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Property Selling Info


eMoove - FAQ's Cost of Buying a Home
Gazumping
Types of Survey
Homebuyers Survey and Valuation
Building Survey
Home Condition Report
Stamp Duty
The Legal Side of Buying a Home

Cost of Buying a Home

  • The Deposit
  • Conveyance Fees
  • Stamp Duty
  • Valuation – The Lenders Valuation and/or Independent Survey Fees
  • Mortgage Lender’s Application Fee (if any)
  • Mortgage Indemnity Insurance Premium
  • Buildings and Contents Insurance Premium
  • Mortgage Payment Protection Insurance (if required)
  • Moving In/Removal Expenses
  • Furniture
  • Redecorating and restyling the house, if necessary

Gazumping

Gazumping is a term used when a seller accepts an offer from one potential buyer, but then accepts a high offer from someone else. The first buyer may have applied for a mortgage, instructed a surveyor and solicitors and will have incurred abortive costs if they do not proceed. The practice tends to occur in a buoyant market, when house prices are rising, and there are more buyers than sellers.

Until contracts are exchanged, either or both the vendor or purchaser may withdraw, and in the case of the vendor, may accept a higher offer. Unfortunately, agents are legally obliged to inform sellers of all offers made on their property, even after one offer has been accepted. Between making the offer and exchanging contracts, the buyer may well spend a considerable amount of money applying for a mortgage, and paying legal advisers and surveyors fees. It is possible for a whole chain of transactions to be affected by someone else being gazumped.

Can Gazumping be Avoided?

If is does happen there is nothing that you can do, but there are some ways in which you can minimise the risk of it happening.

  • Choose a seller whose agent has a policy on gazumping, if at all possible. Some agents insist that the vendor signs an agreement to turn down any offers after one has been accepted.
  • Keep in regular contact with the seller’s agents to ensure that all parties know how the sale is progressing. The vendor may be less tempted to consider another offer, if they can be satisfied that the purchaser is proceeding in good faith, with a clear intention of exchanging contracts at the earliest opportunity.
  • Once terms are agreed, and an offer is accepted, request that the property be removed from the market, and that a sold board is erected. Contact the agent if this does not happen.
  • Draw up an exclusivity agreement with the seller after your offer has been accepted. In return for a fee, this gives you exclusive rights to the house, as long as contracts are exchanged within an agreed timescale. In practice, few people enter into such an agreement, but it is always worth considering.
If you are gazumped, it is always worth maintaining contact with the vendor and/or their agent, expressing your wish to proceed in the event that the other buyer pulls out if they cannot obtain a mortgage. Stranger things can happen!


Types of Survey

Although the vendor is responsible for completing accurately standard pre-contract enquiries, the rule “buyer beware” places on the buyer the burden of discovering any physical defects in the property being purchased.

All lenders require a basic valuation, which essentially is for their benefit only. A valuation is not a survey. It is a limited check on the property that your mortgage lender carries out to ensure it is worth the money they are lending you.

Increasingly lenders, particularly for low percentage advances, may undertake a desk top appraisal style valuation, without even a valuer/surveyor being instructed to inspect the property. With minimal risk, where a low percentage advance is required, this speeds up the process and reduces the cost to both the lender and borrower. Although a valuation is not a survey, a professionally qualified surveyor will normally be instructed to undertake a valuation on behalf of a lender. Always check when applying for a mortgage whether the lender will be instructing a surveyor or valuer to inspect the property.

Typically, a mortgage valuation includes:

  • details of the property and construction;
  • a brief statement on the condition of the property;
  • identification of possible repairs;
  • a valuation of the property (with repairs undertaken, if required);
  • insurance – recommended value.
Your home is likely to be the biggest purchase you will ever make, so having a survey is worth it. A survey not only offers peace of mind, but can potentially save you thousands of pounds in costly repair bills, or even prevent you from buying a property with significant structural defects.

The Council of Mortgage Lenders and any solicitor will advise you to get a survey before you buy a property, and not just to rely upon a valuation. The survey, identifying all main defects which exist, will enable you at the very least to renegotiate the price.

There are three types of survey.

  • Homebuyers Survey and Valuation (HSV)
  • Building Survey
  • Home Condition Report

Homebuyers Survey and Valuation

A Homebuyers Survey and Valuation (HSV), also commonly known as a Homebuyers Report, is a survey done to a standard format, as set out by Royal Institute of Chartered Surveyors (RICS). The RICS advise that it is most suitable for conventional properties, built within the last 150 years, which are in reasonable condition. It does not detail every aspect of the property, only focuses on urgent matters needing attention, and is not usually suitable for properties in need of renovation, where major alterations are proposed, or for a period or timber framed properties.

The HSV includes details of:

  • the general condition of the property;
  • any major faults in accessible parts of the building that may affect the value;
  • any urgent problems that need inspecting by a specialist before you sign a contract, such as wiring and dampness;
  • results of tests for damp in the walls;
  • damage to timbers – including woodworm or rot, identified within the limitations of the report;
  • the condition of any damp proofing, insulation and drainage (although drains aren’t tested). No services are in fact tested.??
  • the estimated cost of insurance and value of the house;
  • the value of the property on the open market, reflecting defects, if any exist.

Building Survey

A building survey is a comprehensive inspection of a property. It is suitable for all properties, but particularly the following.

  • Listed properties.
  • Older properties, including period and timber framed houses.
  • Buildings constructed in an unusual way, however old they are.
  • Properties you plan to renovate or alter in any way.
  • Properties that have had extensive alterations.
It examines all accessible parts of the property, and you can ask to have specific areas included, so it covers any particular concerns you have about the building.

A building survey typically includes details of the following:

  • general description of the property, and location;
  • technical information on the construction of the property and the materials;
  • major and minor defects, and what they could mean;
  • the possible cost of repairs, particularly if separately requested;
  • results of damp testing of walls;
  • damage to timbers, including woodworm and rot;
  • the condition of damp proofing, insulation and drainage (although again drains aren’t tested);
  • recommendations of any special inspections, and further investigations.
A building survey may not commonly include a valuation, but your survey can provide an opinion of the open market value, and fire insurance reinstatement value, if requested.


Home Condition Report

In June 2007 the Government is introducing a reform that will change the way we buy and sell our homes in England and Wales. It was originally intended that the Home Information Pack would include a Home Condition Report. It was to be mandatory, but it is now voluntary (see Home Information Packs).

The Home Condition Report (HCR) acts as a “health check” for your home, and it is similar to a surveyor’s report. The Home Condition Report is commissioned by the seller, and not the buyer. It is an objective report on the condition of the property. The Home Condition Report will be completed by a qualified Home Inspector, who does not have to be a Chartered Surveyor. It classifies all the main elements of the property, such as roof, walls, foundations etc., into ratings 1 to 3. These correspond to good condition, need of repair and serious defect, which make the report clear and concise. The report lacks detail, however, of the Homebuyers Survey and Valuation Report (HSV), or Building Survey.


Stamp Duty

What is Stamp Duty?

Stamp Duty is a tax. The amount charged depends on the purchase price of the property. The latest rates of UK stamp duty, which may be subject to change, are as follows:-

Purchase Price of Property Stamp Duty Payable
Up to £125,000 £0
£125,000 to £250,000 1%
£250,000 to £500,000 3%
£500,000 Plus 4%


Exempt
Properties in disadvantaged areas are excluded from Stamp Duty (see Inland Revenue List of Areas Excluded from Stamp Duty).

Apportioning Stamp Duty
If the purchase price of a property is just over a stamp duty band, the burden of paying stamp duty rises significantly. For example, if the purchase price is over £125,000, the purchase will have to pay stamp duty of not less than £1,250 (1%). The stamp duty jumps, however, from 1% to 3% of the purchase price for properties worth over £250,000. For example, the stamp duty on a purchase price of £249,500 is £2,495 (1%), whilst the stamp duty on a property worth £255,000 is £7,650 (3%). Typically, if a property has a value close to a stamp duty band threshold, either the property will me marketed at a price just below the threshold, for example either £124,995, or £249,950, or a lower offer will be made on the property, and a separate price will be paid for fixtures and fittings, particularly for example electrical alliances. Any such payment made must relate to an actual transaction, and the payment has to be realistic, otherwise the sum agreed can be challenged by the Inland Revenue. If this happens, the Revenue will make its own judgement, and a demand may be issued for stamp duty which they think has been avoided. It is always best to err on the side of caution.

In practice, it may be that a property will sell for £249,995, and an adjoining property of identical layout and size, but with the benefit for example of a modern fitted kitchen and bathroom, will not achieve a significantly higher value, having regard to the additional burden of stamp duty.


The Legal Side of Buying a Home

Buying a home is normally the highest single financial transaction any of us will make. It can be like trying to find your way through a legal, financial and administrative maze. It is essential that you seek sound, professional advice and employ a solicitor as early in the process as possible, once your offer has been accepted.