7 Common Mistakes when Buying a Home - Part 1

Hi guys !

Dan and Kye here again from Crescent Mortgages and today we're going to be covering the seven common mistakes that people make when purchasing a property.

This is part one of two videos. Before we get started, as always, just to remind you that we are qualified mortgage and protection brokers with 20 years combined experience in the industry.

So today I guess we just want to really hit home on those common mistakes that people make which can actually have a really really big impact on purchasing a property and can cause you a lot of problems, so stay tuned and let's jump into it.

Not obtaining an agreement in principal certificate before you start your property search.

So the reason for obtaining an agreement in principle...

Actually before we do that, what is an agreement in principal certificate?

So an agreement in principle is essentially just an agreement from a mortgage professional whether that's a bank or building society, or a mortgage broker, confirming that they believe, based on the information you provided that you should be able to attain a mortgage.

It's not a guarantee but it is as they say an agreement in principle, so it gives you a good indication that you should be accepted.

Now the reason for obtaining an agreement in principle is two fold.

Number one, it's quite important when you go to the estate agent. A lot of estate agents won't let you view a property without showing them proof of the ability to get a mortgage or they certainly won't let you make an offer on a property, they will not let you make an offer no, and it just shows that you are serious it shows that you've done your research and they know that if they do want to sell that property to you that you can do it.

You're basically not a time waster, because they don't like that, they don't like time wasters no.

So although there's no guarantee, that if you have an agreement in principle doesn't mean you're definitely going to get the mortgage but it's as close to giving them the assurance that they need to let you move forward and make an offer on a property.

So that's the first reason. The second reason for obtaining and having the conversation to get an agreement in principle is for your own personal budgeting, so until you have that conversation really you have no idea how much you can borrow with your mortgage assuming that 99% of us will need a mortgage to purchase a property unless you're kind of in the lucky 1% that has the cash somehow, so you need to know how much you can borrow and then with the deposit that you have on top that will determine what your budget is and how much you can purchase for.

There's absolutely no point starting to look at properties for x amount if you have no idea whether you're going to be able to achieve that mortgage. You might feel confident that you can, you might know what you earn if you're confident of how much you're going to be able to borrow but don't make the assumption until you've had a conversation with a mortgage broker or a bank or building society.

Preferably a mortgage broker because they have more lenders to choose from than obviously just one, I mean from our perspective. So I guess what would we do so if someone comes to us?

They're want to start a property search, they need an agreement in principle. We'll I've asked you but I'm actually going to answer your answer - shut up.

We'll take some of your information, some of your personal details, you know how much you earn, outgoings, a few other important bits of information. We'll then check criteria, we'll run lender's affordability calculators and we'll then confirm how much we think you can borrow. We can also give you an idea of what your mortgage payments might be answer any questions that you have about the process or the mortgage anything else at all, we'll then send you the agreement in principal certificate.

We'll do that for free

And then you can just carry on with your house search and as soon as you found somewhere and had your offer accepted you can come back to us and we'll then obviously move forward with the with the mortgage application once we found you the best scheme that you're eligible for.

Glad I cleared that up.

Putting off your solicitors paperwork

One of the most important roles in the process will be your solicitor, so you will always need a solicitor to oversee the purchase of your new property. Now the legal paperwork, is it 1 page, 20 pages?

How is it?

How did you find it?

It's a lot of pages - overwhelming at the start. It's a lot of information about some stuff you might have already done you might have already told your broker or your estate agent you feel like you're duplicating some of that information but the solicitors need to open a file to really get on with the work and that first document is the one that's the most overwhelming.

If you get that one out of the way things normally get a little bit lighter and it gets a bit more specific and it's a bit more interesting than just you filling out a big old form.

It's a bit overwhelming to start with, I mean so ultimately the solicitor cannot do any work for you and and they're role in the purchase process is arguably one of, if not the, most important.

More important than ours??

I like to think not, you can say maybe equally but it's very important yeah.

But I guess the point is if I can just continue the solicitor's work it will essentially determine how long the purchase takes, the mortgage should be agreed quicker than the legal work takes, so if you put off the legal paperwork that they send you that's the first thing you need to do is complete that. If you put that off for four weeks, if you bury your head in the sand ignore it, you are delaying your legal work and essentially the purchase of the property by four weeks, so don't bury your head in the sand get it back to them as soon as possible.

If there's anything you've got wrong or you leave blank they'll come back to you but just complete the paperwork and get it back to them so they can start the legal work for you.

The second point on the solicitors Kye?

Yes, being careful about which solicitor you pick. You're trying to keep costs down when you're buying, and understandably so, but picking the absolute cheapest solicitor can cause you more problems than you'd like.
You get what you're paying for to a degree.

There are some good value, but within reason.

Exactly, and if you get a solicitor that doesn't pick up the phone, won't answer your emails, and you're trying to complete and get your keys in the next week and your solicitors not doing their job, on a holiday, that's going to be stressful and you might save £50 but you might have ruined the whole process and everything could fall apart.

That's obviously sensationalizing it but it does make a difference to just do a bit of digging a little bit, doesn't it?

Yeah, just do a bit of due diligence you know, check online, check reviews, maybe get someone that you know friends or family have used, just to make sure that they are going to be half decent and get the job done for you.

Not budgeting for all fees and other property related costs.

Yes you're going to need to cover the cost of your deposit so if you speak with a broker or bank you'll have an understanding of how much you can buy for how, how much you have saved, what size deposit you can put down, but there will be fees on top of the deposit that are going to be incurred that can't be avoided.

So the common ones to start with?

On the legal side of it again, so the the legal fee itself the solicitors, no way around that.

No unfortunately that is being paid whether you like it or not, that has to be paid and the other one would be the stamp duty or the tax on a property.

Yes you do have to pay tax to buy a house...

They get you don't they, they will get you.

Not everyone though, we won't get into the finer details but first time buyers buying up to a certain amount in certain parts of the UK, again depending on the time that you're watching this video because things may change, there can be some exemptions, some people don't actually have to pay and again you only pay stamp duty over a certain threshold as well so speak to your broker, they should be able to give you a good indication of what the stamp duty will be, have a little look online you can find calculators and once you've instructed your solicitor they will confirm the stamp duty, but make sure that you've you budgeted for that as well.

The other one would be moving costs or estate agency fees, so I suppose they're all going in together, but estate agency fees being the bigger of those generally. If you're not a first-time buyer.

If you're selling - probably a lot of you may know this but if you're purchasing a property you don't have to pay the estate agent it's the person selling the property that has to pay them but obviously if you are already homeowners selling your property you are going to have to pay the agent either a set fee or a percentage which does vary but there is going to be an estate agent fee do not forget about these costs because you are going to have to pay them before completion as well as your your deposit.

Yeah definitely and then you've got the small ones on top haven't you.

Moving cost if you need to hire a van it can cost you a bit, Mortgage fees but again they're very low aren't they generally. These days some brokers, such as ourselves, are completely fee-free.

Arrangement fees can normally be added to the loan, a lot of lenders will give you a free mortgage valuation, you may opt to do a more comprehensive survey just to look at the property in a bit more detail, you don't have to do that but that is your choice and again if you do that you are going to have to pay for that. Again shop around for surveyors in your area to see roughly how much they're going to charge you, normally in the hundreds of pounds, tops for the for the mortgage fees, whereas the other ones you talk about are in the thousands generally.

Being afraid to ask questions.

Or as Kye likes to call it...

"Shy when you buy"

Shy when you buy, I quite like that actually.

What we're talking about specifically is asking questions to the estate agent. You're going to contact them, you show interest in a property, they're going to hopefully let you book a viewing so you can have a little look around the property.

You need to really utilize this time so ask the Estate Agent. Do not be shy or intimidated by the estate agent, ask them as many questions as you want ask them.

Have you had any viewings on the property?

Have you had any offers on the property?

Are there any issues with the property that they know about?

You know that potentially it isn't obvious, ask as many questions as you want to. Now sometimes estate agents won't necessarily give you the honest truth, they're obviously trying to negotiate from the other side, but ask the question, get a feel for it.

There's absolutely no harm in asking.

Definitely.

Then the other part is making sure you put your best foot forward isn't it?

Sell yourself.

Sell yourself, yeah exactly. You're putting yourself in the shop window not only when you're asking questions, but if you do proceed and want to make an offer point out why they should sell to you, not just because you've given the best price a lot of the time. If you give the same price to someone else, if you are caught in a bidding war or something like that if you've offered £200 000 on the property and someone else has offered £200 000 on the property, why should they pick you?

Are you a first-time buyer with no chain? That can be a positive. Have you already spoken with a mortgage professional or broker you've confirmed that you're good for the money? You're ready to move forward with an application as soon as the offer is accepted? All of these things - show them that you're keen to move forward quickly, often estate agents do like to see that you're going to be a quick sale and that there's not going to be significant delays.

Anything that makes you look like a stronger proposition as a buyer may just give you that edge against someone else who's interested in the property.

If you've asked those questions when you're viewing, if you've asked is the vendor wanting to get this done quickly, then if you can do it quickly you're solving a problem and that leads into negotiating.

Asking this question and getting the information from the agent, are they looking for a quick sale?

Have you had many offers on the property?

How many people viewed the property?

How long has it been on the market?

These will all help you negotiate. Now negotiating when purchasing a property there's no exact science to it, every property is different and it really does depend on the market. If the market's slow and the property's been on the market for three months without a buyer you're obviously in a stronger position to try and negotiate an offer under asking price because then there's a good chance that they're going to meet you somewhere in the middle. On the flip side in a hot market, like at the time of filming now properties are being sold so quickly, maybe you're not in quite a strong position to negotiate as a buyer because if you come in £10,000 under the asking price there's a good chance that someone's going to view the property tomorrow who will offer the asking price or above and then unfortunately they're going to sell it to them and then you have to continue your property search, but asking those questions and getting a feel for how much interest the property has will help you make a judgment on how you want to negotiate and purchase the property.

Okay, we hope you found these last couple of points helpful, make sure you stay tuned as the next video will be covering the final few common mistakes to avoid when purchasing a property.

See you next week.