The Step-by-step house buying process for England & Wales
Houses are not small time investments. They are generally a long term plan you have to commit to, daunting enough even for seasoned individuals to think twice before cashing their chips in. For first time buyers, it is an experience often mixed with anticipation, fear and joy because this is probably one of the earliest big time investments in their lives. Although a complicated process, this becomes a lot smoother the moment when proper planning and careful survey comes into the picture.
People invest much more than money when they decide to buy their first house. Emotions run high especially when the investment is directly related to a space that they have always dreamt about. ‘Home’ is an operative keyword here. It is when they proceed in the search for a house that can be turned into a ‘home’, factors such as comfort, locality and security, amongst others, need to be taken into account.
We are here to help you streamline the entire process by providing a step-by-step guide. Follow these simple outlines carefully, and you will find that quite a large chunk of the pressure has been taken off of your head.
6 steps to Owning a New House
Step 1 – Doing the research
Because buying a house is a big investment, it is always important to finish a round of preliminary research, most of which includes
Thinking about the cost
Unless you have access to a lot of funds, some hefty inheritance or a huge chunk of savings, chances are you will have to get a mortgage in order to buy the house of your dreams. This is why you have to calculate not only the amount of money you are willing to spend but also how much you will be able to afford, considering interest rates fluctuate and your capability to spend varies from time to time.
Fix a budget that is probable and can not only cover the deposit amount but also the various miscellaneous costs that come along with it, such as postal fees or stamp duty and mortgage fees. The cost for moving and the amount that needs to be handed over to the broker or real estate agent should also be kept in mind.
Make sure you add everything and go over it twice.
Once you have decided what or how much you want to spend, it is time to decide what sort of mortgage you will be opting for. Online mortgage services, Mortgage Brokers, Independent Financial Advisors and Banks are a couple of the most solid options you have.
It is advisable to do a preliminary search online to gauge the ‘lay of the land’, thus getting an estimate of the different kind of mortgages available in the market. Your Mortgage broker or the IFA you hired will be able to do a more comprehensive assessment around the parameters that you have set.
Make sure that you have checked your credit scores before applying for the mortgage. You do not want to get in trouble later just because you missed out on your personal details.
It is a good idea to discuss this with your bank because they often provide small but impactful benefits for their own customers.
Once all of this is done, and you have decided on which plan to follow, an agreement in principle will be handed over to you, signed and cleared with the first background check.
Step 2 – Finding a house.
After you are done with how much you can afford to spend, it is time to look for the properties that would pique your interests. First and foremost, decide the kind of localities you would like to view properties in. This move will take into account the sort of distance you are willing to cover, the sort of neighbourhood you want and the different amenities it has to offer. Make sure that your research is based on the budget you decided earlier.
A long-term view is very important for investments of this nature.
Make sure that you take your future growth into account (If you are in your initial years of occupation). How much your salary amounts to every year, whether or not there is an increment every year is to be put under the category of future growth.
The value of a particular area might rise or fall, depending on the various facilities that have started to develop or are going out of use. New complexes, transportation connections often enough fluctuate real estate prices in an area.
– The kind of properties you want is vital to this lengthy exercise. Whether or not you want a two-bedroom or a three-bedroom house, or if you are okay with getting an apartment needs to be decided.
– Whether or not you want a two-bedroom or a three-bedroom house, or if you are okay with getting an apartment needs to be decided.
– Activities and amenities around the area should be factored into decision making too.
– If you already have kids or are planning to have one, it is recommended that you browse through the schools available in the locality and check their status.
– Your place of employment and the distance from your soon-to-be house is something that must be looked into. Whether or not you can commute from your home to work
Whether or not you can commute from your home to work easily, if public transport is available easily in the area and if the place in itself has any employment opportunities should be strong reasons while making your decision.
Make sure you visit as many neighbourhoods and properties as you can. It is always better to inspect the places first hand before deciding to invest in them. The idea is to have an idea of the locality and the surroundings. If you are still unsure about the area and cannot be sure about its value and quality, rent a place there for a couple of months to make the final call.
All of this needs a lot of dedication and severe concentration to be researched upon. Do not give up. This is extremely important if you do not want to regret your choice later in the future. Remember there is no need to hurry!
Step 3 – The Offer.
Once you have managed to find the place of your liking, move on to making an offer to seal the deal. However, there are a couple of things you must keep in mind.
– Ensure that you are not at a disadvantageous position while making an offer. It is very common for Estate Agents as well as sellers to hype the price, thus during negotiations always keep calm and do not let your emotions about the property flood the entire process.
– Constantly looking at the market prices and tracking how they are performing is a good way to make sure that the agent or the seller is not trying to make a fool out of you. It also puts you in a stronger position to bargain.
– Put the offer in writing to the agent; it is his/her obligation to pass it on to the buyer. This makes sure that there is less probability of an argument over the same, later in the future. If the offer piques the interest of the seller, then negotiations begin!
– Open negotiations and Sealed Bids are two very popular ways to common ways in the bidding process. In cases of Open negotiations, it is advisable to start lower than the original asking price. If there have been bids that trump yours, the Estate agent will inform you of it. Stay calm at all points of time and keep the polite demeanour on.
It is a common phenomenon where the dream house completely erases all negotiating skills and further makes sure that the budget you had set in the first place goes for a toss. Do not let this happen.
In cases of sealed bids, you have to write down the amount you are willing to spend and put it in an envelope. The seller then takes his/her pick by taking the highest bid placed.
While this is a lot more pressurising scenario than the first one, it is important that you always stick to your pre-planned budget. If you let your feelings come in the way, it is quite possible that the mortgage you had initially signed up for will not be able to cover you.
It is advisable to try and find out the competition from the realtor and see if outdoing the highest bid is something that you are capable of. You can try negotiating with the seller directly and see if that works out fine.
Sellers often insist on putting down holding deposits to make sure that the buyer is serious enough about the purchase. The deposit is most often not placed in the hands of the seller, but handled by the real estate agents. Make sure you are aware of its status as refundable or non-refundable.
Making an offer is quite the job, but once you are done with this, a large part of your job is anyway done. It is a tricky space, and you need to have your negotiation skills on point. If you think it is too much to handle, there are agents who facilitate the purchase of houses and properties for individuals.
Step 4 – Surveyor and the Solicitor
After you have agreed upon the offer on the property, you will have to hire a Solicitor to take care of all the legal matters about the sale of the house.
It is the Surveyors job to check the property and make sure that all the problems are brought out before the sale; this will affect the price of the house. The Solicitor will also investigate to make sure that there are no administrative problems with the house.
Valuation Survey is conducted by the orders of the lender in order to make sure that if need be, the property will be able to pay off the debt in the first place. This, however, is not a proper survey. It does not reveal the minute problems that are present in the house.
– A proper survey of the property, before purchase, is anyway advisable. This is to make sure that most of the problems hidden to the naked eye can surface before you own the house.
– If the problems are noticeable and would require a substantial sum of money to fix it, the seller can then be asked to reduce the price proportionately so that you do not have to spend extra.
– There are different types of Surveys that will facilitate your queries about how the house would hold up in the future. Mpore advice on surveys can be found on the RICS website.
– A condition report is the cheapest and simplest survey of the lot. It does not provide valuation about the property nor does it conduct a thorough check.
– Traffic light color-coding is used to indicate different levels of danger, and it comes with a summary of risk in the morning.
Homebuyers Report is much more detailed and includes a valuation as well as an insurance reinstatement value that charts the claims returns as well. However, this is still restricted because most of the major problems cannot still be pointed out and it becomes useless if the report keeps coming back to advocate for the surveyors.
Building Surveyor Reports are the most thorough out of the three and definitely more expensive than the rest. This is the one survey that will comb your ‘house-to-be’ down to the smallest scratch and crack and hand you a comprehensive answer including all sorts of valuation.
Remember what we said about the budget? All of this comes under the same umbrella as well. Expenditure like this needs to be compensated for and included in the overall cost and budget. You must keep in mind that you cannot overdo things and have to stick to the price you calculated.
It is a possibility that the house you plan on investing will turn its back on you. It is thus also possible for an individual to not accept the offer and pull out on the spot. Before hiring the investment firm, one must remember that nothing is more important than spending the right amount of money.
Step 5 – Contracts
Once all of this is done, and the efforts you have put to search for not only a house but also a locality, negotiate and bid, conduct a survey and apply for a mortgage, all that is left is to exchange contracts and finalise the offer.
Make sure your solicitor goes through the contracts before you do decide to put down your signature on them and make it official. This is the time; you should not have any doubts in your mind.
You should have all the questions and queries you have had in the past now answered, and you have absolute clarity about them. If not, there is still time to stop and ask them before handing over the contract.
– Agree on a completion date and make sure that you do so before exchanging the contracts with the seller. It is to cement the transaction after the legal documents and papers have been signed.
– While you are at it, get all the paperwork for buildings insurance in one place. Do not falter with this because it becomes your responsibility as soon as the ownership changes hands.
– Deposits come handy in these scenarios, especially when it is possible for individuals to get cold feet and then turn around from the offer.
– The amount holds them to the contract, and even if they decide to run away, at least there is some compensation for the loss faced by the seller.
– If you do not run away and do decide to continue/start living in the house, then the money does not go to waste.
Your dream house is very close to becoming yours, just a couple of more boxes to tick and then, right after that everything falls into place.
Step 6 – Final Touches
Money that you owe to the seller to finalise the entire purchase the property has to be then moved from your solicitor’s escrow account to the solicitor’s account of the seller. It might be true that since some of the money comes from the mortgage provider, there will be a transfer fee.
A mortgage account fee is often enough a compulsory deposit that the buyer has to provide. Lenders can also charge this fee for setting up, maintaining and closing down your mortgage account. Paying it up front instead Is advisable. These activities do not cost a lot
– Make sure you have cleared all the bills with your Solicitor, and there are no dues left.
– Once all of this is done, your solicitor will then register the sale of the house with the Land Registry for properties in England and Wales.
– The sales need to be registered with Land and Property Services In Northern Ireland and Scotland it is imperative that they do so with the Registers of Scotland.
– The cost of this procedure will always hinge upon the price of the property.
Sellers have to pay their estate agent once the sale is completed. There exists a contract between the agent and the seller, in which the amount to be paid is agreed upon right at the outset and is always a percentage of the price in which the property has been purchased, usually 1% to 3% of the sale price plus 20% VAT.
Your solicitor will arrange for funds to be sent to the solicitors employed by the seller on the day of completion.
All that needs to be done now is the handing over of keys by the estate agents. You get to move in.
A timescale for this process is difficult to predict but allow 1-6 months in most cases.
What you have to remember while making this purchase is that it is a meticulous one. If you are not serious about it, or if you do not put your heart and soul to it, chances are you will never find a house that suits you and even if you do, it burns a giant hole in your bank account. Everything needs to be tested and carried out properly before such a long-term investment is made.
Follow these steps and do not falter from them. You will end up with a beautiful house that falls in your budget. Happy House Hunting!