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  • The Complete Guide to Buying a House

    29th August 2018

    The Complete Guide to Buying a House

     

    Buying a house, particularly as a first-time buyer, can feel like you are just about muddling your way through the process. It needn’t be that way – here we discuss the full timeline of buying a property, things to consider and who is on your side at each step of the process. It is easiest to think of the buying process as being 3 key stages – finding the right house to buy, checking the house is a good one to buy and finally buying the house and making it legally yours. Each of these stages can be broken down into 3 parts which we will go into detail below.

     

    The 3 Key Stages

    Overall homebuying process infographic. Find a house, check the house, buy the house

    Buying a home can be broken down into 3 key stages – finding, checking and finally buying the house. The key is knowing what to do and cover at each stage so you complete the process feeling happy.

     

    The First Key Stage – Finding the Right House

    Find a property infographic. Budgeting for what you can afford, searching for a property and making an offer on a property

    The first key stage of finding the right house can be broken down into 3 sub-stages. The first and most important thing to do before you get carried away and start looking for your dream house is to work out your budget for buying a house. It isn’t as simple as this is the size of my deposit so I can get this size mortgage on a 5 or 10% deposit! If you gauge it like this so you can jump into property viewings you will end up disappointed when you fall in love with a house.

     

    a. Budgeting for a property purchase

    Find a property - Budget infographic. Budget is made up of savings, mortgage, sale funds minus sale and purchase costs

     

    You think you have a decent level of savings built up and you want to invest in property – usually to live in yourself but it could be as a buy-to-let. Either way your purchase is an investment just like buying stocks and shares. You want to buy good stocks that go up in value not bad stocks that will crash. In the same way you want to invest in a good home not one that ends up costing you money.

    To establish your budget you must consider what amount of savings do I have available that I am willing to spend (you’ll want to keep a buffer of savings for a rainy day, maintenance issues and for any furnishings or decorations you want to buy after moving in) and how much money will I have left from selling your current property (if you aren’t a first time buyer).

    You’ll then want to speak to a mortgage broker to find out what mortgage deal you can get – how big a loan can you take out, what are the repayment terms and so on. This will provide you a mortgage in principal that will show you are a serious buyer that is ready to proceed as quickly as possible when you are competing against another buyer on making an offer. It is worth noting that the mortgage in principal has been argued to have no value and not be worth the paper it is written on. After all, it isn’t legally binding and is subject to credit checks and the mortgage valuation on the property you find. But it does show good intent.

    But, hold your horses. You know how much money you have available but you need to work out all your costs that must be paid from this. You need to consider how much stamp duty you will need to pay, how much conveyancing and surveying will cost (we will discuss this later under checking a property), how much it will cost to move to your new house and insure it.

    The amount left after costs is your maximum budget. Now you are in a position to have some fun and go on the hunt for properties you know you will be able to put an offer on!

     

    b. Property Viewings to find the right house

    Property search infographic - view houses on sale, arrange viewings from a shortlist then view favourite properties a second time

     

    You have your budget, your start looking for the right house. Things start to get real. But keep your feet on the ground. Rushing this part because things are getting exciting can result in a massive headache later. Interestingly, despite the fact you will spend many years in a property you buy, the average viewing only lasts around 8-10 minutes. We have created a viewing checklist to help you cover all the bases on each viewing. From checking there is enough storage to making sure your mobile phone has reception!

     

    Ways to search:

    • Property portals allow you to quickly see what is listed on the market. Well known examples are Rightmove and Zoopla.
    • Estate agents – whilst listed on property portals they sometimes have properties that they are selling ‘off market’ at the sellers request.
    • Auctions can be a good way to by a property and if you secure the winning bid you will walk away as the owner. Learn more about buying at auction.
    • Property Sourcers: a less common approach but property sourcers scout the market for you looking for houses that meet your budget and requirements and can sometimes find deals that save you more than the sourcer cost you.
    • Newspapers – the local and national newspapers also have adverts of properties for sale. You might find something here that is listed privately rather than through an estate agent.

     

    Set Criteria and wish-list factors

    When searching for properties up to your maximum budget you need to be able to narrow the results down – you need to know what you want from a property. This includes factors such as:

    • Size (1 bed, 2 bed, etc.)
    • Location
    • Neighbourhood
    • Investment potential
    • Garden
    • Local amenities (shops, schools)
    • Type of house (detached, semi, terraced etc)

     

    Viewings:

    Once you have found a number of houses you like the look of via portals and estate agents, it is time to schedule in your first viewings. The first viewing can be kept short and simple – are your core criteria met and do you like the feel you get when you are there? You have to live there after all! There is no point going into all the small details like broadband reception if you don’t like the idea of living there.

     

    Second Viewings:

    If you have decided you like a property then see it again – don’t get rushed into making an offer because there is apparently a lot of interest. It is unlikely a seller is going to rush accepting an offer knowing that there is another party that want to view again and possibly want to add another, possibly better, offer to the table. Take our viewing checklist to make sure you check all the major points that will affect your enjoyment of the property and ongoing budget once you move in. You don’t want to move in to realise the water pressure is terrible or that there is nowhere to park at night.

     

    c. Making an offer on a house

    Agreeing an offer infographic. Both buyer and seller have a price in mind and offer is accepted when both parties agree on a price

     

    This stage can get a little tense! You have found somewhere you like and need to come to an agreed price so you can get the property off the market. There are a few things you can do to get a better deal here. The first thing to remember at all times – the estate agent is working for the seller. The seller has instructed to sell the property for them and to get them the best possible price. This means that the seller has someone trained in negotiating them the best deal. You may also be very good at negotiating but if not there are a few things you can do to put yourself in a better position.

    1. Don’t give away that it is your ideal property – show interest but don’t appear overly keen or the seller will know that they can push you harder to pay a higher amount
    2. Use a buyers agent – there are agencies that work solely for the buyer to negotiate them a good deal. Usually you pay a percentage of the saving achieved so you’ll be better off whatever the cost.
    3. Do your research into recent sold prices for similar properties in the area, current property listing prices, market conditions and your own notes from your viewing checklists so you to put forward a reasonable and justifiable offer.
    4. Don’t jump straight at the offer price – there is usually always room for negotiation unless there really is a lot of interest in the property. Equally don’t offer too low below the asking price. This can just annoy the seller and make them more resistant to meeting anywhere below the asking price costing you more in the end.
    5. Are you a cash buyer or in need of a mortgage offer? As a cash buyer you are a lower risk of issues with funds arising meaning the seller may accept a lower offer to ensure the sale completes
    6. Is the seller in a rush to move?
    7. Has the property been on the market for long?
    8. Remember there may be room for negotiating later – if issues are flagged up in your mortgage valuation or survey you may be able to negotiate later in the process.

     

    Once you have put an offer forward, received feedback from the seller, submitted a revised offer and so on, you will hopefully reach a position where you both agree on a price. The property can be considered ‘sold – subject to contract’. You aren’t home and dry yet though. Remember, an accepted offer is not legally binding – you have time to carry out surveys and legal checks first and get an official mortgage offer. Only at exchange of contracts does the sale become legally binding.

    It is worth bearing in mind that three in ten (30%) sales collapse before exchange of contracts (Which). This is for two main reasons. Firstly, because a survey shows up issues that you are either not willing to take on or cannot agree on a new price that allows for funding their repair. But it can also be because a buyer has reluctantly been pushed to the top of their budget or a seller has been pushed to their lowest price later deciding that they are not comfortable with the price. Setting a fair offer reduces the chance of either party wanting to Gazunder, Gazump, gazang, or walk away and therefore saves you time having to search for another property and money on more surveys and conveyancing.

    Gazundering: the buyer is tempted to change their offer just before exchange of contracts, threatening to withdraw if the seller doesn’t accept a lower offer

    Gazumping: the seller is tempted to accept a better offer just before exchange of contracts despite the investments you’ve made into conveyancing and survey

    Gazanging: the seller withdraws in the belief that the market will improve in a few months and they will get a better price

     

    The Second Key Stage – Checking the House

    Checking the property infographic. Getting a mortgage offer to ensure you can afford to buy the property. Checking the condition of the property by getting a RICS survey and conveyancing to check the legal factors surrounding the property

    This stage is where things start to come together and you stop to check that you are making a good investment and not jumping in too deep! You check you can afford to buy the property, that it is in a condition that you are happy with and that there are no legal factors that could affect your enjoyment and use of the property.

     

    a. The Process of getting a Mortgage Offer

    Mortgage offer infographic. Mortgage valuation takes place, if the valuation matches the offer price a mortgage offer is made. If the valuation is below the offer price then you must renegotiate the offer price, find an alternative mortgage or walk away

     

    This stage after having your offer accepted is all about confirming you can actually afford to go ahead with the purchase. Your mortgage in principle from earlier provided an indication that you shouldn’t have problems but your lender needs to be confident that they can recover their money from the sale of the property should you default on your loan.

    Your mortgage lender will send a surveyor from their panel to conduct a mortgage valuation. This is where the surveyor does a short check of the property to make sure there are no obvious issues affecting the property’s value. The value will be based on sale prices of similar properties in the area and the current market conditions. The mortgage valuation is produced for your lender so that they know if the mortgage they are lending is recoverable in the event you defaulted and they had to repossess the house. It is not a survey – it is not produced for you to ensure there are no costs that will come up or issues that you will need to rectify, just that the lender can recover their loan.

    If the mortgage valuation matches your agreed offer then you will be provided a mortgage offer and you can move on to the next state – getting an independent RICS survey.

     

    If your mortgage valuation is lower than your offer then you have to make a decision:

    1. Renegotiate with the seller – find out if they will sell the house for the price that your mortgage lender has stated it is worth

    2. Justify why the valuation is wrong – provide real examples that show why the mortgage valuation is incorrect. In reality a valuation rarely gets changed but it is worth trying if you feel there is strong evidence to back up why it is incorrect.

    3. Find an alternative mortgage on a higher loan to value – this will allow you to borrow more money to cover the difference between what the property is worth and what your offer is. This will increase the cost of your mortgage.

    4. Search for a different property – if you are unable to resolve the problem using the steps above you will need to need to go back to the property search.

     

    During periods of uncertainty where property prices are stagnant or declining, mortgage valuations can often come in lower than your agreed offer.

     

    b. Getting a RICS Homebuyer Report or Building Survey

    Search for a surveyor at surveyors near me. The surveyor inspects the property and sends the survey report. You can then decide on your next steps - proceed with confidence, walk away content or renegotiate with justification

     

    This stage and the conveyancing stages are professionals focused on you! These stages are here to ensure you are in the best possible position when purchasing and not left in a compromising position with issues to resolve.

    A RICS Building Survey or Homebuyer Report ensures you know exactly what you are buying and ensures you avoid buying something you later resent! There are plenty of properties in good condition in the UK property stock but there are also a large number of properties where homeowners have not kept up to date with maintenance and repairs – it just hasn’t been the top priority. Some of these issues are more visibly obvious – a crack in wall or missing tiles. Others are more subtle and hidden and it is professional knowledge and experience that can piece together small factors to establish whether something sinister or simple is happening to the fabric and structure of the property.

    Some homebuyers rely on the mortgage valuation in the belief that it is itself a survey and that the mortgage lender would only provide a mortgage offer if there was nothing wrong. A mortgage valuation is conducted for the lender to ensure there are no obvious visible structural issues affecting the property’s value and that they could recover their loan if they needed to sell the property. The property value really just needs to cover their loan value with a buffer to reduce the risk and cover sales costs.

    An independent RICS Homebuyer Report or Building Survey ensures you are fully informed about all defects and maintenance required so you know that the value of the property you are buying covers both your deposit and loan. It also ensures you aren’t left in negative equity by having to pay out for expensive maintenance repairs that haven’t been accounted for in the property value. At its core, a building survey is designed to keep you in a strong financial position – you know what you are buying and what money will need to be spent so you can plan and budget both in the sale price and your ongoing maintenance budget.

     

    When getting a survey you want to get the:

    • Right Survey – use our interactive quiz to see which survey is best for your property
    • Right Surveyor – provides the information you want in your report, has the level of expertise you are happy with plus many other factors. Read each surveyors biography fully to help you choose.
    • Right Price – the cheapest is often not the best value. A surveyor charging more is likely to spend more time inspecting the property as well as providing a more detailed, analytical and helpful report. A bit more spent now could save a lot more down the line. It is worth bearing in mind that the average cost to people buying a house that don’t get a survey is £5,750 in repairs. Get quotes from trusted independent RICS Chartered surveyors.

     

    Once you have your report you have 3 main options:

    1. Buy with confidence – you can proceed confidently knowing the true condition of the property and that you are happy to take it on.
    2. Renegotiate with justification – if big issues do come up that will cost money to fix, you can speak to the seller and justify why the price needs to be dropped to compensate for the work needed or ask that they have the repairs done before completion.
    3. Walk away content – of course you don’t want to walk away from a property you wanted but you’ll be satisfied it is the right decision for you and that you have avoided taking on levels of issues that you weren’t comfortable with.

     

    c. Conveyancing Solicitors – doing your legal checks!

    Check the property - conveyancing infographic. Conveyancer checks contracts and makes local searches

     

    The final part of checking over the factors around the property and reaching a point where the sale is legally binding. The two key points that happen in this stage – a number of searches take place from local authority checks to flood risks as well as drawing up contracts with the sellers conveyancers setting out what is included in the sale and when everything will take place.

    The conveyancing process is the legal work that is required to transfer ownership of the property from the seller to the buyer. Whilst it starts in the Check the Property stage of the process, it moves through the remaining stages even continuing after you have moved in to ensure any loose ends are tied up.

    Before either parties conveyancer can start any work they must have been correctly instructed – this can be one of the biggest causes of delay. A conveyancer will send out a client care letter stating the service they will provide and the price. They cannot start work until they have received it back signed giving them the clear instruction to go ahead. It is becoming more common to accept scanned copies or electronic signatures although this isn’t standard practice yet.

    Once this has happened the first thing that is required is for the sellers’ conveyancer to send a standard draft contract to the buyers conveyancer when the title documents are available. This states the parties involved and the standard terms of the sale. Changes to the contract (such as fixtures and fittings included, completion dates etc) come later on. The buyers’ conveyancer cannot start work until they have been correctly instructed and received the draft contract.

     

    Your conveyancer (on the buyer’s side) will then conduct a range of searches:

    • Local Authority Searches – these are the documents that take the longest to come back (often 1-6 weeks but can be longer and this varies by local authority) and are usually the last documents to be received. These searches provide the most information as they look into many factors including any planning issues.
    • Water and Drainage Searches – made with the company providing water and drainage services to the area. The search will confirm how the property is charged for water and waste services (metered v unmetered), if there is a mains water supply and public sewer and if there are sewers or mains supplies that may restrict further development or extension of the property.
    • Environmental Searches – many parts of the UK are former industrial or manufacturing sites. Where the land is still contaminated and can affect health, the local council can request you pay for it to be cleared up which can be very expensive. During these checks, insurance is often provided against a test that came up clear and is subsequently found to be wrong.

     

    There are other less common searches that may be required specific to your property such as a chancel repair liability search – making contributions to the local church repairs. Once all checks are complete you will understand any leasehold terms, restrictions of usage, access to services, rights of way – anything that could affect your use and enjoyment of the property.

     

    What you can do to prevent delays:

    ID – make sure you have 2 forms of ID ready (one with an address and one with a photo). This can include a driving licence and passport but you can’t use one ID for both. The copies provided to your conveyancer must be certified. Only certain people can officially verify copies and these are solicitor, post office, bank, accountant embassy or notary public.

    Communication – keeping the seller updated at all times helps to reduce stress and frustration on their side and can greatly reduce the chance of the sale falling through as it shows you are doing everything you can do move the process along.

     

    Choosing a Conveyancer:

    You should choose a conveyancer who is good at communicating and has good availability as two core factors – this helps to keep the process moving and ensures you know what’s going on.

    You can choose a:

    • National firm – often have longer opening hours and can be cost effective as you can speak to a case handler rather than the conveyancer each time saving money
    • Online firm – often cheapest using central call centres to manage your case and lower overheads. However, it can be harder to speak directly with your conveyancer or drop off last minute documents
    • Local firm – usually offer good local knowledge and provide one point of contact. Easy to resolve issues by going to the office
    • DIY – we don’t recommend this route but you can do conveyancing yourself. Most mortgage lenders will insist you use a conveyancer in their terms

     

    Conveyancing Costs

    Fees increase with the complexity of the transaction (complicated leaseholds etc) with fees averaging between £850 – £1,500. Like surveying, the cheapest fee is not necessarily the best value for money. Anything that is rushed and missed could cost you a lot more later on.

     

    Other points to remember:

    • Your seller may wonder why you are asking certain questions, particularly those that they didn’t ask when they bought the property. Where a seller doesn’t wish to answer a question, remember to stay objective and politely explain why you are asking.
    • Be prepared for misunderstandings between each side – these can happen. Stay calm and try to get to the bottom of any issues so you can move forward.
    • Your conveyancer cannot speak to other conveyancers in the chain – it’s in their regulations. Your estate agent needs to be the one who coordinates exchange and completion dates with other estate agents. Find out more about each persons role in the process.

     

    The Final Key Stage – Buying a House

    Buy a property infographic. Exchange of contracts makes the purchase legally binding. Completion is where you pay the seller and receive the keys and then move in and tie up any loose ends in the first 30 days

     

    In this last stage the process becomes legally binding and by the end of the process you have paid in full and the house is yours.

     

    a. Exchange of Contracts

    Exchange of contracts infographic. Contracts are read out in a recorded call between both parties conveyancers to confirm they are identical. Buyer and seller sign the identical contracts which are then sent by post with the buyer paying a deposit

     

    This is where things start to become more concrete – during exchange of contracts the transaction becomes legally binding. Contracts are read out in a recorded phone call to confirm that each party has an identical contract stating the completion date, any fixtures and fittings included and the agreed sale price. These are then signed and posted to the other party (exchanged) along with the buyer paying a deposit (usually of 10%).

    At this stage you can breathe a bit – it’s now far more unlikely that the sale will fall through! Make sure you have buildings insurance in place at this stage because if anything happens to the property, you are legally responsible!

    If you have chosen to complete on the same day as exchanging contracts then you will need to have organised removals, home insurance and mortgage funds in advance. If you are completing after exchange (which happens in most cases) you have some additional time to organise removals and the transfer of mortgage funds. Most mortgage companies require at least 5 working days between the two stages to arrange mortgage funds.

    One of the biggest reasons to keep the two dates separate is to prevent game playing such as gazundering, gazanging or gazumping. This happens when one party decides to renegotiate knowing that the offer isn’t yet legally binding and the other party stands to lose money on removals bookings, completion delay fines and other checks. Because of this they are aware that the other party is likely to give in and change their offer to ensure completion goes ahead.

     

    b. Completion 

    Buy the property - completion infographic. The buyer sends remaining funds to the seller and the seller transfers ownership to the buyer

     

    At this point, completion day, you’ve reached the stage you’ve been aiming for since you started establishing your budget – ownership of the property is transferred to you and your funds are transferred to the seller.

    There are things you can do ahead of completion day to ensure it goes smoothly and ensure there are no delays. Whilst delays aren’t that common, they usually centre around missing funds required to pay your seller. These can be because of:

    • A lack of mortgage funds – check with your conveyancer that your mortgage funds have been drawn down before completion day
    • A lack of your funds – make sure you send any additional funds you need to provide for the purchase through to your conveyancer
    • A lack of buyer funds – if you are selling make sure your buyer has sent their funds to their conveyancer and checked that their mortgage funds have been drawn down ahead of completion so you aren’t delayed by them

    Checking that this is in place should help ensure completion goes ahead successfully without a hitch. Each buyer and seller in the chain should do the same to ensure that everything goes through smoothly on completion day.

     

    What happens if I cause a delay?

    You could be served a notice to complete by the seller giving you 10 working days to complete the transaction. You could have to cover the cost of the notice fee, sellers costs (e.g. hotels and removals), and interest on any outstanding funds. If you are also selling and your buyer delays then you can also service notice to complete.

     

     

    c. Tying up Loose Ends in the First 30 Days 

    Buy the property - moving day infographic. You can move into the property and make yourself at home and tie up any loose ends

     

    Moving house is the final part of the process and usually happens on the same day as completion. Once the seller’s conveyancer has received your funds the property is yours and the seller has to vacate. You can collect the keys from the estate agent (if they sold through one) and start moving in!

     

    Things you need to do after moving in:

    • Notify your bank, DVLA and update other companies (e.g. mobile phone provider)
    • Inform utilities suppliers – you don’t want to pay for any usage from the previous owner
    • Get locks changed – for security as there is no way of knowing who has other keys
    • Start mortgage repayments
    • DIY
    • Have a house warming!

     

    Things your conveyancer needs to do in the first 30 days:

    • Pay stamp duty to HMRC
    • Register the transfer with the Land Registry
    • Notify your mortgage lender of completion
    • Notify the freeholder if a leasehold property

     

    Download the full infographic guide here.