Housing Market

Ideally, most people in the UK have their own detached home with a garden and garage, although this is extremely rare in London where most properties are blocks of flats and terraced houses, and therefore expensive.

There are two types of real estate:
• Freehold - Own the land (or shared freehold if you buy a flat)
• Leasehold - Buy the accommodation (building), but rent the land. Contracts are usually 99 years (but some can carry up to 999 years nowadays), this period can be longer and shorter. The shorter the contract, the less expensive the value of the property (you will particularly pay attention to any lease of less than 80 years as the cost of extending the lease becomes more expensive. The leaseholder can indeed purchase extra years on the lease from the freeholder. There are cost guidelines freeholders must follow when pricing extensions, and in most cases you will find that the sum paid to increase a lease will be reflected in the new value of the property.).

The Leasehold Advisory can offer advice about property.

Prices

The overall average for London house prices in 2011 was £406,000 (£228,000 in the UK); however prices can extend from £200,000 to £1,500,000 and more. You can find history of sales in an area/street on websites such as nethouseprices.com or zoopla.co.uk.

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How to Search for Real Estate

Properties in the UK range from semi-detached and detached houses from modern town houses to dilapidated country mansions and castles to chic city flats.

The first step to a successful search is determining what you want. Buyers should research the areas and types of property they are interested in. Consider local amenities, transport links, schools, open space and council-tax bands. Make a comprehensive list of what you want, and don't want, in a home to make your search as efficient as possible. If what you want is not on the market, it is also possible to buy a plot and build the home of your dreams. This takes considerable funds, energy, and planning.

Online Listing

Online listings can give you a great feel for the market and allow you to determine if a place fits your specifications. Most sites allow you to set-up alerts to find the best property for you.

• Right Move (the most popular website for properties)
• Find a Property
• Prime Location
• Property Finder
• Your New Home
• New-homes
• Loot
• Gumtree

If looking for a historical home, Stately Homes is a great resource.

Another great online resource is the UK classifieds on EasyExpat. You can also chat with other expats on the England forum and receive advice.

Home and Property Magazines

UK Home and Property Magazines are valuable sources of info for new homes. They usually include a list of new developments throughout the country and advertisements for builders and developers.

Newspapers

Local newspapers are a good source of information about property prices, the type of property for sale and local agents. Most have a property section.

These include:
• The Times- Saturday and Sunday edition
• The Daily Telegraph- Saturday edition
• The Guardian

Public Postings

Many places have billboards offering advertisements for a variety of goods and services. Watch these boards for useful postings. Laundrettes, cafes, grocery stores, community centres, and bars all might have private ads.

Property Shows

Annual property shows are an excellent way to view what is available on the market. They are also a great resource for advice on buying a home and those design, decor and furnishing options.

• Daily Mail Ideal Home Show- held in March
• Property Investor Show - held in September

Estate Agent

An estate agent can be a useful resource for finding the right place quickly. Also called home search consultants or buying agents, a good agent knows the legal pitfalls and has access to a variety of housing. An agent will provide you with a description of available properties, escort you to viewings, make sure your contract complies with expected standards.

Estate agents are remunerated buy the vendor and not by the buyer. This illustrates their ambiguous position as their client is the vendor, not you. Of course, in order to be paid they need the ensure that the transaction goes through, which means assisting you in your research as much as they can but ultimately their official assignment is to get the highest possible purchase price for their client. Interestingly, they are also obliged by law to pass on to the vendor any official offer to purchase the property on sale, verbal or written, irrespectively of whether or not an offer has already been accepted. This will be explained in more detail below.

To find an agent, consult:
The National Association of Estate Agents
Arbon House 21 Jury Street, Warwick CV34 4EH
Tel. +44 (0) 1926 496800

Making an Offer

Once you have found a property, you make a formal offer via the estate agent who will have to pass it on to the vendor. The vendor will decline it, decline it but with a counter offer they would be prepared to accept, or simply accept it. When the offer is accepted, the property becomes ‘Sold subject to contract’, as it can be often read on estate agent signs.

If the offer is accepted, the agent (or if there is no agent, the seller) will write to confirm the address of the property, the agreed price, and the terms and conditions. The document will also include the names and addresses of both parties and their solicitors.

Prices

Buying property is one of the few times in the UK when you're expected to haggle over the price. Most homes sell at around 5 percent less than the original asking prices, with some places receiving a 10 percent reduction. Sellers generally presume buyers will haggle and rarely expect to receive the asking price in England (this is opposite to Scotland). This applies equally to new and old properties.

To figure out an adequate price, calculate how much you can afford, how much competing interest there is in the property, prices recently paid for comparable properties (assuming that information is available on websites such as nethouseprices.com or zoopla.co.uk), what you wish to include in the price, and your preferred date of entry (or completion). Location is the prime factor in determining value. Also consider the state of the property market (whether properties are selling fast or slowly) and the amount of work that needs to be done.

Another cost to consider is the running costs of the property.

This may include:
• Council tax
• Buildings insurance
• Contents insurance
• Mortgage protection insurance
• Standing charges for utilities (electricity, gas, telephone, water);
• General maintenance

As an indication only, annual running costs usually average around 2 to 3 per cent of the cost of a property.

It is important to remember to get a good understanding of the vendor’s position as this can help you refine your bidding strategy. Always ask questions about the vendor when viewing the property with an estate agent: how long the property has been on the market, are the vendor selling in order to buy a new property or moving away from London, or maybe abroad, etc. In some cases, if you get the impression that a vendor is keen to sell quickly, either because they must leave soon or have been trying to sell for too long, they may be more willing to compromise on price!

Contracts

Before you sign any documents, including your contract with your estate agent, have it looked over by a lawyer or advisor. It is extremely important that every element of a contract be understood before signing. In the UK each party is represented by one solicitor, contrary to systems like the French system for instance where a notary will be in charge of the whole transaction. This guarantees there will be no conflict of interest as you can be sure that your solicitor will ensure your best interest is preserved.

In any case, nothing is guaranteed until the 'exchange of contracts' (exchange of property deeds), so both buyer and seller can withdraw at anytime, for any reason. This can be a frustrating time and you will hear stories of chains collapsing, which means that several people are waiting to complete their own sell in order to be able to buy and are dependent on each other and one has not succeeded.

After your solicitor has carried out an inspection of the papers, he will provide a report to you with recommendations. Quite often, a contractual letter containing further qualifications is issued on your behalf by your solicitor. If the terms are acceptable to the seller, the seller's solicitor will issue a final formal letter.

Your solicitor will then transfer 10% of the purchase price you will have transferred to their account first to the account of the solicitor representing the vendor. The funds will remain lodged there, still out of reach from the vendor, but this will in essence your guarantee to purchase the property. In other words, this is the point of no return of the transaction and should you not proceed with the purchase, the 10% would then be released to the vendor’s own account. Should THEY not proceed, the 10% will be transferred back to you and the vendor will then become liable to meet the costs you have incurred to date. This stage is called the ‘exchange of contracts’.

This does not conclude the process however as you will not become the owner of the property until ‘completion’ has taken place. This means that the remaining 90% (whether they come from your own funds, from you bank, or both) are transferred across to the vendor’s solicitor’s account and your name is added on the property’s deeds. There is no set rule and ‘exchange of contracts’ and ‘completion’ can take place on the same day or typically be 1, 2 or 3 months apart.

In most cases, your solicitor will act for both you and the mortgage provider.

Potential Issues

Chains

A chain is simply a group of buyers and sellers who are linked by their properties. Everyone in the chain relies on the sale of another's property. If one person backs out of a sale, the whole chain can fall apart. For first-time buyers, this is not a problem as no one is relying on the sale of their property before they can buy another.

Gazumping

Gazumping refers to a seller accepting an offer from one potential buyer, then accepting a higher offer from someone else. It can also refer to the seller raising the asking price at the last minute, after previously agreeing to a lower one. In either case, the original buyer is left in a difficult position, and either has to offer a higher price or lose the purchase.

As mentioned earlier, even with the best intentions estate agents are contractually bound to pass on any offer made by any potential buyer, whether a prior offer has been accepted or not.

Financing

It is important to prepare for financing well before looking for a home. If you require financing, it is necessary to work out how much can be borrowed. Until 2008 it was usual to borrow up to 90% of the value of the property, 95% or even more than 100%. This is no longer the case and 95% mortgages are rare (and subject to additional insurance). In order to calculate how much you can borrow, English banks multiply the person's annual salary. It is usually up to 4 times, but can reach 5 or 6 times, depending on the situation and the percentage borrowed. If buying with a friend or partner, up to approximately 3 to 5 times the combined salary may be borrowed. The more money put down as a deposit, the more can be spent on a property, and also the lower the interest rate (as this represents a lower risk for the lender) . However, this is only a guide and the range of mortgage products on the market means that each buyer must do their own research. Mortgage offers are numerous and you can use a mortgage adviser to find the best deal according to your situation.

Two basic types of mortgage:
• Repayment - Generally describes a mortgage in which the monthly repayments consist of repaying the capital amount borrowed as well as the accrued interest, so that the amount borrowed decreases throughout the term and by the end of the loan term has been fully repaid.
• Interest only - For a set term, the borrower pays only the interest on the principal balance, with the principal balance unchanged. At the end of the interest-only term the borrower may enter another interest-only mortgage, pay the principal, or (with some lenders) convert the loan to a principal and interest payment (or amortized) loan at his/her option.

A deposit will be paid at the signing of contracts, usually about 10 percent of the agreed upon price. Cleared funds must be in the hands of your solicitor in advance of settlement. Often these funds will come from the mortgage provider, with the balance being provided by you. If you've got a mortgage, the money will be paid to your solicitor by your lender before completion, and will be sent by him to the vendors solicitor by bank telegraphic transfer on completion day. These funds have to be sufficient to cover all sums as per the state for settlement, which includes the purchase price, stamp duty (if applicable) and registration dues on the title.

Fees

Most fees are calculated as a percentage of the cost of a property, therefore the more expensive a property, the higher the fees. Most of these fees are associated with a mortgage, so cash buyers incur much lower fees.

• Mortgage product fee: Mortgage deals generally have a product fee associated with them. It can be added to your mortgage amount but remember that interest will be charged. The market average would be around £1,000, but this can vary greatly from a deal to the next. It is crucial to compare both rates AND set ups fees when comparing two mortgage deals.
• Mortgage account fee: This fee is to cover the setting up, routine maintenance and closing down of the mortgage account. This is usually £300 or less.
• Stamp Duty Land Tax: This is payable to the government on properties valued at 125,000 GBP or more. This is basically a property tax, calculated as a percentage of the purchase price.
• Valuation fee: This fee pays for the assessment of the property you wish to purchase to ensure a) the price you are paying is a fair reflection of the market and also to ; b) the property does not suffer from major structural defects that would impact on its resellability and therefore present and future value. The fee will depend on the purchase price but a budget of £500 to £1,500 should cover it.

Closing

When the final payment has been made, the deeds to the property are handed over to the buyer's solicitor, including the conveyance or transfer of ownership. The estate agent will then be allowed to release the keys on to you. There are several other last steps:

• The conveyance stamped
• Pay the stamp duty on the property purchase to the Inland Revenue (you will have already transferred the corresponding amount to your solicitor’s account and they will take care of paying Inland Revenue)
• Register the transfer of ownership with the Land Registry
• Notify your lender that the sale has been completed and inform the insurance company
• Send the title deeds to your mortgage lender who holds them as security until the loan is paid off or the property is sold

Auction

Buying at auction is very exciting and can offer you a significant savings. Note that this buying method is not for novices as there are many pitfalls. These are usually properties that are difficult to sell and/or need serious renovation, or properties that were repossessed by a lender following the non-payment of mortgage monthly payments. If you are determined to buy through this method and are inexperienced, get the advice of professionals and preferably bring someone with experience. It is also advisable to attend a few auctions as an observer before placing a bid.

Auctions in the UK

Auction sales are popular in the UK and almost every weekend there is an auction somewhere. There are over 30,000 auction sales a year in the UK. December is one of the best times to buy at auction, as there is the least competition at this time.

When buying at auction you need to move fast. They are usually only advertised 3-6 weeks in advance. Bidders must provide their identity, so bring photo ID and your solicitor's details. When a bid is accepted, the property is legally yours (it is as if you had exchanged contracts on the spot – see above) and you must pay a deposit of around 10 per cent (in cash or by banker's draft). You have four weeks (20 working days) to pay in full. You should arrange buildings insurance immediately after the sale is completed.

Guide Prices and Reserve Prices

Guide prices tend to be deliberately conservative in order to attract as many prospective buyers as possible and the actual selling price is often much higher than the guide price. The guide price is different from the reserve price. The reserve price is the lowest price the seller is willing to accept. If no-one bids above the reserve price, a property will remain unsold. When bids pass the reserve price the auctioneer announces that a property is "on the market" and will be sold.

English Auction Venues can help you find an auction in your area.

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