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Most agents set a guide price slightly above of the figure that they expect to achieve for a property, but the precise level which a vendor will accept depends on a number of matters, the most important of which will be the number of competing bidders and the overall market conditions.
The more secure you appear to be as a buyer, then the stronger your negotiating position will be i.e. if you are a cash buyer and not subject to the sale of your own house or a mortgage, then the better the position you are in to offer a lower price. In a declining market there are better deals to be done than in a rising market. Then it is up to your judgement as to who else is bidding!
- Convince the vendor that you are proceeding fast with the purchase. They must believe that, even if another offer comes in, you are the best people to run with.
- Agree with the agent that the property should be taken off the market
- Progress your mortgage application as fast as possible
- Get a structural survey carried out from a surveyor approved by your building society/bank.
- Get quotes for the conveyancing i.e. the legal work and then instruct a solicitor to act for you
-Spend some time in the area of the house to see if there are any nasty surprises lurking!
- Keep in contact with your solicitor and building society/bank to ensure that they are making progress
- Brief the vendor on how you are getting on
- Understand the legal processes and the advice that you are given
- Subject to satisfactory offers of funding and acceptable terms, be ready to exchange contracts
Only when you have exchanged contracts can you begin to relax: at that point you have a legally enforceable agreement. Completion i.e. when the balance of the purchase price less any deposit has to be paid, is normally one month after exchange of contracts. You then have possession of the house, can move in and celebrate. Ahead of you are the joys of DIY and home improvements that many new purchases involve.
As the government announced the roll out of HIPs on all homes by December 14th, propertyfinder.com’s survey of 842 estate agents reveals just what a shambles the legislation has been so far. HIPs, which are already compulsory in the home selling process for homes with three or more bedrooms, will be introduced on all homes from mid December.
70 per cent of estate agents think that HIPs have disrupted business, and 84per cent of them want the legislation abolished altogether. Instead the government is doubling the number of properties caught by the legislation. Estate agents say that 51 per cent of sellers do not know they need a HIP when they instruct the agent to market their property. Furthermore, a fifth of this group of sellers are put off marketing their property because of the extra hassle and cost involved.
This move is going to impact upon the very people Yvette Cooper has today pledged to help with affordable housing. The people who live in one and two bed homes are on lower incomes and will be deterred by the extra £350 cost of a HIP (average cost across all agents surveyed). The cost varies very little according to the size of the property so is a disproportionately large expense for smaller, less valuable homes. This is likely to constrain supply of first-time buyer property.
42 per cent of buyers do not know what a HIP is and don’t find the information contained useful, whilst a further 51 per cent know what a HIP is but don’t rely on it. That is a massive 93 per cent of buyers who find a HIP unhelpful - sellers are effectively paying £350 for nothing.
Warren Bright, chief executive of propertyfinder.com said: “Estate agents across the country can see HIPs are simply not delivering and want them abolished. Sellers don’t know what they are and buyers ignore them. Now this discredited scheme is being extended to all properties, the confusion will only deepen. For the government to be heaping new burdens on the property market at a time when it is already feeling some strain is beyond belief. The government should leave the housing market alone, not tie it up in red tape.”
After searching for so long to secure your dream home – and finally finding it - the desire to fast-track the contract and paperwork makes it really easy to overlook problems with the home, some of which may in fact be quite prominent.
Perform a Do-It-Yourself inspection
It is difficult to imagine buying a car without checking the motor and taking it for a test drive. Unfortunately many people do just this when buying a house, which costs so much more! By properly inspecting the property you intend to purchase you’ll know the exact condition of it, thereby reducing the ‘surprise’ of possible costly repairs found to be necessary after you take possession. These lists show some of the aspects you should consider when inspecting a property:
Inside the home
• Check that all the floors are level and that there are no gaps between the floor and skirting boards.
• Jump lightly on wood floorboards to assess their stability.
• Look for signs of rising damp, including rotting carpet, mould on the walls or ceiling and musty odours.
• Check the walls and ceiling for warping and cracks. Fresh paint or wallpaper may be hiding problem areas.
• Assess whether doors and windows are square. Jamming may indicate structural subsidence.
• Make sure all light switches work. Also check each power point by using a power point tester (these are relatively inexpensive and can be purchased from hardware and electrical stores).
• Test the water pressure in both hot and cold taps. Ideally, turn on several taps simultaneously. Partially fill the bath or sink and observe the drainage of this water. Sluggish flow could indicate damaged or blocked sewer drains.
Outside the home
• Inspect fences and gates for stability and rot.
• Are there any large trees near the house? The root systems of trees can cause structural subsidence if they are close to the home.
• Check that the land's water runoff drains away from the house.
• Inspect all outside walls. Are they straight, cracked or rotten?
• The condition of the mortar between the bricks must also be assessed.
• Make sure there is adequate sub-floor ventilation.
• Check the condition of the eaves. Water staining may be an indication of damaged gutters.
• Look at the line of the roof to make sure it is straight. Are there any broken tiles?
• Check the stumps for subsidence, rot, borer or termite attack.
A professional inspection
Professional inspectors should examine every accessible part of the home, including the roof space and sub-floor. They will check for poor structure, leaking roofing and guttering, subsiding footings, faulty wiring and plumbing, dampness, rot and many other faults.
Inspections are not designed to disclose cosmetic deficiencies (e.g. paint chipping in the kitchen). You will need to decide for yourself whether these types of items need attention.
You should be provided a written Inspection Report following the inspection. This will inform you of any property faults, how bad these are and give you a guide to probable repair costs. Inspectors may also be able to give you qualified advice on any home improvement ideas you may have.
Armed with this information you can decide whether you wish to purchase the property. If you do decide to make an offer on the property, you will be in a far better position to negotiate.
Your local Building Advisory Service, or perhaps the Construction Industry Council’s approved Inspector’s list, should be able to help you find a professional inspector.
The buying process can be so quick, especially in a hot market, and a lot of people are lulled into a false sense of security. They forget to perform the due diligence required of such a large purchase. After having discovered faults in the property many buyers find they can not afford to spend money on repairs and are forced to either take out a loan, or put up with the problem, which causes stress and annoyance. And It's not just the problem itself; it's what it leads to if it doesn't get fixed
There is no point getting angry with the seller either - in many cases, they are unaware of the problems themselves. It’s surprising what people live with without knowing it! They are usually very surprised when an inspection report comes back with issues on it – even more reason to have one done. By Joanna Johnson
The average home-buyer can save £55,000 by having a three bed home built for them, compared to buying a new build from developers, according to new research from propertyfinder.com. Buying a home in England costs approximately £267,600 whereas the cost of land, materials and labour would total only £212,850 - a saving of more than 20 per cent.
The cost of building a new home ranges from £152,644 in the East Midlands to £295,054 in London. The main reason for the huge discrepancy in the cost is the price of the land. In London, a hectare of land (with planning permission) costs an eye-watering £9.6m. In the East Midlands it is just £1.9m - one fifth of the cost. As a result, plot sizes tend to be smaller in more expensive regions. In London, the typical plot size is tiny to make it affordable - just 207sqm – almost half the expansive 390sqm enjoyed in the North West where home builders can spread themselves out more.
The savings - compared to the cost of buying a new build home - vary enormously. Those in the South East save the most (£101,389), three times the average saved in Yorkshire (£33,229). London home-builders save less than average – just £43,813, a mere 13 per cent compared to buying a new build home.
Warren Bright, chief executive of propertyfinder.com said: “The regions with the most expensive home prices are not, as you might expect, where the savings from commissioning your own build are highest. The relationship between land prices and house prices is the most important factor. Getting hold of the land is the main problem. For example, land in London is so scarce - and planning permission so hard to come by - it is barely worth the cost and effort of attempting your own project. Other regions show enormous savings, especially the South East and South West.”
The cost of having a home built has risen slightly faster over the last five years than buying a new home – 48 per cent compared to 45 per cent. In London it only costs 30 per cent more than five years ago to build your own home, compared to a 79 per cent increase in the North East. This reflects the change in land prices. The cost of a plot in London has risen only 35 per cent in the last five years, while aspiring home builders in the North East must pay 3.4x the price in 2002.
Warren Bright continued: “The price of new homes has underperformed the wider housing market by 20 per cent over the last five years and build costs have risen faster than the cost of buying a new home in all regions except London. But it can still make financial sense depending where you live and how high your pain threshold is. It can be a long and difficult process to take the reins – most people have neither the time, nor the inclination. You can save more if you actually get your hands dirty and do it yourself, but that’s another order of difficulty! Other countries are much more used to having homes built than we are here. The Germans and Australians, for example, enthusiastically build and are particularly proud of the more varied domestic architecture that has resulted.”
Nicholas Leeming, major client director of propertyfinder.com comments on the London Property News, "Recent data shows that the UK housing market is cooling. Prices are stagnating and transactions are down. But the market in London and the south east is expected to remain resilient, and the rental market is very perky indeed.
The top end of the market is holding up much better than the bottom. While there has been a significant annual decline in transactions overall, there has been an increase in transactions for all properties over £500,000 (particularly those over £1m). In London and the South East this is a large proportion of the market. Transaction levels and prices for these properties have not slowed as rapidly as the lower end of the market. These buyers tend to have equity already and tend to have a long record with their lenders.
At the bottom end of the market, some first time buyers who manage to secure a mortgage will be taking the opportunity to make opportunistic bids on properties. However, it is becoming more difficult for people looking to make their first step onto the housing ladder as lenders have tightened their criteria. Lower loan to value ratios will stretch many would be first time buyers, and they are likely to wait and see what direction the market takes, choosing to stay in private rented accommodation for longer.
Tenant demand for rental properties is high and rents are rising. In order to get a good deal on a rental property, people thinking of making a move should do it sooner rather than later and try to lock into a long term contract with your landlord."
This year, sellers are more apathetic than last about carrying out home improvements as household finances are stretched. However, there are fewer buyers in the market than there have been for a couple of years and sellers can expect to compete for them. It is more important than ever that people make an effort to appeal to buyers and maximise their chances of a sale. Nicholas Leeming, FRICS, major client director at propertyfinder.com gives sellers the following advice:
When you first decide to put your home on the market, ensure that you check out what else is on the market in your area, and price your home realistically.
Bedrooms add value
If there is a room that you use for storage or a playroom that could be used as a bedroom, clear it out and put a bed in it.
Aesthetic Appeal
Concentrate on the aesthetic appeal of your property. Remember, first impressions are everything and buying a home is an emotive process.
Make sure that the front of your property looks appealing. Don’t forget to tend to the front garden and avoid bold or tacky statements such as garden gnomes and ostentatious ornaments. What is parked outside your home can also make a big difference. 75 per cent of buyers say they would be put off a property by broken down vehicles and caravans parked outside.
Smaller aesthetic improvements can add significant value to your home but don’t have to break the bank – a fresh coat of neutral paint can do wonders in helping to appeal to buyers, and is obviously the most economical way to make over your home. If you are short of time or money, focus your attentions on the main living area and the kitchen, as this is where most people spend the majority of their time and getting the look right can sell a property.
Our research shows that 84 per cent of people are put off by bad décor in a home, but don’t forget that this sentiment extends to the outside of the property and the garden too.Most gardens look a bit of wreck in the winter, but it’s a good time to do some landscaping ahead of the spring – that’s when gardens look their best and the housing market is at its busiest. Make sure it’s tidy, swept and the grass edges are neat, even in winter. There is a tendency to think that merely having a garden is enough to attract buyers. The reality is that 85 per cent of dwellings in the UK have a garden and one that is in a state of neglect is more likely to put off potential buyers than attract them.
Cleaniness
It may seem obvious, but the most important point is to make sure your home is clean. A lot of sellers forget to clean the windows and prevent the maximum amount of light getting into the house. On a dull day, make sure you turn the lights on for a viewing and, if possible, use mirrors in rooms to make them look bigger and reflect the available light.
Structural Repairs
Don’t try and cover up structural problems as these will be revealed by a survey and hold up proceedings later down the line. But don’t spend money on hidden benefits such as energy efficiency, despite publicity about it. This will be a deciding factor for very few buyers – reports from estate agents and from our own research show that only around 7 per cent of buyers even look at an Energy Performance Certificates.
Adding Value
The money you spend on hidden improvements will not be reflected in buyers’ offers. If you invest in the appearance of the property, you are more likely to add immediate value to your home.
Consider the value of your home when deciding what to change. For a smaller, lower value property, more expensive work like a new kitchen will never be recouped in the sale price. But for a large high value home, a swanky new kitchen could more than pay for itself and appeal to more buyers too.
Whatever improvements you make, ensure you put your own priorities aside and concentrate on how to appeal to the majority market. My top tip is to avoid bold statements both inside and out – prospective buyers like to see a neutral décor on which they could stamp their own identity.
As an extension of this, avoid clutter and mess – it can make it harder for buyers to picture themselves living there, as well as sending out a message that the property is uncared for. Clear excess clutter out, particularly things that are personal to you, such as photos, and put them into storage if necessary.
Phenomenal house price growth has put a strain on household finances nationwide, with the house price to income ratio doubling over the past 10 years.
London house prices in particular have soared – rising a third faster than the rest of the UK. However, according to the latest research from propertyfinder.com, the average rate of decline in affordability in the capital has kept pace with the rest of the country – the house price/income ratio is just over twice its level of 10 years ago. The ratio in London stands at 8.3 compared to 7.2 for England. The figures mask wide variation in the changing pattern of affordability from borough to borough in London.
Rich boroughs see slower growth
Traditionally affluent outer boroughs such as Richmond and Barnet have enjoyed strong house price growth, yet the rate of decline in affordability is below both the London and the UK average. Price income ratios in the commuter belt were always high and have been maintained as they remain firm favourites with wealthy working families.
Rich inner London boroughs have also seen the house price to income ratio rise more slowly than average – the house price to income ratio in areas such as Kensington and Chelsea, and Westminster has always been high, but in these areas it has less than doubled over the past 10 years. The phenomenal growth in house prices reflects a change in the population as wealthy foreigners have flowed in.
Poor boroughs' declining affordability
In stark contrast, the poorer inner London boroughs have suffered the fastest decline in affordability. Newham, which 10 years ago was very affordable, has been the worst hit – with the house price to income ratio has more than tripled to 8.5.
Waltham Forest and Hackney follow suit. The price to income ratio is almost three times the level of 10 years ago. The 10 boroughs with the fastest decline in affordability are all areas that are traditionally perceived as less affluent.
City money is spilling in, pushing up house prices while affordability for existing residents looking to move in these areas is declining more rapidly than anywhere else in London. For them there will be no option but to spread further afield to areas such as Redbridge and Barking.
Warren Bright of propertyfinder.com said, “Traditionally affluent inner London boroughs have become special enclaves of the super-rich – in particular foreign money that even the success of the city can’t match. Even the rich have been priced out to other areas and this has had a knock-on effect across the capital - the success of the city in particular, has had a direct impact on affordability in previously cheaper boroughs. Poorer incumbent residents in lower income boroughs are being priced out of the housing market.”
Tower Hamlets – an unusual case
Tower Hamlets has seen one of the slowest declines in affordability in the capital. This is because the wholesale redevelopment of Docklands changed the housing stock and the population. There, the rapid rise in house prices has been matched by the influx of richer residents, keeping a lid on the growth in the price/income ratio.
“Over the longer term, we should see an ebb and flow," Warren says. "If house prices continue to moderate as they are doing, and the city experiences a couple of years of less positive growth, we may see this wave retreating and affordability in some of the newer areas improving more quickly than elsewhere. The next upswing would then push the gentrification further than the first. Only a very serious economic depression would cause a long term and sustainable reversal".
The housing market’s resilience in the face of higher rates was remarkable in 2007 and testified to the underlying strength of household finances. The high proportion of borrowers on fixed interest rates and fierce competition among mortgage lenders insulated the market from the Bank’s attempt to slow the market.
The beginning of the credit crunch, just a month after the final base rate hike, marked the turning point. Competition among mortgage lenders evaporated as they turned to protecting their margins or struggled for funding.
Although they have cut down on other spending, home owners are generally not struggling to meet extra repayment costs as mortgage rates have started to rise, but confidence – the key in any economy – is on the wane.
Borrowers prepared for extra mortgage costs in 2008
Interest rates have already begun to fall, and are likely to be at 5.25 per cent by the middle of the year, possibly down to 5.0 per cent by the end of 2008. How far they fall will depend on the extent to which the money markets begin to function again and on how reluctant lenders are to pass on the full extent of the cuts. If lenders keep borrowing rates high, or the markets remain troublesome, the Bank of England will have to cut base rates further in order to have an effect on the end-borrower.
The 1m mortgage borrowers coming to the end of their fixed rate in the next twelve months, who will face the highest jump in monthly interest repayments, are already preparing. 8 per cent have already begun reducing their spending to ensure they can accommodate the extra monthly repayments, and others have financial plans in place to ensure they won’t struggle.
Cooler housing market to see lower transactions
The housing market will face a quieter 2008, particularly in the first half of the year. But unemployment is low and there is little evidence of forced sales. A period of stalemate between buyers and sellers is the most likely outcome. Prices will slow to a crawl and transaction numbers are likely to be lower. The normal Christmas slowdown certainly came early this year, but the whole market has been disrupted by the roll out of HIPs to all properties from December 14th. It will take the market some time to adjust.
Most importantly, falling rates will spur confidence in the market and lead to a stronger second half, both for prices and volumes. Due to years of low house building, particularly in the so called 'middle market', there continues to be a lack of homes in the UK and this will stop prices from falling significantly. propertyfinder.com research shows that there is an annual shortage of 350,000 family homes on the market and that one quarter of buyers are forced to buy a smaller home than they are looking for. People want and need far more family homes than exist, and as a result, three and four bedroom homes will retain their value best. We expect average house price growth of 0 – 1 per cent during 2008.
Areas of weakness
There are two extremities of the market that may prove more vulnerable in a slowdown.
Firstly, commodity new builds. Small properties without character are in oversupply and unattractive in an environment where high capital gains on a property are not a certainty.
At the opposite end of the market, premium London properties, reliant on demand from foreigners and the City, may lose value if bonuses are low this year and if the massive capital gains of prior years no longer look like a sure bet.
Warren Bright, chief executive of propertyfinder.com said "For some time, the UK has had a two speed housing market – with London and the South powering ahead in terms of growth rates. The financial market affluence which has largely spurred this growth is now in question and one of the main changes we expect in 2008 is the North-South gap in house price growth to narrow. Household finances are holding up well and a fundamental lack of UK housing supply will buoy prices over the long term. But market uncertainty and flawed HIP legislation have resulted in fewer buyers and sellers, so house prices are moderating. The MPC should act again sooner rather than later to bolster confidence and ensure the second half of 2008 is more positive."
