Buying a home: answers to the most common questions asked by first-time buyers

·10-min read
 (Shutterstock)
(Shutterstock)

Starting the journey towards first-time home ownership means entering a weird world of jargon, etiquette, and second guessing.

For first-time buyers, house buying is a steep learning curve.

We asked some of London’s top property professionals which questions come up time and time again – and then we found out the answers.

How do I make an offer on a property?

(From: Chelsea Whelan, partner in Knight Frank’s Notting Hill office)

Answer: Offers need to be made to the selling agent, and most agents suggest putting it in writing too.

“Supply as much detail as possible to support your offer, this helps the seller make the most well-informed decision,” said Matt Johnson, senior sales manager at JOHNS&CO. This means giving information about your deposit (including proof of funds, like a bank statement or accountant’s letter), whether you have a mortgage offer in place, what sort of time frame you are looking at, and details of your solicitor.

There are, anecdotally, tales of vendors being convinced to go with a buyer by a touch of flattery, so its worth mentioning how much you love their house and how excited you are about the prospect of living there.

Will this property be a good investment?

(From: James Turner, associate in Knight Frank’s Hampstead office)

Answer: The short answer is property is an investment which can go up or down. Nobody can guarantee strong price growth; a smart buyer will take any such claim with a strong grain of salt.

In general terms, however, the trajectory of London’s property values has been upward for generations, so providing you are willing to stay in place long enough for prices to rise you should turn a profit. Regeneration zones tend to see outperforming price growth, as do areas with new transport improvements on the horizon, and locations on the fringes of more expensive postcodes.

“Keep in mind what will attract people to the home in the future and the more there is close by - good schools, amenities, transport links - the better price you can command,” said buying agent Matt Turner, founder of Astute Property Search.

You can also opt for a property with potential which, over time, you can upgrade to add value. Chris Cady, director of Dexters in Westminster, suggests avoiding homes with “endless structural problems” and instead look for places with potential to extend. “These kinds of renovations can help bring about a healthy profit,” he said.

What is the lowest price the seller will take?

From: Jonny Dyson, director of Winkworth’s Ealing and Acton office

Answer: Most vendors do have a bottom line - but neither they nor their agent will be willing to tell you what it is.

This means you have to make an offer based on what you can afford, and what, based on research about local selling prices, you think it is worth.

You can also do some discreet detective work to try and assess how desperate the buyer is to sell: if they are relocating for work, the property has been on the market for months, or they have another place they are desperate to buy they are more likely to be willing to negotiate.

“Probe the agents subtly and do this during the viewing and definitely outside of their office,” said Turner. “They should open up more during general conversation away from colleagues. I managed to get £90,000 off an asking price once because an agent mistakenly told me that the owner had an overseas tax bill they had to pay in eight weeks.”

Making a below-asking offer is perfectly acceptable, but don’t push your luck too hard. The average difference between asking and selling price is around five per cent in London.

“There is a fine line between insulting a vendor and losing your credibility or engaging them at a sensible level to find a mutually acceptable price,” said Plum Fenton, London specialist at buying agent Haringtons.

Johnson points out that agents work for sellers, not buyers, and aren’t there to help you get a low offer accepted. “A better way to phrase this question would be: “What would be a reasonable opening offer?” and go from there,” he said.

“Usually, a client will come back with a counter-offer which will give you their bottom-line, or at least the level of their expectations.”

When bargaining Murray Smith, managing director of Site Sales Property Group, suggests raising your price in small increments of £2,000 rather than £5,000. “This helps to keep you in control and hold back some bargaining power,” he said.

Can I borrow the Stamp Duty payment, and add to my mortgage?

From: mortgage broker Heron Financial

Answer: The only buying cost which is routinely added to your mortgage is the arrangement fee, said Ray Boulger, senior technical director at John Charcol.

But this doesn’t mean you can’t borrow more than you need to buy your first home and spend the extra on whatever you like. Stamp Duty is paid after you’ve completed on a property, and therefore after your mortgage money has landed, so it is feasible.

“The key is whether the affordability calculator says you can afford a slightly bigger mortgage,” said Boulger.

One thing to be careful of when considering borrowing extra – whether it is for Stamp Duty, furniture, renovations, or whatever you are thinking of – is that you don’t tip yourself into a higher interest rate bracket.

Interest rates depend on “loan to value” – the size of your deposit compared to what you are borrowing. If you had a ten per cent deposit, for example, your loan to value is 90 per cent. If you go for more money, but your deposit stays the same, then your loan to value status will get bigger.

However, interest rates usually go up in five per cent increments so you might well be able to borrow a few thousand more without penalty. Your broker or mortgage lender will be able to advise.

What is the difference between exchange and completion?

From: Savills

Answer: Expect it to take somewhere from three to six months to buy a property, once you have had your offer accepted. During this time there are many hurdles to clear, and exchange and completion are the two big ones.

Put very simply, exchange is the point at which you have got your mortgage in place, had a survey, valuation, and council searches done, and formally agree to buy the property. You must also put down a deposit, usually ten per cent of the value of the property - which you will forfeit if you change your mind.

Completion - possibly on the same day but more usually a week or two after exchange – is when you pay the balance and can finally start thinking about colour schemes and housewarming parties.

“Exchange involves the exchange of contracts that make the sale of a house legally binding,” said. Chris Cady, director of Dexters estate agents in Westminster “This means that before contracts are exchanged either the buyer or the seller can withdraw from the transaction.

“Completion is the date that the legal ownership of a property is transferred. After final checks and searches, the buyer’s lawyer will place the balance of the purchase money to the seller’s lawyer. After the funds are received, the transaction can be completed, and the estate agent can release the keys to the buyer.”

What does leasehold mean?

From: developer Pocket

Answer: Rather like the offside rule in football, no two pundits have identical explanations.

Generally, the term refers to flats, not houses. And the vast majority of London flats are sold on a leasehold basis, so it is something you do need to get your head around.

Christian Warman, of Tedworth Property, describes it as an agreement between a freeholder and a lessee (you!) allowing you to occupy the property for set period of time and subject to the conditions of the lease.

So, although you are buying a property, the building and the land it sits on is owned by someone else - you will, usually, have to pay an annual ground rent to them. Costs vary, and this is something your solicitor should discuss with you. Beware, ground rents tend to go up over time so what might sound quite reasonable now might be a lot more by the time you come to sell up.

“Leases can have onerous clauses in them, such as an absolute prohibition to make any alterations to the layout of the flat,” warned Warman. “But in reality, a freeholder will normally allow approved alterations in return for a fee. But in general, the lease of a leasehold property will aim to provide harmonious living between different leaseholders in the same building.”

You need to pay close attention to how long the lease you are buying is for. Leases can be extended but this is an expensive process, and it gets incrementally more expensive the shorter it becomes. Warman feels anything less than 80 years is a problem.

Johnson is even more cautious and suggests taking advice if a lease is less than 100 years.

How do I tell if this is a safe neighbourhood?

From: Jonny Dyson, director of Winkworth’s Ealing and Acton office

Answer: This has become a really important question in the current climate.

You can check local crime figures on websites like www.police.uk, but statistics can be misleading. If your postcode includes a high street, for example, it could well be that a lot of the crimes reported are shoplifting, pickpocketing, and pub fights. Oxford Street, for example, has one of London’s highest levels of thefts, but far lower numbers when it comes to violent crime, burglary, and car and bike thefts.

The best way to truly assess the safety of a neighbourhood is to spend as much time there as you can. “Walk around at different times of the day and night to make sure you feel safe in your potential new neighbourhood,” said Lynda Clark, CEO of First Time Buyer Group. “Speak to the local community and ask them how they find living there, visit the local shop and catch the bus or train into town.”

Fenton agrees: “There is no better way to find out than spending some time after dark in an area to see its true colours,” she said.

Its also worth finding the area’s local Facebook group to ask people whether they feel safe walking around at night.

Can I offer on two properties?

From: Jonny Dyson, director of Winkworth’s Ealing and Acton office

Answer: In theory you can offer on 100 properties if you like – offers aren’t legally binding and you will only start racking up costs once an offer is accepted and you start hiring surveyors and the like.

Agents absolutely hate buyers doing this because it means that - in the slightly unlikely circumstances that you get both offers accepted - you are inevitably going to pull out of one sale and that will aggravate their clients.

There is also an argument that making multiple offers makes you look flaky and unreliable.

Buying agent Sara Ransom of Stacks Property Search advises caution and discretion – don’t make offers on two properties being sold by the same agent. “They won’t be inclined to take either offer seriously,” she warned. “Remember their job is to work for the vendor and if they don’t think you are serious then they should tell their vendors this.”

Even if the properties you like are being sold by different agents Fenton thinks you will get found out. “The selling agents do not operate in their own vacuum, they all know each other, and word will get around very quickly,” she said.

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