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How can buying a house be made less of a nightmare?

home-buying

A government review of the home-buying process has begun and our call to simplify one of the most stressful purchases is being heard. We’ve called for change and we’re now hoping to see actions as well as words, and sooner rather than later.

Anyone who has ever bought a home will know this: it’s one of the most stressful experiences in life. The process can be fraught with stress about whether the dream home you’ve set your sight on will end up being yours. A home is the most significant purchase that many will make.

There may be good news though. We could be about to see that stress and the problems that come with home-buying tackled at long last.

Back in April, we issued our calls to all political parties on the consumer issues that need to be tackled by the government. Nearly a third of people (27%) said the government should prioritise home-buying and selling as a consumer concern that ought to be addressed after the election (with only social care, energy prices and scams coming before it).

In an online poll between 19 and 20 April 2017, 2,130 people were asked to provide up to three consumer issues they believe the government should prioritise next, out of a prompted list of ten issues. Here are the results.

Consumer issues survey 2017

We called on the government to conduct a review into reforming home-buying to make the process easier, particularly for the buyer. We also asked them to examine the role that professionals, such as estate agents and conveyancing, play.

Home-buying review

This weekend the government published the first stage in progressing with this reform by calling for evidence to feed into their review.

We want to see the government now bring forward changes to the outdated and flawed home-buying process. They must put consumers first, ensuring estate agents deliver a better service for both home-buyers and sellers, and that the conveyancing process is simplified. This will mean consumers will be able to make more informed choices about the professionals they use when buying or selling a house.

More than one million properties were bought in England and Wales in 2016 alone and our research found that it can take people an average of four to five months to complete a purchase. One in three sales fall through and as a result, on average, consumers lost £2,200 because of the costs already incurred.

Making these changes could not only make buying a home easier, but help hundreds of thousands of people a year, and potentially save consumers thousands from when a sale falls through.

What elements of the home-buying and selling process do you most want to see simplified?

Comments

The worst part of buying or selling a home is whether the purchase or sale will go to completion.

With so much at stake, the stress of not knowing whether it will definitely go through until moving day is ridiculous. If a sale or purchase is agreed, it should become a binding contract.

I would like to see both buyer and seller deposit £10,000 with the estate agent or solicitor that they forfeit to the other party if either party pull out.

We need a system that does away with chains whereby, when an offer has been accepted by the vendor, the buyer pays a deposit and is
committed to follow through with the sale. Anyone who then attempts to break the chain should either forfeit the deposit or move into rented accommodation.

Developers selling new properties need to be prevented from demanding their own terms and conditions of sale during the conveyancing process, such as unexpected reconfiguration of the original planning specifications and also benefiting their own legal teams by allowing them to oversee both the sale of their buyers property as well as the sale of their own.

Estate agents should liaise with the vendor in arranging a qualified surveyor to inspect the property prior to it going on the market to speed up the process and combine all the surveillance fees in with the estate agents to be settled upon completion, which should be subject to regulation.

Beryl, whilst I would also like to see chains disappear I do not think it practical. There will not be the spare houses available to move into temporarily. I doubt that many purchasers want to delay the process, but their ability to buy and its timing is almost always dependent on them selling their own property. At the point when they have all the information on the property and they exchange contracts, financial penalties become payable if they do not then complete.

Perhaps the alternative is for the vendor to keep the property on the market even when they have an offer, and only remove it upon exchange of contracts? If other offers are received then informing any prospective purchasers that they are in competition might help. After all, until a contract is signed, the vendor is the one taking the risk and should be able to act in their own interests.

As far as the vendor arranging for a surveyor, I would not want to rely on that if I was buying, and I doubt the mortgage provider would; the latter’s main concern is whether the value of the property covers their loan, and they would usually want to arrange this themselves, or have an approved surveyor do it for the prospective buyer.

Is a bridging loan the answer?

Not if your sale falls through and you may be borrowing a lot of money for an extended time. I wondered if, when you make an offer, it has to be accompanied by a non-refundable deposit. This might at least compensate some of the vendors costs incurred in a failed purchase, and focus the buyer on making a sensible offer that they believe can be followed through.

There is something to be said for the Scottish system, where both parties are legally bound to to the sale and purchase. I have no experience but some speak highly of this system compared with the options in England.

@darren-shirley, darren, home selling and buying is certainly a stressful process. I suspect part of the problem is everyone trying to achieve the highest price they can – and why not? The major part, though, has to be the chain – the inability to actually buy something until you have sold your own asset, and I see no answers yet to solve this problem.

Beryl suggested a solution – sell your property, move into rented accommodation and continue your buying search with the money available (subject to mortgage). This could work for some, but only if there were houses to rent available on a short term basis in the right area.

I am disappointed that Which? raise this topic but do not give any practical ideas as to just how to address the problem. Calling on government to “act” is just passing the buck. How should they “act”?

Is the Scottish system really any better? Surely it still depends, in the end, upon sales and purchases going smoothly, unless they have a lot more free properties to rent?

Which? spend a lot of Members’ money subsidising their mortgage service (it lost nearly £4 million last year). Perhaps, as they are experts in this field, they could contribute a plan?

Another alternative that may be suitable for retired people in areas where housing is less expensive is to buy another house, move at leisure and then sell the old property. Since April 2016, there is additional stamp duty land tax to pay on a second home, but at present that can be recovered when the old house is sold.

That requires a huge amount of capital, doesn’t it? With relatively low income a mortgage would be unlikley.

However, perhaps what we should be doing is persuading people to move away from high-priced areas (often because they are “popular”) to areas where prices are lower, and more property is available. This needs some joined-up policies, such as relocating business to provide employment. The government can set the example by moving public services out of London.

You need to ask why it is necessary these days for the bulk of employees to be centred in major cities.

I did this and I know quite a number of people who have bought before selling or kept their old home and rented it to people they can trust. Obviously there are plenty of regulations to be complied with, and there are risks, but it can be a worthwhile investment.

By the time you reach retirement age, a mortgage has often been paid off. You may have a lump sum with your pension and can raise the balance from investments. As a cash buyer you are attractive to sellers who don’t want the complication of chains and you can wait until a good offer turns up. If you live in an expensive area and want to stay in an expensive area, then it might not be an option unless you take a bridging loan, which brings in other risks.

*(f you are in this fortunate position, it is a good way. However, I suspect the vast majority, including those below retirement age, could not possibly do this. It is these people who may well have to move, not from choice but for employment. The retired may well be downsizing or moving nearer relatives, with more time to endure the buying and selling process.

That’s why I specifically mentioned retired people and cheaper areas. People may be downsizing because the kids have left home or they want a property that is easier to manage and cheaper to run and maintain.

I liked the outcome of the last review done years back, where a homebuyers pack was prepared by the seller for any buyer to use. This was supposed to speed up the conveyancing process thus diminishing the time for things to go wrong, such as changes of mind or gazumping Also the buyer can see the pack at the outset so knows the result of searches and surveys, exchange could happen in a couple of weeks. Then completion can occur once the chain is complete.
I know these packs came to market but I seem to remember it was the mortgage companies that still insisted on doing their own surveys at the buyers expense. This negated some of the packs benefits so they stopped being used almost immediately.
I would like these packs brought back in and made mandatory this time. Mortgages must also refer to the valuation in the pack. Therefor they need to be fully qualified and independent, so I am not a fan of the sellers estate agent suggesting the conveyancer or surveyor used, or a mate of the seller.

The problem with sellers’ packs was they may not be seen is giving an independent view. If I am spending a fortune buying a house I would want my own survey and valuation, and so would my mortgage company. These are not time consuming. Simply a cost to the buyer, who would not be likely to do them unless they were serious about buying. What could be prepared in advance are all the solicitor’s work on searches, title, and so one where time seems to be lost.

No-one is going to want to be legally bound to buying a house unless it has been surveyed and you are certain you can afford it, so a potential buyer needs to have first contacted their mortgage lender to agree and secure an amount they can afford to borrow before making a firm offer on any property.

Once you have found a property you like and decide to go ahead with the purchase you then contact your mortgage lender to state your interest and the lender engages its own appointed surveyor to inspect the property and issue a House Buyers Certificate before a firm offer is made. With all the finances already pre-secured and in place, the buyer can then go ahead with their offer, and if it is accepted by the vendor you are then legally committed to buy. The same legal system would also apply to your vendor who is legally obliged to vacate their property after accepting your offer, and of course to yourself also after accepting your buyers offer on your own house, which should prevent the chain from breaking down.

It can help to speed up a purchase if a vendor already has a surveyers report in place, but the onus would then rest with the buyer and/or his/her mortgage lender to either accept or decline its authenticity. A cash buyer may decide to accept, depending upon how much and how quickly he/she wants to buy the property.

There is always going to be a certain amount of stress involved when buying and selling property, but the system currently in operation is evidently not working if 1 in every 3 sales falls through, so changes need to be made. However, if finances are guaranteed and in place as soon as you contemplate moving, even before you have found your dream home and the dreaded chain is no longer a continuos threat, the process should be speeded up and run a lot smoother.

Whilst you can get a mortgage in principle, based on your financial status, this still leaves you with the problem that you cannot proceed until you have the money from the sale of your existing property – if you have one.

That goes without saying Malcolm, so you need to have a committed buyer of your property whose offer you have accepted and both you amd your buyer are legally committed to proceed with the sale. With an assured and legally binding sale, money is guaranteed and this automatically puts you in a good position to find another property sooner rather than later.

Most lenders would accept this legality as the money from the sale of your house is assured. It also puts an end to gazumpting and those irritating dalliers who seem to delight in keeping you and everyone else in the chain on tenderhooks by staying put with a myriad of excuses for doing so, until the poor unsuspecting buyer, under pressure to move by their buyer finally pulls out or is forced to by other buyers down which can often be a very long chain.

It’s a very flawed and unfair system.

I was sorry to hear about the problems you reported some time back, Beryl. What do you think would be a practical system that could make life easier for the buyer and seller?

Beryl, i’m not sure about legally binding sale and how many people will be in such a position. Most people will not have a legally binding sale until completion and that usually requires real money to be available, not a promise. I must have misunderstood the proposal.

Malcolm once you make an offer on a property and it is accepted then you are legally obliged to go through with the sale, that is why it’s important to (a) make sure you can afford it and funding is in place before making the offer and (b) you or your lender have had it surveyed. My late brother was a realtor in Vancouver and this is the system they adopt over there, so it eliminates gazumpting and chains are not broken.

Hope that explains my above deliberations 🙂

Wavechange, I would hesitate to enter into the housing market system currently operating here again, unless I found a vacant possession property. I am still in my original abode but am thinking of doing what you suggest, (and if my memory serves me right is what you actually did when you moved) – buying before I sell my current home, but at my time of life it would have to be an apartment! I have looked at one or two but there’s usually a chain!!!

I don’t find retirement apartments too appealing as they often have short leases and are not that easy to sell, quickly losing their value when you sell or expire!

Beryl, we seem to be at cross purposes. You can make an offer on a property at present without having liquidated your own house to provide the funds necessary. Are you suggesting you should only be able to make an offer on another property when you have sold your house and have money in the bank (and made the necessary checks on your purchase)? And that you can only offer your house to someone when you can vacate it when they can complete? If so, I don’t see how that could work in practice, attractive though the principle seems.

Sorry if I’ve misunderstood.

Malcolm, you can make an offer on a property here but you can also pull out of the purchase if you change your mind before exchanging contracts and potentially break up a chain. In Vancouver that is not quite as easy as you are expected to proceed with the purchase once the offer is made and accepted by the vendor. You are obliged to go through with it.

The system in BC is very different to here. The following website may explain it more fully: lornegait.com – The Basics of Making an Offer – Tips For The Savvy Home Buyer – Lorne Gait

This says, for example – “Contingencies – “Subject to” Clauses

If your offer says:

“this offer is contingent upon (or subject to) a certain event”

you’re saying that you will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:

Read more
The buyer obtaining specific financing from a lending institution: If the loan can’t be found, the buyer won’t be bound by the contract.
A satisfactory report by a home inspector: for example, “within 10 days after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract. “

Presumably and contingency could also be “a successful sale of my own property (otherwise I will not have the money top purchase”)?

Which explains the importance of (a) a home inspector report (surveyor in UK) and (b) finance is in place before you sign the written offer agreement (c) the sale of your own property which is undergoing the same written offer agreement contract, plus an agreed desposit, which cannot be altered without good reason, often involving legal procedure, therefore preventing gazumping and pulling out of a purchase more unlikely.

Realtors in BC have to undergo at least 6 months study and a written exam at the end before being qualified to practice.

Beryl – If you are able to buy before you sell then it removes a lot of the trauma of moving and it is much easier to do decorating etc. before moving furniture into the new house. The vendors of my house had already moved out and sold the house at well below the asking price. We agreed an exchange date that gave them adequate time to remove the remaining furniture.

Wavechange did you sell your original house or let it?

I did some decoration and other work at my my ‘new’ house before moving in. After clearing a spare bedroom in the old house I started to repair cracking in an inside wall. It had cracked before because the central heating pipes ran down the wall just under the surface of the plaster. To my dismay, the cracking was more serious and I discovered cracking behind the radiator and slight cracking in the outside wall. The insurance company forgot to contact the loss adjustor, but eventually someone came and said that the drain was probably cracked. No-one turned up to put a camera down the drain but at long last a contractor turned up and dug up the drain and confirmed the problem. The contractor managed to wreck the carpet. It was months before I could put the bungalow up for sale. Eventually I had to wait for a certificate to confirm the work had been done properly. Apart from that, selling was not much of a problem.

Great, I like happy endings Wavechange 😉 As you rightly say, empty rooms are much easier to decorate.

The property market here is very hit and miss. I would like to think that Which? could be instrumental in bringing about a much needed change. After all is said and done the 1 in 3 people whose sales never materialise will most likely experience much of the stress and preparation necessary to suitably present their homes on the market but are let down through lack of regulation and ethical directives.

When I moved to the area in the early 80s I rented in order to focus on getting in to my work and then search for somewhere to buy a house. Eventually I decided to try to get a bungalow on a quiet modern estate. I saw a hand-written notice in a window, looked round and put in an offer subject to the mortgage survey. I was very lucky, but I don’t remember hearing about problems with chains in these days.

I do hope you have less problems when you next try to move, Beryl.

I have a sense of déjà vu all over again in reading this Conversation as I am sure we have been round this particular mulberry bush many times, many many times, over the last few years and none of the remedies seem to stop the coughing and spluttering about house buying and selling despite all the good intentions and worthy proposals. The problem, like unfair railway fares, is that we are dealing with an elaborate and extremely complex system that has so many interfaces with other parts of the mechanism that every shift in one place throws something out of alignment in another place – and fixing that relies on adjustments to something else; and so it goes on and we get nowhere. If only it were possible to start again from a clean sheet and build a house buying and selling system from scratch.

One of the biggest problems with tinkering with the process is that at no two times is the market in an identical state. We seem to be either in a buyers’ market or a sellers’ market and rarely in a constant state market; the selling and buying techniques required for each market state differ and are dynamically driven by the experience of each market state. Nearly two decades ago I sold my London property in what was at the time a fairly sticky market that certainly favoured buyers. I soon attracted a buyer and – against my normal instincts – withdrew my property from the market in order to secure the sale; it was made clear that there was no deal otherwise. Meanwhile my buyer vacillated and prevaricated, and, aided and abetted by his conveyancer, protracted the process while he assembled his funds [which had allegedly been assured at the time of acceptance of his offer]. Two unnecessary indemnity policies later and after a lot of false brinkmanship around some previous building work we eventually exchanged at the agreed selling price
and completion soon followed, but not before some further dramatic procrastination efforts had to be thwarted by me and my agent and solicitor. So based on that experience I would recommend that all offerors must submit a statement of funds available certified by their legal representative, bank or mortgagee. But that still might not work in a buyers’ market where the pressure on sellers is unequal since buyers have excess leverage,

From the point of view of buyers I would say there must be a check on the ability of sellers to keep the property on the market after accepting an offer in good faith. A holding period of four weeks should be applied so that the offeror can clear the survey, legal and funding formalities before the seller is entitled to accept any further bids, and a system of recompense for wasted expenditure in the event that the seller terminates a purchase in favour of a new buyer without good and satisfactory cause.

These measures alone will not speed up the conveyancing process but they might impose some discipline on the market. At the present time we are in a sellers’ market in certain parts of the country and the risk of gazumping has reappeared. In the context of good faith – which should underpin every part of the property market – I think gazumping and gazundering should both be outlawed after an offer has been accepted and be subject to severe sanctions in breach thereof. Enforcing that is the tricky and expensive part if the transaction is not to be forfeit.

This is better about the Scottish system: if the buyer’s offer is accepted, s/he is immediately under obligation to buy that property, and the vendor is also committed to the deal as soon as s/he accepts the buyer’s offer.

This is worse and I would like to see it changed: we have an offer-over system, ie the vendor sets a price and invites offers in excess of this via a sealed bids system, with a dealine. This secret bidding leads to the misery of having to wait until the dealine before you know if your offer has been accepted, and in Edinburgh certainly it also leads to buyers often paying way over the odds to secure a property. Currently the word is that you have to offer 20% over the asking price to be successful. This, at least in part, has led to the crazy house prices we have had in Edinburgh. When you look at how much bang you can get for your buck elsewhere in Scotland, it is truly shocking. Edinburgh’s a great city to live and work in, but not greater to this extent.

Thanks Sophie. Friends have spoken highly about the Scottish system, but I realise that none of them have bought properties in the large cities. Of course, under the English system it’s not exactly cheap to buy in London etc.

Solicitors and estate agents make a vast amount of money from conveyancing, as does the government via VAT. I was recently quoted a huge price by an estate agent, and was then told it was +VAT. I asked if anyone selling a house would be doing so whilst registered for VAT and able to claim it back, and he said no. I think there is some VAT pricing regulation that suggests using “+VAT” to mellow the true cost of anything is illegal, but can’t find a reference to it.

What would cause far fewer sales to fall through would be legislation to the effect that solicitors and estate agents can only get their fees on successful sales, and they get nothing on those that fail. No doubt they will wriggle around so that their income remains more or less the same, but the pressure would then be on them to arrange sales that work first time.

South Africa was once a pariah nation because their racialism prevented free movement of citizens. Although present taxation on people moving house doesn’t actually prevent movement, it must surely put a dampener on the process. I think there is an average cost of £25k on the expenses of moving, a lot of which is taxation. Not so long ago that would have bought a nice home. Now it is just money wasted, therefore people are encouraged to stay put. After all, people are fined for driving badly, in order to make them behave better. This cost is a disincentive, plain and simple.

Compared to the fees charged by estate agents, the fees charged by solicitors and conveyancers are modest and reasonable considering the responsibilities they exercise. They also cover a number of direct disbursements like local authority searches, Land Registry fees and money transfer charges. If estate agents had to present their bills for payment instead of sliding them under the completion statement for deduction and remittance by the solicitor or conveyancer from the proceeds of sale the charges would be more transparent and value for money might be more readily assessed. As it is, even at 1%, they get a hefty whack from a house sale in an expensive area and there is sometimes not much to show for it.

David Carling says:
28 October 2017

Make it illegal to sell any new house which involves a lease. All current leases should also be made illegal and every home owner should automatically own the freehold on the day the legislation is passed. The speculators holding homeowners to ransom with punitive charges should have their money making wings clipped.

David says:
28 October 2017

Dear Which? writers, don’t you think you should have also at least referred to the system in Scotland and how your observations apply or don’t? Is Which? only aimed at subscribers in England & Wales?

http://www.emptyhomes.com/
“Latest Government data suggests that there are over 200,000 homes that have been empty for over six months.
No doubt some of these will be in the wrong place. But perhaps we need some incentive to get these back into use.
An interesting piece this year in the DT suggests that the number of dwellings in the UK exceeds the number of households by 1.4 million. A proportion will be second homes. However, if we have a real housing crisis, should this continue? I seem to remember that the Lake District tried to restrict the sale of second homes while locals were unable to find a place to live.

There are various reasons why homes can remain unoccupied. They may need refurbishment to make them saleable or even fit for habitation. A couple that I know have run a successful small business by buying up structurally sound properties and improving them. Sometimes this involves installing new kitchens/bathrooms/heating systems/rewiring, but some of the improvements require planning permission. The work is done mainly by local plumbers/electricians/etc. in between other jobs and the time between buying and going on the market can take a year, or more in some cases.

Many new buyers would relish the opportunity to take on such projects to get on the housing ladder. I did with both my first homes, and lived in them whilst I did the work. Keeping property off the market denies these opportunities. We are free, of course, to buy up such properties for our business purposes and make a profit – that is the society we live in. This often happens because a private buyer cannot get finance on these type of property. Maybe that should change, and we should have loan schemes available to enable them to do this more easily.

My friends focused on properties that had been on the market for a long time and was available cheaply. People obviously did not want to buy them or would not be able to get a mortgage. It’s not a good idea to risk your health just to get on the housing ladder.

“Not able to get a mortgage” was the point I was making. This could be changed so an enterprising first time buyer could take advantage of a “cheap” property that required work. Much of the refurbishment cost is in labour; why should only those with the cash to buy then profit from this? Affordable housing is a misused term, but this is one genuine way of making it available.

I don’t see where “risking your health” comes into this. I would like to see all possible done to encourage first time buyers to get on the housing ladder, by refurbishing properties themselves rather than only allowing professionals to profit. Local authorities could help, as could more understanding mortgage providers. There is no excuse to leave a house empty for 6 months or more when people are desperate to find somewhere to live.

Exposure to dust, which might contain asbestos is, a cause of irreversible respiratory problems. My friends are well aware of this, since one is an asthmatic, and keep away until the major work has been done. Health is more important than money.

I would have to check but I don’t think the properties concerned are in areas where there is a great demand for housing. Obviously there are many areas where there is.

One of my son’s found a small amount of asbestos – over what had been an electric boiler cupboard. He contacted his insurance company who paid for all the removal and associated costs. That should not deter anyone from taking on a project; they can always look for help if it is needed.