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.

Before looking at the actual house buying process, the first item you will need to consider are your reasons for wanting to buy a house at all.

Historically, buying your own home was seen as the thing to do, and it still is a valid solution to a great many needs. Owning your own home provides a secure environment in which to raise a family, and allows you to become established and build relationships with those in your community. Historically, it has been a good investment, and for most, is the most valuable asset they will ever own. The ever diminishing stock of social housing means that for families, it is the only option which ticks all the boxes.

However, buying a house is not necessarily right for everyone. Young single people in particular have often been encouraged to get on the housing ladder at the earliest opportunity, when waiting would have made more sense.

For example, a young professional working for a national or multi-national employer is likely to have to relocate several times during the early years of establishing his or her career, and if this involves selling and repurchasing each time, the costs and hassle involved would make renting a better option.

If you are considering buying with a partner or a friend, it is worth giving serious consideration to the strength of your relationship. Forced sales which result from joint owners no longer wanting to live together are rarely without problem, and if the value of the property has fallen, you may well be trapped and unable to sell.

Assuming that you have carefully thought about your motives, and have decided to take the plunge, what is the process?

Save a deposit.
At various times, there are lenders who offer schemes to those who do not have a deposit, but the ongoing regular supply of 100% mortgages is not certain. Even when 100% mortgage are available, the cost is likely to be significantly higher than would otherwise be the case, and there may be enhanced charges or further restrictions. Saving a deposit will almost certainly get you a better deal with lower charges.

In terms of the amount of deposit, you will normally need an absolute minimum of 5%. There are quite a number of lenders who will normally consider an application for a 95% mortgage, and there should be a reasonably wide choice of product available. However, the interest rate charged is likely to be significantly higher than if you had a larger deposit, and most lenders will want to charge a Higher Lending Charge (HLC). The HLC is explained in greater detail later, but suffice it to say that it usually amounts to several thousand pounds and is best avoided if possible.

If you are able to save a deposit of at least 10%, then the mortgage deals available will be considerably better. Not only this, but in most cases the dreaded HLC will not apply. There are further advantages to having a larger deposit, and the very best schemes are limited to those wishing to borrow less than 75% of the value of the property. However, the difference between a 75% mortgage deal and a 90% mortgage deal is far less than the difference between a 90% mortgage deal and a 95% one.

Quite often, we are met with the argument that a 100% mortgage is needed, as the applicants find it impossible to save a deposit. Whilst we accept that there are sometimes occasions where a family find themselves in rented accommodation where the rent is far more than a mortgage would cost, this is the exception rather than the norm. For most, the inability to save a deposit should really be taken as a warning that committing to buying a house may be the wrong decision at this time. Owning your own home always has uncertainties, and repairs and maintenance always seen to be needed at the most inconvenient of times. Mortgage rates can and do go up as well as down, and therefore surplus of income over expenditure is an absolute must, and if this doesn’t exist now, it is unlikely to after you have taken on a mortgage.

Once you have saved your deposit, or decided to buy without a deposit (if suitable schemes are available), the next stage is;

Complete an accurate budget planner.
This part of the process is essential, and if you want help, just ask. The Mortgage Warehouse has years of experience in helping first time buyers assess whether or not they can afford to buy. We can supply you with a blank budget planner, and will even help you fill it in if required.

One of the most common mistakes made when calculating a budget is to seriously underestimate the costs of living, especially what is spent on entertainment and leisure. As a guide, the Abbey have released figures obtained from the Office of National Statistics Family Spending Survey showing the average cost of living, excluding mortgage/rent payments and any other credit commitments. A single person averages £521 per month and a couple £1056. A family of two adults and two children reputedly spend a total of £1,270 per month.

As soon as you are happy that you have accurately budgeted for your expenditure, and know how much you can afford, the next stage is;

Contact a Whole of Market mortgage broker.
Obviously, we would hope that you would contact us at The Mortgage Warehouse and ask us to help you with your mortgage requirements, but if not, you should make sure that you speak to another whole of market adviser.

At The Mortgage Warehouse we don’t charge fees, unless your mortgage is very small (less than £60,000). This means that not only can you be confident that we are recommending the best mortgage for you from the whole of the available market, but we will look after your mortgage application and it won’t cost you a penny. Many people don’t realise just how valuable this service is until they have had a taste of sitting in the queue waiting to get through to the lenders’ overseas call centre themselves.

If you decide to call us, we will discuss with you your individual requirements and decide the best way to proceed. This is important as each applicant has different circumstances and theses need to be taken into account. For instance, it is often said that a first time buyer should obtain an agreement in principle or mortgage promise before looking at property. This is true, but only where the applicant is hesitant about their credit score. In such instances, we will identify the most suitable mortgage product and request an agreement from that lender, and will normally receive an answer the same day.

For those who are confident that they have a good credit score, it is not necessary to get an agreement in advance of looking for property, especially as one can usually be obtained within hours if required. The reason for this is because lenders are introducing and withdrawing mortgage rates far more frequently than has been the case. What may be the best mortgage deal available on one day may have been superseded the next, and it is very likely that the application would be with a different lender than the one who has granted the initial agreement. Each agreement in principle or mortgage promise requires a credit search to be conducted, and too many credit searches in a given period of time can actually lower your credit score. For this reason we suggest waiting until an offer is to be made before finalising the mortgage lender and scheme.

Looking for property
For many, this is the fun part, but there are a number of do and don’ts that should be borne in mind.

• Do take your time, and view as many properties within your price range as possible. Having a set number of pre-conditions may mean you miss out on something which could be ideal.

• Do look in all the places you might find property for sale. Register with all the estate agents in the area you are looking, and get the local papers, especially if there is a local “property” paper. Look on the internet; there are now many property listing sites, and most estate agents have websites with interactive search facilities.

• Do view your favourite properties more than once and in different weather conditions, and at different times of the day.

• Do have a critical eye, and be aware. The smell of bleach or air freshener may indicate a house proud owner, but might just as easily be covering up the smell of damp. Ask the seller to demonstrate things like showers; are they acceptable, or is there just a dribble? Look closely at things like the internal joinery and how wall and floor tiles and other flooring has been installed; are there faults? Can you live with them?

• Don’t forget that the estate agent has only one job, which is to get the best price for the seller.

• Don’t be hurried, either during a viewing or into making an offer.

• Don’t be misled by sharp sales practices. Most property is not selling quickly, and there are in reality, very few properties which are that special or unique that you won’t find one similar or as cheap.

• Don’t forget that the agent is obliged to pass on any offer you make without applying conditions. You are not required to see their financial adviser before having an offer passed on, and you are not required to make the offer in writing or in person at the estate agents office. If the estate agent refuses to pass the offer on, you are quite at liberty to contact the seller direct.

The seller and their estate agent can quite legitimately ask you to demonstrate your financial ability to complete the sale. Unfortunately, there are people who will make offers with no realistic chance of being able to purchase, and this is just a waste of time, effort and money for all involved. However, a copy of the agreement in principle or mortgage promise is quite sufficient, and there is no requirement for you to disclose personal financial details to either the estate agent or the seller.

• Don’t be taken in by discounts, paid deposits or other incentives. In most cases, the net price after the discount or incentive is the true value of the property, and is the figure the lender will use. Occasionally, having a 5% deposit paid by a national established house builder will be acceptable, but most lenders will still require you to put in at least 5% of your own money as well. Carpets, curtains and white goods are normally true incentives and well worth negotiating, especially with a new property.

• And lastly, don’t forget that most property is a compromise between features. Properties built in the 60’s and 70’s tend to have larger than average gardens and larger than average rooms, but are likely to be architecturally uninspiring at best. Modern executive developments often feature properties with character which are visually appealing, but they will have smaller gardens and smaller rooms, and will almost certainly be built “cheek to jowl”.

Part two of this guide contains details of the process which starts with having your offer accepted.

Northern Rock got themselves into trouble by giving mortgages for 125% to first time buyers who couldn’t afford them.

This is one of the most common myths to be heard at the moment, and perhaps that isn’t surprising. There is certainly much truth in the view that it was Northern Rock’s aggressive business plan which got them into difficulties, but it is also true that some truly inept mismanagement by the authorities guaranteed their demise.

With their unerring ability to spot a scapegoat tied to a bandwagon, a number of politicians queued up to heap scorn on Northern Rock, the FSA, the Treasury, the Bank of England and their colleagues in government, not necessarily in that order. In the clamour for the sound bite, the truth became an early casualty.

Northern Rock did not ever lend more than 95% of the property value on a secured mortgage. They did have a facility called the “Together” mortgage where applicants who had a good credit history (and it did have to be good) could take a separate unsecured loan for £30,000 or 30% of the property value whichever was the less. This meant that the only applicants who could actually borrow 125% or the property value were those buying for £100,000 or less. This was no different from an applicant obtaining a 95% mortgage from any other lender and arranging a separate loan themselves, and many did.

Another of the criticisms levelled at Northern Rock was that their income multiples were too high and as soon as interest rates started rising, people found themselves in difficulty.

Again, this had very little basis in fact. To gain the highest income multiples, Northern Rock insisted that an applicant opted for a fixed rate of five years or longer, thus locking in affordability. Even at low rates of wage inflation, an applicant could expect to be earning at least 20% more at the end of the five year period, and that provides for quite a hike in interest rates before affordability would be reduced.

Perhaps the best indication of whether Northern Rock lent in a reckless manner is an examination of their arrears book, and we are informed that their together mortgages actually default less than many standard mortgages.

RIP the Northern Rock Together plan, it will be sorely missed and did more to help first time buyers onto the housing ladder than any number of ill thought out new initiatives being introduced by its current critics.

The quick answer is when it is a property being sold in the normal way.

Let me explain; just lately, we have received quite a number of enquiries from first time buyers who have evidently found a bargain. What is more, most of them seem to be on the verge of losing it and therefore mortgages and especially valuations have to be arranged yesterday.

Now, don’t get me wrong, we pride ourselves on our efficiency and are often able to get things done in double quick time, but sometimes it is just not necessary. We have even had one instance of a client paying for motorcycle couriers to chase round the country dropping papers of here there and everywhere!

I thought it might help just to clarify what is really happening in these situations, and help put the buyer back where they should be, in control.

The first thing to bear in mind is that if you have found the property in an estate agents window, it isn’t a bargain, whatever the estate agent may tell you. Let’s think about this a little more.

Firstly, the sole purpose of the estate agent is to get the best price possible for his client the vendor. The vendor would, quite rightly expect him to use all the skill at his disposal to achieve this, and it therefore follows that to even offer a property at less than the optimum price, would be negligent, and a failure in his duty of care.

Secondly, in the very rare instances when a property is offered for less than its proper value, it rarely makes it as far as the estate agents window. If the estate agents instructions are (for whatever reason) to sell quickly for a reduced price, they would again be negligent if they didn’t sell the property to the buyer who could complete the quickest. That person is likely to be a cash investor who the estate agent has had previous dealings with and can be confident in his status.

Thirdly, most estate agents are paid a commission based on the price they get for the property. There is no earthly reason why they would sell for less than value and lose out on commission.

So why are you being told “You need to get a valuation within a week or it will go to someone else” or “your offer will only be accepted if you can complete in three weeks” etc?

The answer is simple, it is money! There are rarely other buyers waiting in the wings to steal your bargain from you, and threatening to re-market the property is a bit of a misnomer, as in theory, it should continue to be marketed up to the point of exchange anyway. The fact is that in these difficult times, less houses are being sold and therefore estate agents have three objectives.

Firstly, they need to maximise the income they receive, and this can be most effectively done by encouraging you to use them to arrange your mortgage. First time buyers are more savvy now than they used to be, and are unlikely to be swayed by statements such as it is compulsory to use their adviser, or they are not allowed to pass offers on without checking the financial status of the purchaser. But, they may be tempted to use the in house service when a quick valuation is needed, knowing that it would then be the estate agents responsibility to see it happened. It is surprising how many properties have “valuation deadlines” when offers are accepted!

Secondly, estate agents need to receive commissions as quickly as possible to generate revenue to continue run their businesses, and as they are paid on completion, they want that day to come round as quick as possible. In fact, the same applies to mortgage brokers like us, and we need to make sure things happen quickly as well. Anyone who tries to tell you specialist brokers and advisers don’t have the same speed incentive is pulling your leg.

And thirdly, with falling house prices a hot topic in the news, estate agents want to make sure that once an offer is made and accepted, it completes quickly before the buyer changes their mind.