There comes a time when you’re sitting around in the pub on a Sunday with friends and you suddenly realise that instead of swapping stories of wild, lost weekends and recounting last night’s drunken adventures everyone is talking about house prices. A few years back you may have overheard such conversations and quietly pledged that you will never be like that – until suddenly you are.
Part of the reason buying a house tends to dominate conversations is that it that it’s hugely complicated, nerve-shreddingly stressful and takes longer than you’d think reasonably possible. It’s also the single biggest transaction you’ll make in your entire lifetime (especially if you’re a first-time buyer), both emotionally and financially.
Essentially, buying in London is like renting in London, only with more hoops to jump through, more paperwork and loads more people to give money to. Follow these tips, though, and you’ll emerge at the other end a real-life, bona fide home-owner – a feeling that beats anything you ever felt as a renter.
A more or less completely accurate representation of the process of buying a house.
Sorting the mortgage
Even before you hit the listings or start peering into estate agent windows, it’s important to know exactly what you can afford.
The general rule with mortgages is that you can borrow five times your annual salary, but remember that lots of things – credit ratings, in particular – can scupper that. Ironically, if you’ve never been in debt it can be harder to borrow money and those who have under-control credit cards and loans are considered safer bets for banks.
A mortgage broker can help with the process and as they tend to take a commission from the bank, it shouldn’t cost you anything. A broker can help you understand why your initial application might be declined. They are also able to view multiple deals from many different banks and know which are more likely to lend depending on your financial situation.
Remember that the size of your deposit will affect your mortgage rate. You want to shoot for a loan-to-value ratio of around 80 percent if you want to get a good rate and keep your monthly payments low. So if your house costs £350,000, you’ll need a deposit of around £60k.
You also need to factor in stamp duty – a whopping £7.5k on a £350k property – lawyers’ fees and surveys, which can cost another £2,000 at least. Bear in mind that you are going to need to furnish the place and eat until your next pay cheque as well.
Once you get this all nailed down you will be offered a mortgage in principle, which is a pretty fair bet that the bank will lend you money (but not a guarantee, on which more later).
Finding a place
Like everything else nowadays, house-hunting takes place online and you quickly get used to reading between the lines on estate agents' listings. For the first few days the wanton abuse of the English language and judicious use of capital letters and adjectives is hilarious, after a couple of weeks it is maddening, but fluency in agent-speak is a skill best mastered quickly.
‘Development potential’, for example, means the place will be a dump. ‘Desirable location on a quiet residential street’ means it is in the middle of nowhere. ‘A short bus ride from’ means it’s a long way from the tube. The faster you can get to grips with this language, the less time you will waste on pointless viewings.
The process is mostly common-sense: the longer a place has been listed the greater the likelihood that there is something wrong with it, so search the newest listings and as soon as you see something you like, get in there fast. Look for obvious omissions – the length of the lease, for example – if something isn’t in the ad, it’s for a reason.
It’s also advisable to get out there and – as much as you may shudder at the thought – meet estate agents in person. Drop into all the offices in the areas you’re keen on and register your interest – putting a face to your name means you’re more likely to stand out from the gigantic list of other Londoners and be front of the agent’s mind when a hot new pad comes onto the market. And, if nothing else, you’ll get a free coffee.
Get used to seeing lots of these.
Making the call
Once you see a place you like it’s time to make the call and arrange a viewing. Given the pace at which the London property market moves, you’re less likely to be ignored if you make a phone call rather than send an email. Yes, we know it’s more awkward – suck it up.
When you get the agent on the phone expect to be quizzed in minute detail about the state of your finances by someone who sounds like they still get an allowance from their parents. Feel free to refuse to answer anything that you are not comfortable discussing with a stranger.
Also be aware that agents have a stack of houses on their books and will likely try to get you to visit a couple in the area at the same time. These places are almost always horrible and there is a theory out there that agents deliberately take you see something hideous just above your price range to encourage you to spend more money, so bear that in mind.
Viewing (and viewing, and viewing…)
There are two types of viewings – groups and one-on-ones. The latter are far preferable to the former, which tend to involve being herded around by a disinterested estate agent while four or five other potential buyers mutter loudly about terrible it is (and then call later to put a low offer in). One-on-ones are a much better opportunity to quiz the agent and get a feel for the place.
And quiz the agent you should. London has a dearth of decent property at good prices and the likelihood is that this will be your one shot to get all the information you need – by the time you’ve arranged a second viewing, it could be sold. Take pictures on your phone as when you get home later having seen four or five houses you may struggle to remember specifics.
Look for warning signs: if it’s an upstairs flat, peer into the garden – immaculate lawns and flower beds, good; a rusting old car, upturned garden furniture and empty beer cans, bad. If the tenant (or owner) is there then ask them why they are selling. Take a look at the walls for damp, turn the shower on and check water pressure. On the way back to the station, check out the shops and restaurants, could you see yourself spending years here? If not, walk away.
Above all, don’t lose hope. Weekends will be ruined trudging around damp houses in Stratford. Nine out of ten places you see will be horrible. But eventually something good will come along.
Yep, this could soon be you (only with a much smaller house in the background).
Making an offer
When you do finally find a place you like then ask the agent there and then whether an offer has been made and at what price (he or she might tell you whether it is over or below asking price). Ask if the seller is in a chain – do they have to buy another place before they sell – which can delay sales by months.
Go away and think about it but not for too long. It is best to call back by the end of the day as once an offer is accepted, the estate agent should stop taking others and you don’t want to lose out. Make an offer below or at asking price (property website Zoopla will give you a rough idea of what the place is worth) and see how the agent responds.
There will likely be a period of hard bargaining at this point, particularly if you have offered below asking price and the seller wants more money. If you are without a chain – meaning you don’t have to sell your current place before buying – now’s the time to make sure the agent knows it. Sometimes sellers will take a lower offer from a first time buyer simply because it will be quicker.
Sorting a survey
Sadly, having an offer accepted is only the beginning of one of the most Kafkaesque periods of house buying, a time when literally anything can go wrong, more often at not at great financial (and emotional) cost. Friends and colleagues at this point of the process will be recognisable for the dark bags under their eyes, short tempers and endless trips to quiet corridors to take private phone calls.
Once the offer is accepted, both you and the bank will want to get a survey done. The bank to check that the property actually exists and that the price you’re intending to pay is realistic (so they’re covered in case they need to repossess the place), and your own surveyor for nasty things like damp, subsidence and structural defects.
You’ll be paying for all of this, which is especially terrifying because the seller is under no legal obligation to stick with the sale. If they suddenly get offered more money, they can pull out, and you’ve just paid for someone to check out a property you can’t buy. Sadly, there’s no way around this. The best advice is to keep in regular contact with the agent and get the surveys done as quickly as possible, since then you can move on to the legal period and get things properly locked down.
Nope, all those zeroes aren’t a mistake.
Like estate agents, solicitors can make or break a house purchase. A good one can be your best friend, a bad one your worst enemy. Ask around for recommendations and don’t feel that you have to use the solicitor recommended by the estate agent.
The conveyancing process is supposed to take around six weeks, but it can take a lot longer, especially if there are legal issues with the lease or the freehold. Flats that are part of bigger houses require extra work – the solicitor will need to clarify what kind of ownership you have and what costs you are liable for down the line. It’s a slow step, but one that could save you big in future when, for example, your upstairs neighbour suggests you ought to contribute toward the cost of getting a new roof.
At this point it’s worth bearing in mind that the seller will also have shelled out for a lawyer, so they are more unlikely to pull out than during the survey period. Still, keep in touch with both your lawyer and the agent and don’t be afraid to hassle/stalk them to the extent that they receive your calls with a heavy sigh.
Once the lawyers have done their thing, you’ll set a date for completion. This is the final stage of the process and barring the death of either you or the seller – in which case there are arguably bigger problems afoot – the sale is going to go through.
The bank will transfer the money and suddenly it’s all over. You pick up the keys and hope that you still like the place when you crash through the door to find it completely unfurnished and dusty after two months. The significance of what’s just happened slowly dawns on you and you’ll feel overwhelmed with an emotion that could either be joy or dread. This is an excellent moment to open a bottle of wine.