The above question has been asked on a number of occasions recently, especially as some house price surveys indicate the market is almost in freefall and others indicate that prices are actually rising.

A selection of the most recent figures available show that both the Halifax and Nationwide house price indexes showed a monthly drop in May of 2.4% and 2.5% respectively, leading to annual falls of 3.8% and 4.4% with both forecasting further falls. In contrast Prime Location reported a rise in prices of 0.4% giving an annual increase of 6.9%, and the Land Registry reported 0% movement in May with an annual increase of 1.8%

So why the difference? And more importantly, who is right?

To find out the answer to those questions, we need to examine how the data is gathered and identify how that might effect the results. In the case of Prime Location, and similar indexes such as those published by Rightmove, the data is based on asking prices rather than sold prices, and whilst they certainly give a feel for the mood of the market, we believe in this exercise, they should be ignored.

The Halifax and Nationwide indices are based on the sale of properties that they have granted mortgages on, and this is where we begin to see the reason for the difference.

Firstly, the data can be influenced by the number and type of customers applying for mortgages. For instance, if they have a particularly good deal for first time buyers, first time buyers are likely to make up a disproportionately large percentage of the data, which will then be overweight in terms of lower value starter homes typical of first purchases.

Secondly, virtually all property bought with the help of a mortgage will have been “valued for mortgage purposes”. This means that a valuer would have carried out a valuation, the sole purpose of which is to confirm to the lender that the value is correct. If the valuer makes a mistake, and it turns out that the house is worth less than the valuation, the lender could lose out. Therefore, when the media is full of predictions of a crash, the valuer is likely to take a much more conservative view, especially if the lender employing him has already said publicly that they expect house prices to drop by 9% this year! A self-fulfilling prophesy?

The Land Registry data is compiled from every transfer of ownership of registered land, regardless of whether there is a mortgage on the property or not, and the sample is therefore significantly larger. Whilst some of the data will have been influenced by the policies and practices of lenders and the valuers, the influence is much less with such a wide sample.

The above has, I hope, explained why there are differences between the various indices. As for who is right, that’s easy, it’s the Land Registry. It is just such a shame that many parts of the media continue to show a preference to bad news and scaremongering, rather than reporting the facts.

Buildloan, the mortgage packaging arm of Buildstore have announced improvements to one of their most popular self build mortgage schemes.

The scheme, which is run in association with The Mortgage Business (TMB) who themselves are part of the HBOS group, is a Self Certified Lifetime Tracker mortgage for self builders and renovators providing advance stage payment lending to £500,000. Previously the maximum loan was capped at £350,000.

The product is priced at 2.44% over the Bank of England base rate for the life of the mortgage, giving a current pay rate of 7.44%. An early repayment Charge is payable at 1% of the amount redeemed prior to the 30th September 2011. There is an arrangement fee of £995 for loans up to £350,000, which increases to £1,995 for loans between £350,001 and £500,000.

The Buildloan products have always had a welcome place in the market, being unique in providing funding when starting each stage of the build rather than at the completion of each stage. With lending of up to 95% of the cost of aquiring the land, and 95% of the cost of the build (in certain circumstances), the Buildloan/TMB product has been instrumental in allowing self building to become an option for many who otherwise wouldn’t have had the available cash flow.

Way back in time, those who thought they might want to buy their home would open an account at a building society, and start saving. After several years of saving, the account holder would apply to the same building society for a mortgage. The building society would judge the application using similar criteria as today, but with less reliance on information from others, and more reliance on the “in branch” interview. One of the biggest considerations would be how much the applicant had managed to save, and how they had conducted their savings account. If everything was considered to be acceptable, a mortgage might then have been offered.

The reason I say might have been offered, is simply due to the fact that the building society would be lending money it had taken in as deposits from savers. If insufficient deposits had been received, then regardless of how good an application was, no money could be lent out.

By the mid 1980’s, the industry saw the arrival of centralised lenders, many of whom were branches of overseas corporations. Adverts started appearing on TV for the likes of the Household Mortgage Corporation, and names such as Bear Stearns and GMAC (General Motors) were starting to be heard. These new centralised lenders were different, in that the money they lent was not money that had been received in as deposits, but money that had been borrowed from other banks and financial institutions. This period in time also saw the emergence of mortgage brokers, who provided cheap and efficient distribution for these new lenders, most of whom did not want to invest in large branch networks.

As time went by, many traditional lenders also saw the advantage of lending money that had been borrowed from other lenders, and so the practice spread. In some cases, the lender themselves would not want to actually administer the mortgages themselves, and so, every now and then, they would package up the mortgages they had granted, and would sell these onto another lender in a process called securitisation. The whole process worked very well and benefited many, as long as the quality of the mortgages which were sold on was accurately known and graded.

In the UK, we operate in a regulated market, and as such we should be able to be reasonably confident that all those who have been granted mortgages are able afford them and have the ability to keep up with the payments. Of course there will always be those who slip through the net, but for most lenders, accounts in serious arrears are often less than 1%. However, in the United States, the distribution of mortgages is far less regulated, and it has been possible for vast numbers of mortgages to be granted to those who wouldn’t qualify if they were in the UK.

Typically, the applicant would have been talked into taking a mortgage deal with a very attractive initial discount, ignoring the fact that as soon as the discount had ended, the applicant would not be able to afford the repayments. However, even this would not necessarily be a disaster if the mortgage holder was able to sell the property and repay the mortgage, and prices were rising very fast in parts of the US.

The problems started when it became clear that there were vast numbers of people who had mortgages they couldn’t afford, and the market started to become flooded with property being sold on a forced sale basis, meaning that the ever increasing property price rises suddenly reversed. As most of these mortgages had been securitised, it meant that the “structured investment vehicles” they had become was no longer worth what everyone thought they were.

Of course, financial institutions and markets being as they are, every Tom Dick and Harry had wanted a piece of the pie and there were many institutions who had invested in structured investment vehicles now faced some serious losses on their investment. The problem is that most institutions have had difficulty calculating their own losses, let alone being able to assess the losses suffered by their competitors, and have therefore been very reluctant indeed to lend money to each other; this is why the credit crunch as more properly referred to as the liquidity crisis.

For those lenders who had built their business on the back of being able to borrow the money to lend, this was a serious turn of events, most notably demonstrated by the difficulties suffered by Northern Rock. What has been less well publicised is the number of centralised lenders who have either gone into liquidation, or simply just shut up shop for the time being.

Whilst the clock has not quite gone back to the mid 1980’s, it is certainly true that those lenders with money to lend, are those who have also receive deposits, and that is why there are quite so many television adverts at the moment for savings. It has been said that many of the lenders who are able to grant loans are simply profiteering, and it is a hard charge to refute, when the likes of the Nationwide announce increased profits on the back of 40% less lending!

Will it get better? The general thinking in the industry is that there will be return of activity and an eventual loosening of some criteria, but this might take some time. There is almost unanimous agreement that there will never be a return to the days of being able to borrow 90% of a property’s value with bad credit and no proof of income, but that isn’t necessarily a bad thing. We will know that the market is starting to recover when we see the first lender introduce a 100% product that does not need a guarantor.

The Association of Mortgage Intermediaries yesterday published their Value of Mortgage Advice report in which they reveal that brokers could save consumers up to £1,830 every year.

The research for the report was conducted by independent financial services market research company NMG, who were tasked with examining the difference in value obtained by those using a broker to source the best mortgage deals, and those who went direct to lenders.

Chris Cummings, Director General of the AMI said “Intermediaries are able to identify the most suitable product for the consumer at a competitive price”. He further stated “Analysis of consumer attitudes shows they value this advice much higher than that provided by lenders, and in these difficult times it is more important than ever for consumers to access good financial advice”

Cummings adds: “Advisers know their clients and use this insight and their knowledge of the market to identify the most suitable and most price competitive products for the client. If the government wants to achieve its aim of more fixed rate mortgages, this will be done via intermediaries.”

It is thought that one of the reasons mortgage brokers offer such value is that they will look at the true cost of a particular deal, taking into account the effect of any charges. When consumers approach a lender direct, their decision as to which mortgage is best is often based on seeking the lowest headline rate, and with the lowest rates now attracting the highest arrangement fees, this can often prove to be an expensive mistake.

The Royal Institute of Chartered Surveyors (RICS) has released figures which suggest the number of sales could fall by as much as 40% this year, and have also forecast that house prices will fall by approximately 5% this year.

The figures seem to support the views of both us and other industry commentators, who believe talk of a 30% fall in house prices to be nothing more than scaremongering with little basis in fact. Indeed with interest rates forecast to remain level, and unemployment relatively stable, there does not appear to be huge scope for significant increases in arrears and repossessions.

There is a significant body of opinion that believes that homeowners will simply not accept that they have to effectively give their home away, and will sit tight and ride out the current difficulties. These latest figures from RICS seems to suggest this is exactly what is happening.

The Abbey have today announced the launch of a special three year fixed rate remortgage deal for those whose mortgage is less than 50% of the value of their home.

Priced at 5.78% (cost for comparison 7%), the fixed rate remortgage deal comes with a free valuation and free remortgage legal fees.

The scheme is only available through selected intermediaries, including the Mortgage Warehouse.

We hope this might prompt other lenders into reducing rates over the coming months.

Feeling a little more relaxed by a bank holiday which was not characterised by rain, I now feel able to approach this subject without the overwhelming desire to scream in frustration. Let’s face it, last week things got a bit silly.

On the one hand, the website housepricecrash.co.uk was registered in 2003, and now, some five years later we actually do have falling house prices. It is difficult not to have admired their tenacity in the face of the facts over the years, and now that their moment of triumph has arrived, it is not for me to belittle it with reason.

Indeed, I can even understand the position taken by Mr D’Arcy of fool.co.uk who tells us that he had the foresight to sell in 2005 and is now just waiting for a 30% correction (he hopes it will be 50%) before getting back onto the housing ladder. Selfish yes, but completely understandable.

What I find hard to accept is when someone who should know better, and is in a position of authority, publicly announces their expectation of a 30% crash. Yes Mr David Blanchflower, member of the Bank of England Monetary Policy Committee, I mean you.

Now, it may be that Mr Blanchflower, who is one of those who sets the Bank of England base interest rate, is playing sophisticated politics, and hoping to manoeuvre his MPC colleagues into earlier and steeper base rate cuts. But whatever he is doing, he is causing public worry and consternation, and should in any event leave the politics to elected politicians.

Now, we do not profess to have a crystal ball, nor do we profess to have any form of economics qualifications, but we do like to think we have a modicum of common sense. Many of those who have forecast a house price crash over the years have cited the growing gap between house prices and average incomes as the reason. Indeed, you will be able to uncover news details from as early as 2001 and 2002 where commentators were forecasting the bursting of the bubble. What most of them fail to appreciate is the role of interest rates in the whole process.

House prices do not crash because of a lack of buyers able to afford them. They may experience a modest correction, but a lack of buyers tend to lead to a stagnation of the market rather than any sudden reduction, and with lending volumes at roughly 50% of what they were, this is what is happening now.

House prices do crash when current owners can no longer afford their mortgage payments and are forced to sell, and the two main causes of payments being unaffordable are rising interest rate and unemployment, neither of which is currently forecast to any great extent.

To use a very basic (interest only) example, if interest rates were 2%, a mortgage of £100,000 would be affordable by someone earning £10,000 as it would represent a cost of just 20% of their gross income, even though the loan was ten times their income. Conversely, if interest rates were 15%, a £100,000 mortgage would likely be unaffordable to someone earning £30,000 as it would represent a cost of 50% of gross income, even though it is only just over three times income.

If house prices were to fall by 30%, it would mean that everyone with a mortgage of more than 70% would be in negative equity. When the costs of moving were added, it would probably mean that anyone with a mortgage over 65% would be unable to move unless they had additional funds from elsewhere to clear their mortgage.

This returns me to what I believe is the central question, and the question which is still unanswered by those forecasting a huge house price crash: If Mr average can afford to pay his mortgage now and would get less than he owed if he sold, why would he sell? The answer is of course, that in the majority of cases he wouldn’t. Most people will simply sit it out and wait, because they know that all the time they can afford their mortgage they do not have to give their house away, and eventually, whenever it may be, the housing market will return to some form of normality.

In the last part of this guide, we will look at what happens after the valuation has been carried out. We will assume that the property “valued up” and no significant problems were detected.

Mortgage Offer
Following receipt of the valuation report, the lender will check that all other aspects of your mortgage file are in order. In most cases, the lender will have already written away for the various references which will be needed to back up what you have put on the application form, but it is at this stage that any final questions will be asked and checks made. It is quite normal for a lender to carry out a further credit check at this stage, just to check that matter are as they were when the application was made. Assuming that all is in order, the file will be “passed for offer”, which simply means that the formal paper offer will be produced and sent to your solicitor.

In fact, it is normal for three copies of the offer to be produced. The main copy is sent to your solicitor, along with a set of additional “instructions” detailing how the lender wants matters dealt with and any additional requirements which are needed. An example of this might be an instruction to the solicitor to ensure that the lenders interest is noted on a buildings insurance policy. The second copy is sent to the applicant themselves, sometimes with other paperwork such as a mortgage deed for signature. The third copy will be sent to the intermediary.

A good intermediary will check their copy of the offer carefully, and will bring to attention any instances where the offer differs from the application. Sometimes, it can take several attempts for some lenders to get the offer exactly right, and a good broker can really make a difference at this time. Do remember, however good your broker or solicitor, and however much faith you might have in them, you must make sure that you fully understand every aspect of your mortgage offer. If you are in any doubt, ask.

Signing the Contract
As soon as your solicitor has received and checked your mortgage offer, and received and checked all the necessary searches (unless already provided as part of a Home Information Pack) he will arrange a meeting with you. During this meeting, the solicitor will explain to you the contract that has been drawn up between himself and the sellers’ solicitor, and will also explain the terms of the mortgage offer, and any other legal aspects associated with the sale. It is very important that you understand everything that you are told, and therefore you must not let the meeting move on until you are absolutely satisfied. When you are satisfied, your solicitor will ask you to sign the contract, and at this stage will also ask you to give him a check for the amount of the deposit. Solicitors have to keep your money separate from their own, and will therefore pay your deposit cheque into their “clients” account for it to clear (normally five days). In practice, contracts are standard documents and vary little from one sale to another. Because of this, sometimes a solicitor will send you the contract and other papers to sign through the post, especially if you have chosen a solicitor who is not based locally. This is not necessarily a disadvantage, but many first time buyers prefer to instruct a local solicitor who they can go and see.

Exchange of Contracts
In the same way as you will have met up with your solicitor and signed a contract, the seller will have met up with their solicitor and signed an identical contract. This means that as soon as your deposit cheque has cleared, the solicitors will be able to exchange contracts. This is a very important part of the process, as up until this point, either the buyer or the seller is able to pull out for any reason at all, and without explanation, and without having to re-imburse the other for their abortive expenses. As soon as contracts are exchanged, both the buyer and the seller legally have to go through with the sale.

In the past, exchange of contracts was a physical exchange during which the two solicitors swapped over the two contracts. Nowadays, exchange is carried out over the telephone, and in future will almost certainly be accomplished via some form of electronic system. At the time the contracts are exchanged, the deposit will be paid by your solicitor to the sellers solicitor and deposited in the sellers solicitor’s “clients” account. The deposit is never given to the seller, and is always held by their solicitor. At the time of exchange, a date is normally set for “completion” when you will move in.

Insurances
Because you are legally bound to complete on the purchase of the property, it is essential that any insurances are put into force at the time of exchange of contracts. This includes both buildings insurance, and any life assurance that you are taking. If you get run over by a bus after exchange of contracts, the administrators of your estate may still need to complete the purchase. As it is unlikely that the mortgage lender will honour the offer (after all who will pay the mortgage), you will need the proceeds from the life assurance instead.

Completion
Completion is the term given to the last stage of the house buying process and is the time at which the property is fully paid for and you can get the keys and move in. A few days before the date of completion, your solicitor will have “requested funds” from the mortgage lender, and they will have transferred the amount of the mortgage to the solicitor. If there are any charged which are “paid on completion”, these will have been deducted from the mortgage before it was sent to the solicitor. The solicitor will normally deduct his charges as well, and therefore you may have an additional balance to pay in this respect. If so, the solicitor will have told you in good time to ensure that he had cleared funds from you in time for completion. On the day of completion the balance of the money required to buy the house will be sent from your solicitor to the sellers’ solicitor and you will be able to get the keys and move in.

Do remember that interest will be charged on your mortgage from the day the funds are sent to the solicitor, not from the day you move in.

Part two of this guide looked at the process of appointing a solicitor, finalising the mortgage application and choosing the type of survey that would be carried out. In this part, we will look at what happens after the survey results are known.

The whole point of having a survey carried out is to establish that the property is structurally sound and worth the money you are paying for it. It therefore follows that there will be occasions where the survey results are not what is expected, and this is where it really can pay to have a good mortgage broker.

In this section, I will discuss only the results of the lenders valuation report. If you have had a Homebuyers report of Building Survey, this will have been carried out in much greater detail and will pick up faults and problems. In the vast majority of cases these will be minor, and due to the age of the property, but in some cases they may be worthy of further consideration. It is often said that the increased cost of a Homebuyer Report or Building Survey can invariably be recouped by using the survey to renegotiate the price of have repairs carried out by the seller prior to completion. Whilst there is an element of truth in this, it tends to be so only in a less active or falling market, or where the faults are significant. In an active or rising market, the seller is just as likely to withdraw from the sale in the hope that the next buyer to come along will only have a valuation.

When considering the results of a valuation for mortgage purposes, there are numerous possible results, but for ease, I have split these into three broad headings.

Valued Up
This is the term normally used by those in the industry in reference to a property which has been valued at the price it is being sold for, with no serious structural defects. It does not mean that the property has been valued for more than the sale price, which is a very rare occurrence indeed. Common sense would suggest that a certain proportion of property was sold at less than optimum value, but it is rare indeed for this to be reflected in a valuation. At The Mortgage Warehouse, we have decades of experience and have arranged many thousands of mortgages, but know of less than ten instances where a valuer has said in his report that the property is actually worth more than the price being paid. Most valuers we have asked simply say that unless overvalued, the agreement of a purchase price itself establishes a de facto value. We don’t agree, but the net result is that however much you think you have a bargain, don’t expect the valuation to come back at more than the purchase price.

The valuation report will make very brief comments on the condition of the property, and their may be one or two items that it is worth being aware of. For instance, where a property has a flat roof, it is very common for the valuer to include a statement such as “flat roofs should not be expected to have a useful life of greater than ten years, and as the age cannot be determined the purchaser may feel it prudent to make provision for its early repair or replacement”

Downvalued
This is where the valuer believes the market value of the property is less than the purchase price being paid. This might be because a structural problem has been identified, but is more often simply because the valuer doesn’t agree with the value placed on the property.

It would be easy to think that the property has been downvalued because the valuer was having a bad day or was upset by either the seller or the buyer, and we have even had it suggested that the valuer was jealous or wanted the property himself. It would be naïve to think that on rare occasions the valuer was not influenced by such things, but in the vast majority of cases, a property is downvalued for very good reason. There is some evidence that some valuers do try and either read the market forward and value for what they think the value will be in the future, and there is also some evidence that some valuers or firms of valuers will try and influence the market in a given area. Whilst such suspicions are hotly denied, a broker dealing with applications on a national basis is able to spot such trends quickly. On one occasion, The Mortgage Warehouse has found it necessary to inform a lender that we would not place business with them if they continued to use the services of a particular firm of valuers for our cases.

When valuing a property, the valuer will examine the structure of the property, its decorative order, and the advantages and disadvantages offered by the locality. For instance, being adjacent to a busy road is likely to reduce the value, but being within the catchment area for a respected school could increase the value. The value given will be based not only on the valuers opinion, but on the market at the time, and what similar houses in the locality have sold for in the recent past. Let me re-state that, because it is a very important point; the value is based upon what similar houses in the immediate locality have sold for in the recent past. The essential words in the previous sentence are “sold for” which is wholly different to “being advertised at”. In the majority of cases where a property has been downvalued and we are asked to challenge the valuation, it turns out that the valuer was right all along.

So what happens if the property you are buying is downvalued and you think the valuer has got it wrong? The first thing to say is that more often than not, the valuer has got it right, but valuations can be challenged.

To challenge a valuation, the applicant will need to demonstrate why he believes the valuation to be wrong. The evidence is then presented to the valuer, and he is invited to reconsider and change his valuation as a result. In many cases, the valuer will decline to reconsider, but will normally supply evidence to support his original valuation. If the valuer refuses to reconsider, but the evidence is overwhelming, some lenders have a facility to override the valuation and proceed anyway.

I can’t re-enforce enough how important it is to be objective if challenging a valuation. For example, let’s consider the hypothetical example of Mr Smith who is buying No.10 High Street, a four bed semi-detached. Mr Smith has agreed a purchase price of £180,000, and decides to opt only for a valuation for mortgage purposes. The valuer conducts the valuation and values the property at £168,000.

Mr Smith challenges the valuation and uses as evidence three “comparables” being similar property sold in the recent past in the same locality. Specifically, No 7 High Street, also a four bed semi sold three months ago for £182,000. No 17 High Street, a four bed terraced house sold for £191,000 late the previous year, and No 8 High Street, the three bed semi next door sold for £172,000 last month. On the face of it, Mr Smith would appear to have a solid case for reconsideration.

In response, the valuer said that he was not prepared to increase the valuation, as he believed he had accurately assessed the valuation in the current market. He used as evidence the same three bed semi next door as Mr Smith, along with numbers 18 and 28 High Street, both three bed semis being currently marketed at an asking price of £170,000 by two different estate agents. The valuer also made the following comments in support of his valuation:

• The subject property was not originally constructed as a four bed property and had been converted into such by the sub-division of an existing double bedroom into two singles. No’s 7 & 17 High Street were originally constructed as four bed properties and had larger internal dimensions, and number 17 in particular was a three storey recently built town house which were in greater demand.

• No’s 7 & 17 were on the opposite side of the road and benefited by having larger gardens than the subject property. No. 7 had the benefit of a garage.

• No. 8 next door also had the benefit of a garage and had recently benefited from a new kitchen and bathroom. Whilst still maintaining its original three bed layout, it was sold with the benefit of planning permission for the conversion of the loft.

• No’s 8, 10, 18 and 28 all suffered by having a railway line running along the bottom of their garden.

It is obvious to see that the valuer was if anything, over-generous in his valuation. The fact that two very similar properties were currently being marketed for £170,000 would suggest that their actual selling price may turn out to be significantly less than the valuation of £168,000, especially in a falling market.

If you find you are in the position of having a property downvalued, you have two choices. You can decide to withdraw from the purchase and look for a property elsewhere. You will be out of pocket to the tune of the valuation fee, but that should be considered a small price to pay in comparison to the amount the property was overvalued. Alternatively, you can re-negotiate the price to match that of the valuer, and in some cases the seller will agree, especially if they knew that they were being “hopeful” with the price of the property in the first place. More likely, you will settle on a renegotiated price somewhere between the original price and the valuation. Do bear in mind though; the mortgage lender will base the mortgage on the valued price, and any extra over that will have to be an addition to the deposit from your own money.

Retention
A retention may or may not be accompanied by a downvaluation, and means that there is something significantly wrong with the property to such an extent that the valuer thinks it would be a good idea for the mortgage lender to withhold some of the mortgage until certain repairs or work has been completed.

The lender will not always follow the valuers advice, and it is quite often the case that for minor issues, the lender will simply want an undertaking that the work will be done. A good example of this might be very old electrical wiring, which the valuer suggests is replaced prior to occupation and suggest retention of £3,000. The lender may apply no retention, but make it a condition of the offer that the property is rewired within six months of occupation. If the lender does apply a retention, then unless a lower price can be negotiated, or the seller persuaded to carry out the repairs between exchange of contract and completion, further funds would need to be obtained from elsewhere to allow completion to take place.

Retentions are much less common nowadays than they used to be, and should be taken very seriously when they are applied. In some cases, the retention will be applied because there is a serious problem with the property. Such things as damp and rot are able to be remedied, but you might think it calls for a renegotiation of the price, unless of course the defects were known at outset and reflected in the price. If the defect is structural, you will need to ask yourself whether it is worth proceeding with the purchase, even if repair is possible, as the hassle involved in the repair may be far more than cutting your losses and finding another property. However, do bear in mind that previous structural problems that have been properly repaired are not a reason for a reduced price. Many such properties will have been given a certificate of structural stability as part of the repair process, and can be a better bet that an unaffected but at risk alternative property.

In part four we will examine the process from getting the mortgage offer to the day of moving in.

Part two of this guide starts with hearing the news that your offer has been accepted, and it is now that the work begins.

The estate agent will want some details from you at this stage, consisting of the name and contact details for your solicitor, and full contact details for you and anyone else buying with you. They are likely to also ask for details of who your mortgage will be with, and may want to see a copy of the agreement in principle or mortgage promise if one has been obtained. The estate agent will then write to you and confirm in writing that the offer has been accepted.

At this point, many buyers become distressed at seeing the property they are buying still being advertised, and want the agent to “take it of the market”. However, this is often not possible for a number of reasons. The main reason is that the estate agent is acting for the seller, and has a duty to market the property to the best of his ability until it is sold. The property is not sold until contracts have been exchanged (see below), and therefore the estate agent would be failing in his duty to his client, if he didn’t continue to market the property. Bear in mind that although you may be 100% committed to the purchase, it is not unheard of for buyers to simply change their mind after having an offer accepted, or not be successful in getting their mortgage. The estate agent has to make sure that potential buyers are not discouraged until contracts have been exchanged.

Choosing a solicitor
Having the right solicitor can make a significant difference to the whole house buying process, and therefore your choice needs to be considered carefully.

The solicitor has a number of important tasks to carry out. Firstly, they have to prove that the person from whom you are buying the property is legally the owner and able to sell it to you. Secondly, they have to check whether there are any special conditions (normally called covenants or easements) attached to owning the property which may be detrimental. For instance, a requirement to keep livestock fenced in is unlikely to be an issue, whereas a right of way for ramblers across your back garden may well be. Thirdly, the solicitor will check whether there are any local plans which may adversely effect the property, such as a new motorway being planned, and lastly, they will register the mortgage charge (which gives the mortgage lender first call on the proceeds of any sale) with the Land Registry.

It may be that you have been recommended a solicitor by family or friends, and in that instance, if they have proved themselves efficient and reliable in the past, the likelihood is they will be so now. However, if you do not have a personal recommendation, do not choose the solicitor based only on price, as the cheapest are not always the best.

In most cases, your mortgage broker will be able to recommend a suitable solicitor, and at The Mortgage Warehouse we use an organisation called easier2move. In most cases, the mortgage broker will receive a referral fee from the solicitor, but this does not mean this is the only reason for recommending them. A solicitor who relies on referrals from mortgage brokers is likely to be reasonable efficient; if they weren’t, they wouldn’t receive the referrals. In some cases, such as with easier2move, the case is distributed to a solicitor who forms part of a panel of solicitors, who may or may not be local. To remain on the panel, the solicitor has to adhere to a competitive pricing structure and be competent and efficient.

Finalising the mortgage
As soon as you have had your offer accepted you should contact your mortgage broker. If you had previously obtained an agreement in principle or mortgage promise, it will simply be a case of updating the lenders system with the remaining details and making the application live. At The Mortgage Warehouse, we would normally do this over the phone, and then send any paperwork to you for checking and signing. In most cases, we will need to take credit or debit card details at this stage to pay for the valuation.

If you have not previously obtained an agreement in principle or mortgage promise, this will be done as part of the application process, with initial acceptance being confirmed as part of the process.

The mechanics of the mortgage application will be looked after by the administrator allotted to your case, but in essence this will involve the collation of various pieces of information and documentation as required by the lender, and checking that the application is proceeding smoothly. For most matters, your mortgage administrator will liaise directly with the lender, the solicitor, the estate agent and all others involved in the process, and will report to you as each stage is completed. As part of the application process, you will be provided with a folder containing all the relevant documentation about your mortgage, and confirming why it was considered to be the best mortgage deal available. This should be kept in a safe place.

As part of the application process, you will need to choose the type of survey that you want to be carried out.

Choosing the Survey
There are three types of survey that can be carried out, each with a different scope and price, and careful thought needs to be given to what is required.

Valuation for Mortgage Purposes

This is the cheapest type of survey, but isn’t actually a survey at all. The cost will depend on the value of the property, and can vary widely from lender to lender. It is often said that valuers must be very rich indeed for the amount the valuation costs compared with the time taken to carry it out. In actual fact, most valuation fees charged by the lenders have a sizeable chunk of profit built in, and the valuer often receives only a small percentage.

The objective of a valuation is simple. It is to make an assessment as to the value of the property and the cost of rebuilding it if it should burn or fall down, and to check that there is nothing which would adversely effect the prospects of selling the property if the lender had to repossess. It therefore follows that the valuer will check that there are no obvious structural defects or damp, but will not go very much further. The report which results, normally consists of two pages which is mainly tick boxes with perhaps a paragraph or two of comment. The valuation is instructed by and produced for the benefit of the lender, and as such it should not be relied on, although many purchasers do. If subsequent faults are discovered, there is no come back on the valuer.

Homebuyer Survey and Valuation

The following detail is supplied by the Royal Institute of Chartered Surveyors;

The HOMEBUYER Service is in a standard format and is designed specifically as an economy service. It therefore differs materially from a Building Survey in two major respects.
It is intended only for particular types of home: houses, flats and bungalows which are:
• conventional in type and construction
• apparently in reasonable condition.

It focuses on essentials: defects and problems which are urgent or significant and thus have an effect on the value of the property, although it also includes much other valuable information.

The HOMEBUYER, unlike a Building Survey, provides not only a survey but also a valuation as an integral part of the Service, and for this reason will be instructed and paid for via the mortgage lender

Because of the practical limits on the type of property and on the scope of its coverage, the HOMEBUYER Service is priced mid-range; more expensive than a Mortgage Valuation, but less than a Building Survey.

The surveyor’s main objective in providing the Service is to assist the prospective homebuyer to:
• make a reasoned and informed judgement on whether or not to proceed with the purchase.
• assess whether or not the property is a reasonable purchase at the agreed price.
• be clear what decisions and actions should be taken before contracts are exchanged.
The surveyor also gives his or her professional opinion on the particular features of the property which affect its present value and may affect its future resale.

The concise report covers the building inside and outside, the services and the site. It focuses on the defects and other problems which in the judgement of the surveyor are urgent or significant, but it also covers:
• the general condition and particular features of the property.
• particular points which should be referred to the client’s legal advisers.
• other relevant considerations concerning, for example, safety, the location, the environment, or perhaps insurance.

Matters which are judged to be not urgent or not significant are in general not included in the report but the surveyor will mention matters judged to be both helpful and constructive.

Where necessary, the surveyor may also be able to provide some extra service which is outside the scope of the standard package - perhaps providing a schedule of minor defects (for later discussion with a contractor), or arranging for the testing of mains services by suitably qualified specialists.

Where the client should take some action before deciding to proceed with the purchase, this is signalled clearly in the text of the report and included in the summary of action and other key considerations.

A Building Survey (formerly called a structural survey)

A Building Survey is suitable for all residential properties and provides a full picture of the construction and condition. It is likely to be needed if the property is, for example, of unusual construction, is dilapidated or has been extensively altered, or where a major conversion or renovation is planned. It is usually tailored to the client’s individual requirements. The report includes extensive technical information on construction and materials as well as details of the whole range of defects major to minor. A Building Survey is the most expensive option and is rarely available for less than £800, and more often more than £1,000. A building survey is normally instructed by the applicant direct with the surveyor, and does not include a valuation which may need to be instructed and paid for separately via the mortgage lender. However, where a Building Survey is being contemplated, do talk to your mortgage broker in advance. At The Mortgage Warehouse we are often able to persuade lenders to accept a valuation produced by the surveyor for a much lower “retype” fee.

The valuation or survey will normally be carried out within a week or so of making your mortgage application, and it is at this point that both the seller and the estate agent will be satisfied that you are serious.

In part three of this guide, we will look at what happens when the results of the valuation are known.