged. The average insurance costs can go from £200 to £500 depending on the type of insurance features and you can choose to pay it every month or annually.
- Utility costs – Like in renting you will be responsible for paying utility costs as well. These costs include water, gas and electricity and you can choose to pay it monthly or quarterly.
Visit the lender and agree to a mortgage in principle
A lender here would typically be a bank that can put up the money to purchase the property based on your income, savings and credit history. They will offer you the amount they can loan out on a means-based test. Note that this is not a mortgage outright, but rather an indication of what the lender is willing to give you before you finalise the purchase of the property. This is known as a Mortgage in Principle but may be known alternatively as ‘Decision in Principle (DIP), ’Agreement in Principle (AIP) or as a mortgage promise.
DIPs are important measuring tools to determine whether you could afford the property and pay off the home loan. Buyers with poorer credit histories can use this as an indicator as to whether lenders will be willing to provide them with a loan despite their current credit rating. DIPs are also important when making offers to sellers, as they are indicative of whether the buyer has sufficient funds to purchase the property and can provide a competitive edge on other potential buyers of the residential property.
Note that DIPs are not indicative of the interest rate of the loan at purchase – if a significant amount of time passes between getting the DIP and finalising the purchase of the property in question, interest rates may have changed and you could find a better deal elsewhere. It is imperative that when you get a DIP that an offer to the seller is made as soon as possible and that all checks have been made for the purchase of the property before any interest rates increase.
Make an offer to the seller
Offers made to the seller should be on your terms – they should be sizably below your absolute budget and the asking price to allow some room for future negotiation. You should also consider other factors regarding the property, such as whether there are other buyers in play, how properties are selling in the neighbourhood or whether the seller has multiple agents representing them – all of these can help drive down the price of a property below asking price.
Ensure you have the funds
After you have made your offer, you should go back to your lender and confirm that you are going ahead with the purchase of the house, and ensure that the funds are still being provided for the amount and rate that your lender has given (the DIP or AIP in point 2).
Determine whether the property is fit for sale
The buyer must then arrange for the property to be surveyed and to see if there are any problems with the property before planning. At this point, legal professionals will need to be contacted, who will arrange the necessary searches to ensure the land is fit to buy. Usually, this will be through a conveyancing or property solicitor.
Make a deposit
Buyers must then deposit the house, usually by visiting the lender. This will then be transferred to your solicitor.
Exchange the contracts
After making the deposit, the buyer will instruct his/her solicitor to exchange the contracts for the other party’s solicitor to see. If everything is in order, then the deposit will be transferred and the land registry will be informed. At this stage, buyers will be legally committed to the purchase of the property. Buyers will need to look into buying property insurance for their new properties at this stage also.
Completions
Your solicitor will then take the remaining funds from your lender (minus your deposit fee) and pass it on to the seller’s solicitor. The deed of the property is also transferred from the seller to the buyer. After this has been done, the seller’s estate agent will then give you the keys needed to access the property.
Pay for the work and stamp duty
Finally, you will pay the solicitor for his time. If the property you have purchased is also above a certain threshold, you will need to pay Stamp Duty land tax. Your solicitor will transfer this amount on your behalf after the invoice has been settled.
What is a property chain?
A property chain is a linked set of house purchases that depends on the sale of the previous house in the chain. Chains usually start with a first-time buyer and end with somebody who is selling their property but not buying another. When you are in a chain, buying or selling a house depends on the purchases on either side (who is buying your property and who’s property you are buying).
Risks of a property chain
The chain is at risk if one party is no longer able or willing to complete their planned end of a deal, such as backing out of a purchase. Resultantly, the seller of that house cannot afford to purchase their planned property and drops out of the one they were planning to buy. Effectively, the chain collapses. Because legal work would have been ongoing during representing clients broken chains always results in liability for legal costs, making them frustrating and expensive.
Common problems with property chains:
Gazundering:
A buyer reduces their offer at the last minute, trying to force the seller to accept a lower figure or lose the sale.
Gazumping
This is when a seller wants a higher offer from someone else at the last minute, forcing the buyer, who has already got their sale lined up to pay more money or have to lose the sale of their property.
How would Lestons help?
We would keep an eye on the people in the chain to try and sort it out so that it does not collapse. Furthermore, we would move to ensure all parties effectively move on the same day. Usually, every person in the chain will have their solicitors so it can be a juggling act between solicitors, so it is great to have a helping hand when undergoing this complicated process.
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