Unlike many European countries where renting for life is the norm, we Brits love buying our houses. The importance of getting on the property ladder is something that’s been drilled into us since childhood. And it means a lifetime of security, freedom, and creativity in making our homes our own.
But it’s far from an easy path. Even with cash in the bank, the buying process is one of the most stressful things you’ll ever do – guaranteed. It can be a world of obfuscation, hard selling, competition, negotiation, and a surprising amount of emotion (which is why every estate agent worth their salt keeps a box of tissues under their desk). Here are some insider tips and facts from an ex-estate agent, so you can safeguard yourself from as much heartache, stress and confusion as possible.
If you want to make money, buy a “bad” house in a nice area
It’s impossible to separate emotion from the place that will become your home. Walking into a beautifully-decorated, spacious property can sell you on the spot. But if its value has already been maxed out, you’re unlikely to make a lot of money when you come to sell. That’s okay if you plan on being there for a very long time. Making a profit doesn’t always have to be a consideration. But if you can see yourself moving in 5 to 10 years and wanting to move further up the ladder, you’ll want to purchase something that can be extended, improved or upgraded, in an area that’s likely to grow in desirability. Houses can be improved, areas can’t. In other words, never buy the nicest house on the street.
Considering shared ownership? Beware the pitfalls
Buying a house with a tiny deposit and half the mortgage payment sounds like a no-brainer. You can buy otherwise inaccessible brand new properties, decorate to your heart’s content, save until you can staircase to the whole amount, and finally tell your friends and family you’re a homeowner. If only it were that simple. The allure of shared ownership deals tends to overshadow the not-so-obvious downsides. Firstly, you have rent to pay on your remaining share. This will be worth it to many if it means getting on the ladder several years early. But it means your monthly outgoings will be just as expensive as a mortgage payment on 100% of a property, or even more.
If you’re buying an apartment, beware the service charges. You will pay a mandatory monthly amount to maintain the building. In the south of England, this is usually anywhere between £70 to £150 a month. But they can be almost impossible to budget for, as they will be adjusted every year in line with what the building association is spending. They could go up, they could go down.
Finally, being a shared owner can be a strange and uncomfortable limbo between owner and tenant. You can’t make big structural changes, but you’re also responsible if the boiler breaks down. You’ll have all of the financial responsibility, but not quite all of the freedom.
You’re expected to negotiate
In England, negotiation is not a huge part of our culture. We don’t haggle in shops, and we prioritise politeness over bluntness. But when buying a house, even if it says ‘Offers In Excess Of’, even if the estate agent tells you they want the asking price, it’s expected that you would offer less than the advertised amount, at least to begin with. It could save you thousands, so never be afraid to do it.
Don’t give it all away – but don’t lowball
When buying a house, the price isn’t the only thing you’re making an offer on. You’re also offering your position. Having a mortgage approved, nothing to sell, no chain, or cash in the bank is an advantage to the sellers, as it’ll speed up the conveyancing process (and may help them look more attractive to their onward purchase). You can capitalise on these positions and potentially get away with a lower offer. You’re also offering on the time frames you’re able to work to. ‘We can be flexible’ is better than ‘we’re stuck in a tenancy agreement for 6 months’.
Remember also to state any desired inclusions with your formal offer. This could be anything you’ve seen in the house – but it’s usually things like white goods, blinds and curtains, lights, planters, and garden sheds. You’ll have much more bargaining power in the first instance than after the sale has been agreed. These items will go onto the Fixtures & Fittings form, so will be a legal part of the sale. In other words, the sellers can’t change their minds and take them on completion day.
You have to find a delicate balance here. Don’t offer the full amount you have (or are prepared to pay) upfront, as you’ll have nowhere to go if they say no. But – don’t insult the sellers by offering too low, as it could start the negotiation off on a negative. If you’re in a weaker position, like having a long chain behind you, this should be reflected in your offer.
Understand what ‘best and final’ means
The only instance here you might not want to play hardball is where a property is getting so many offers, it goes to best and finals – otherwise known as ‘closed’ or ‘sealed’ bids. This means you get one chance to make the highest (or most favourable offer). Each interested party will submit their final price, and the sellers will choose from that pile.
This is never a pleasant situation to be in (unless you’re the seller). You’ll be feeling in the dark, and the estate agents will not be able to guide you in much more depth than ‘it needs to be a good offer’ (estate agents are never allowed to reveal the figure of other offers). Usually in these situations, the property will achieve the asking price, or higher, due to the level of demand. This doesn’t mean you can’t offer less, but it’s risky. Only offer below the asking price if you’re in an exceptionally strong position, like nothing to sell with cash in the bank
Some final points
Most estate agents – despite getting a bad rap – are honest, scrupulous and good at their jobs (I promise!). But on occasion, you might come across one trying to game the system. Once you put an offer in, an estate agent has to put it to the sellers within 24 hours. It doesn’t matter how low it is, so if they try to tell you on the phone their client won’t accept your offer – remind them they have to put it to them, and let them decide.
A key thing that many first time buyers forget is that estate agents work for the sellers. The seller is the one that pays them at the end of it all, so if it seems like they’re “against” you, it might just be that they’re putting their client’s interests first.
If you’re still in the saving phase and aren’t sure of the best way to get a mortgage together, consider a LISA.
The best thing you can do is to set your expectations. It might take 2 months to buy a place, it might take 6. Do your best, keep up with your end of the paperwork, and prepare for a tumultuous few months. It’ll be worth it in the end.
Lifetime ISAs
If you’re still in the saving phase and aren’t sure of the best way to get a mortgage together, consider checking our post on Lifetime ISAs
