The House Buying Process – a Guide for First Time Buyers – Part 2

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.