Buying a House in The UK – the not so easy way.

December 4, 2009 by Avalon
Filed under: Life in New Zealand, Property Investing

(This was some information that I put together for Kiwi Property Investor friends a while back. I thought it was worth posting, because my view of house buying in the UK actually changed quite dramatically when I saw how it works over here. Most people think that it’s really easy to buy property in New Zealand, and comparitively – it generally is. But that doesn’t actually always mean its better. So just for interest – here’s a view from the other side).

Just in case anyone is thinking of investing in the UK any time soon, here is a run-down of the process, and a guide to what to expect. (And whether its easier or harder than in New Zealand – in my “humble” opinion.)

Step 1 – Go shopping. (Pretty much the same)

You won’t often find a magazine like the Property Press or Real Estate – instead, the local papers are the best way to find properties for sale in an area. Either that or use websites. Fish4homes.co.uk is a good all round the UK site. Also, if you go walking round Estate agents – you can pick up all the info you need on a property. You can call up agents and ask them to post you the details of all the properties they have in you price range (but they often send you stuff more expensive than that – so its best to go in or specify the ones you want). Note – UK property details are VERY different to NZ ones. See the attached version. They go into great detail about what the layout is and what is included in the sale. They also contain a lot more photos.

Step 2 Find the asking price. (A lot Easier)

Unless you are buying a mansion/castle or a property is being auctioned – the price will be shown on the advert or the property details. The asking price is just an asking price – you can offer whatever you like – and most people expect to get offered below the asking price, unless the market is booming (which it aint right now!) 5-10% below is a fairly common rule of thumb.

Step 3 Set up a viewing. (Harder)

This is organised through the agent – but usually the vendor will show you round. (Most agents don’t want the fuss of having to do any work – but then they only get paid 1% commission). You turn up and the owner shows you round (if they have some nouse – the house will be smelling of muffins and coffee). Open homes are NOT common. You have to make an appointment to see each home individually.

Step 4 -Make an offer. OMG – so much Easier

You ring the agent and tell them a number. After they have spluttered their tea everywhere, they will then ring the vendor and come back to you with a reply. (Usually “no way in hell”). You may get another number back. You go away and umm and ahh a bit and if you can be bothered ring the agent back with your next offer. This goes on till you work out a price. Occasionally – you can actually go have a second viewing with the vendor, and sit down and do this bit over a cup of tea. The first time I did this – I got a £60k house for £53K when I was going to pay £56K for it (That was a LONG time ago).

Step 5 – Write up the offer.OMG – still so much easier

Write a letter to the agent saying how much you have agreed to pay for the property. You should add that this is “subject to survey and contract”. Mail it to the agent, with a copy to your solicitor.

Step 6 – wait while it all goes to custard.Unbelievably harder.

At this point – nothing is contractually binding. You as the buyer should get a survey done (a builders report – see below), and get your finance organised. Your solicitor does the rest: title searches, drawing up the contract, asking loads of awkward questions of the vendors – it’s a complete rigmarole and takes forever. Although you have had an offer accepted, the house can still be marketed, and either party can pull out for any reason. You have simply signed an offer; you have not got a contract on the property.

In recent years it has been the case that some people have paid a small non-refundable deposit at the time of making an offer in order to get a house taken off the market and ensure that gazzumping does not occur

(Gazzumping is the Vendor accepting a higher offer when there is already an offer in place).

The solicitors will work out any Right Of Way issues, and if they are any good will come up with a lot of niggles that you need to check. (we like to check the plumbing and drainage – just in case , and we like to know when the septic tank was last emptied).This whole section relies of yours and the vendor’s solicitors actually talking and the agent acting as a go-between. A lot of stress is involved.

Step 7 – Exchange Contracts. (Going Unconditional) Harder

Assuming you got through that bit – your solicitor will have drawn up the actual contract for sale. When (if) you get to the exchange of contracts bit – you go into the solicitors, and sign the contract. They then send it through to the vendor’s solicitor and the vendors sign. NOW you have a signed an active contract for purchase, and both parties are obliged to sell and buy the property.

At this point a deposit is paid (to YOUR solicitors trust account) and held until the sale completes.

Step 8 – Completion.(Settlement) About the same

This would generally occur about 4-6 weeks after exchange of contracts – but can officially occur on the same day (for those people who don’t have a deposit for example). This is the point at which the funds are transferred from the bank, to the solicitor, and from there to the vendors solicitor. When the Vendors solicitor sights the money – the keys are released and the house is yours.

Step 8a – paying the agent. Easier -Not your problem

There’s none of this fuss over the deposit being used to pay the agent. The line of payment is clearly defined and the VENDOR pays. When the vendors solicitor gets the funds form the buyer, they

draw up a bill,

take their cut,

pay the agent ,

pay the vendor what is left over.

NOTES;

Surveys.

This is like getting a builders report – and should be done on any house you want to buy. There are different levels of report from a basic homebuyers survey (which is generally what the banks do to satisfy themselves that its not a pile of rubble) all the way up to a full structural survey. It can cost over £500 for a full structural survey but if the house you are buying is an old one (well over 100 years) its worth it. You need to be aware of any subsidence issues particularly. You also probably want to get damp reports done, and woodworm reports done. These are a lot cheaper, but can be really handy.

Damp Proofing

A lot of old houses haven’t been damp proofed and its something you really need in the UK. (The damp comes up from the floor rather being a condensation issue like in NZ – its fixed by injecting a chemical barrier into the wall just up from the ground.) We could benefit from a similar product here in NZ.

Wood treatments

Similarly easy – they guys go in before you move in and spray the wood to get rid of woodwaorm. Oddly enough – something I have not come across in New Zealand – don’t we get woodwork here? All these things can be used to re-negotiate the price. You have until exchange of contracts to do whatever you want – and you have the option of dropping the price if you want to.

Property Details

I’ve included below the details for the house we sold when we came to New Zealand. It went on the market in May 04, and we exchanged contracts on it on the 17th December and completed on the 21st December. (We left the UK on the 27th December – so you can imagine the stress we were under) We sold it for £215,000. Which is perhaps why I don’t have much time for people in New Zealand who whinge at being offered $10,000 less than the asking price .

Ive also shown a set of New Zealand house details for UK readers to compare. Thats about the standard you get. It’s not impressive.