Home buyers guide

Buying property is the largest investment most people will undertake in their entire lives. Being well-prepared and informed about the home-buying process can save you a considerable amount of money, time and stress.

This guide is directed primarily at first-time buyers, and offers a step-by-step overview of the whole process of purchasing property.

What can I afford to pay for my property?

There are a number of factors to consider when buying a property, but the first and most important is to have a good idea of what you can actually afford to pay.

As well as the cost of the property itself, you should calculate what other fees will be payable, at what stage they will become due and how you are going to fund them.

Cost Approximate Value
Deposit You may not be able to borrow enough money to cover the entire price of the property. Mortgage lenders often require you to put down at least 10% of the price. Note that if you put down less than 15% of the property price, you might have to pay additional “risk interest”.
Solicitor You will need to employ a solicitor for all the legal aspects of buying a property. Some charge a flat rate, others a percentage of the property price (usually 1%). We recommend you get several quotes before choosing one.
Stamp duty This is a tax the government charges when a property changes hands. It is based upon the property’s purchase price, the bands are as follows:
Up to £125,000 – Nil
£125,000- £250,000 – 1%
£250,000 – £500,000 – 3%
above £500,000 – 4%
Surveyor/ Valuation Fee Basic Survey (required by lender): £100-£300
Housebuyer’s Report: £250-£500
Full Structural Survey: up to £1,000 + VAT
HM Land Registry Fee Registration confirms you as the legal owner of the property and registers you at that address. The fee charged depends upon the price of the property.
Up to £40,000 – £40
£40,000 – £70,000 – £60
£70,000 – £100,000 – £100
£100,000 – £200,000 – £200
£200,000 – £500,000 – £300
£500,000 – £1,000,000 – £500
Over £1,000,000 – £800
Local Authority Search Fee Your solicitor will carry out a local authority search in order to find out whether there are any development plans that could affect the property’s value. Fee will amount to at least £60

There will also be personal costs of viewing properties (travel), removal costs to transport your possessions, and any refurbishment or renovation. These are not included in our calculations. Lastly, there may be mortgage arrangement fees charged by your lender which you should include in your comparison of possible mortgages.

How do I pay for my property?

Very few people are lucky enough to be in a financial position that allows them to buy a house outright. The majority put down some deposit (though this is not always necessary) then borrow the remaining money from their mortgage lender.

At this stage, you have to decide on a mortgage lender to get an “Approval in Principle”. The lender will tell you how much they are willing to give you, which helps you estimate how much you can pay for your property. Furthermore, the Approval serves as a guarantee to your Estate Agents and potential vendor.

You do not have to decide on your mortgage type yet. However, you might want to begin to consider what would be appropriate for you and read about the Mortgage Code which sets out minimum standards in order to protect the borrower. The code and additional information can be accessed on the website of the Council of Mortgage Lenders.

In order to calculate how much they are willing to lend you, the lender will require:

  • evidence of your income and employment status;
  • evidence of financial commitments, such as previous mortgage and/or bank statements; and
  • information from credit reference agencies, your employers and your existing landlord.

To find out more about mortgages, you can refer to our guide to Mortgages.

Where can I find property for sale?

There are many different ways to find your ideal property:

Estate Agents:

A seller may employ an Estate Agent to advertise a property and handle negotiations. Agents usually have a wide range of properties available and can offer detailed information. To keep informed about as many properties on the market as possible, contact as many local Estate Agents as possible.

Things to consider:

An Estate Agent is employed by the seller and will try to balance their client’s desire for a high price with their own need for rapid turnover of property. You may wish to seek a second opinion on property from another agent, or you can even employ specialist agents who search on behalf of buyers.

Private Sales:

Some house sellers prefer to handle their sale privately. You will usually recognise a private sale by the handmade sign outside a property or by an advert in your local paper. Since the seller does not have to pay Estate Agent fees, you may be able to get a pretty good deal on a house.

Things to consider:

Since you are negotiating directly with the owner rather than through an intermediary, you should be aware that you may be discussing someone’s home and behave accordingly.

Internet:

Online property listings are very convenient to get a quick impression of what is available on the market, and for buyers who want to move to a distant area. It is usually possible to look for properties according to features, price range and location. Internet listings can be accessed via Estate Agents’ home pages or independent property web sites.

Things to consider:

A photo posted on the internet might not give you an adequate impression of the property, so it is better to remain sceptical until you have actually seen the house.

Auction:

Traditionally the reserve of property professionals, buying at auction has become more popular among private actors recently. This is due to the perceived possibility of obtaining a bargain and the proliferation of television shows discussing the subject.

Making an Offer

Since most property sales are conducted through estate agents, it is most common for offers on property to be made to the estate agent rather than the owner. You are under no obligation to offer the price which is being asked by the vendor. You may be able to seek advice from the agent on whether a vendor will be open to an offer below the asking price, as, for example, they may have a sense that a vendor is seeking a rapid sale.

However, before making an offer it is important to establish whether the asking price is an accurate reflection of the market value of the property. To find this out the buyer must conduct their own valuation of the property against similar types of property, as well as establishing what else their money could buy in the area. Again, property websites are useful for this http://www.mouseprice.com/

If a vendor does not accept your first offer, there is no reason why you cannot increase it until they do. However, you should always bear in mind what you can afford and what other properties you may be able to buy for similar outlay.

Negotiating

If the vendor decides that your offer is not to their satisfaction, or if several people have made an offer, negotiations will need to take place. There are several fundamental factors influencing the course and outcome of negotiations. You can assess your bargaining position by asking yourself the following questions:

How many other potential buyers are bidding for the property?

The more buyers, the stronger the seller’s negotiating position, the more likely that he will push for a higher price (and actually get it). In a strong market the property price might even exceed the initial asking price! Always keep in mind how much you can afford and do not exceed your budget.

How long has the property been on the market? If the seller has been trying to sell the house for a while, or if he even had to lower his asking price, you are in a much stronger position.

Is the seller under time pressure? If for whatever reason he wants to sell the property as quickly as possible, you are likely to get it for a much lower price.

If your offer is rejected you have the option of making a higher offer, or alternatively looking elsewhere for a property within your price range.

If your offer is accepted you will receive a letter of confirmation from the Estate Agent. This is the sign for you to arrange the survey and complete your mortgage application. Note that this is not legally binding until contracts are exchanged – neither for you nor for the seller.

Beware Gazumping: This term describes the sellers’ practice of initially accepting an offer, only to abandon it later on in favour of a larger one. Especially when the property market is strong and house prices are rising fast, the seller might be tempted to reject your offer as soon as a another buyer with a higher one comes along. Unfortunately, in England and Wales there is no legal protection against being gazumped. So be aware that you are always running the risk of losing your expenses on legal counsel and surveys.

Conveyancing

After your offer has been accepted, the conveyancing process starts. This includes all the legal and administrative issues that have to be addressed when a property is transferred from one owner to another. The common practice is to hire a solicitor or a licensed conveyancer to deal with the legal aspects. Hiring a professional solicitor has become cheaper and professional services can be good value for money. Most sellers and mortgage lenders, require you to hire a solicitor or legal conveyancer (someone with legal expertise). Nevertheless, some people prefer to do it themselves, but if you consider this option keep in mind that the process can be very technical and that there are significant risks if mistakes are made.

Below is an overview of the legal and administrative matters that arise in the process of buying a property. If you decide to hire a solicitor or conveyancer, they will take care of all of them; otherwise it will be your responsibility.

Preparation:

  • Checking the title deeds of the property to ensure it really belongs to the seller;
  • Establishing the property’s legal boundaries;
  • Putting together a list of fixtures, fittings and contents to establish what is to be included in the sale;
  • Preparing an enquiry form for the vendor to find out about any material or structural defects they are aware of;
  • Surveying local authority plans for details on upcoming developments that could influence your property’s value;
  • Negotiating with the seller any repairs or changes to the offer;
  • Editing the draft contract for sale prepared by the vendor’s solicitor.

Exchange of contracts:

  • Arranging the date for the completion and the exchange of contracts;
  • Handing over the deposit;
  • Signing the mortgage deed;
  • Performing final searches.

Completion:

  • Handing over the keys and title deeds;
  • Paying stamp fees;
  • Recording the transfer at HM Land Registry for certification.

Note on finding a Solicitor: You can employ either a solicitor or a licensed conveyancer. Generally, the best way to find a good solicitor is by choosing on recommendation from friends or family. Alternatively, your mortgage lender will be able to recommend experienced solicitors. Make sure your solicitor / conveyancer is registered with and recognized by the Law Society or the Council for Licensed Conveyancers.

Survey and Valuation

Each time you visit the property, you should be assessing its general condition, looking for damages such as damp patches or cracks, and comparing the value of other properties in the neighbourhood and the sales prices of similar houses. However, when you apply for a mortgage, your lender will require you to perform a professional, basic survey and valuation in order to assess the property’s condition and find out whether the house is actually worth the offer you have made.

Since a basic survey does not go into much more detail than a superficial inspection, many buyers decide to have a more in-depth inspection and valuation done. There are two different options, the Homebuyer’s Report and a Full Structural Survey. Your choice will largely be dictated by the type and age of the property you are about to buy, but you can discuss your options with a local surveyor who will be able to provide you with guidance.

Basic Survey: Cost: £100-£300

Required and performed by your lender (but you might still be charged for it). This survey is intended to assure the lender that the property is actually worth its price. The surveyor simply compares the prices of similar properties sold recently (see property valuation techniques article), takes into account any major damage, and gives you an approximation of the property’s worth.

Homebuyer’s Report: Cost: £250 and £500, depending on the price of the house.

This survey is for your own benefit, rather than your lenders. The Homebuyer’s Report provides a good overview of the condition of the property. It addresses those parts of the building which are easily visible or accessible. The surveyor will highlight potential problems such as damp, and address the basic construction. Furthermore, the report includes a basic valuation of the property. If the surveyor suspects there might be more serious problems, they will recommend a structural survey.

Full Structural Survey / Building Survey: Cost: around £1,000.

This is the most extensive and costly investigation. A full survey is recommended for all properties older than 70 years and for buildings of unusual construction. You will also have to perform a Structural Survey if you plan to renovate the property. This survey addresses everything the Homebuyer’s Report covers, as well as the structural features of the building and invisible aspects like the wiring and plumbing. This thorough examination will inform you of any defects with the property.

What if any problems are uncovered?

If the surveyor’s report uncovers any faults in the property which were not previously mentioned, you can try to renegotiate the price on the grounds of this new evidence. However, if the faults are serious, you are free to withdraw your offer altogether (remember, it is not binding yet). That means, of course, that you would have to begin the process again.

Completing the Sale

After having completed the survey and satisfied your lender, you will receive a formal mortgage offer with a detailed outline of all the conditions. Your lender will probably also require you to take out a building insurance. Your solicitor should be able to advise you on the latter.

Exchanging Contracts

By now, your solicitor will have prepared the contracts for you and the seller. By signing the contract, you are legally obliged to buy the property, so make sure everything is in order.

Note that if exchange and completion do not take place on the same day, you may have to put down a deposit of 5-10% of the agreed sales price.

Last-minute checklist:

  • The survey is complete and the results are accepted by all concerned;
  • You have the agreed deposit on hand;
  • You have read and understood the written, formal mortgage offer;
  • A firm completion date for the sale has been agreed upon and noted in the contract;
  • Your solicitor has performed all necessary local searches;
  • There are no outstanding issues remaining between you and the seller

Completion

The completion date, which has been set in the contract, is the date the house becomes officially yours. It is also the date by which the seller should have the cash cleared in their account. Your solicitor will obtain the mortgage funds directly from your lender and any outstanding funds from you, then forward the money to the seller.