Finding the right property, whether to purchase or to rent, is a major undertaking for most of us. The aim of this survey is to provide a guide through the whole process, pointing out the possible pitfalls and advising you how to avoid them.
We begin by studying the choice between renting or buying your home and the factors which should be taken into account when deciding where to live.
We then take you through the various stages of house purchase and explain the role of financial institutions, surveyors, solicitors and estate agents. Throughout we have attempted to answer technical points in as straightforward a way as possible.
The survey ends with a guide to insuring your home, and your legal obligations to your neighbours.
WHETHER TO BUY OR TO RENT
The main factor in deciding whether to rent or buy is generally one of cost. It is usually, but not always, cheaper to rent than to buy, although the continuing decline in the supply of rented accommodation available can make it very difficult to find. The financial considerations fall into two categories – ‘one-off costs’ and ‘regular payments’.
- 1 One-off costs
- 2 Regular payments
- 3 Convenience
- 4 Advice and information
- 5 Priorities
- 6 Services and rates
- 7 General condition of property
- 8 Space
- 9 Layout
- 10 Other considerations
- 11 Building societies
- 12 Local authorities
- 13 Banks
- 14 Insurance companies
- 15 Finance companies
- 16 Private loans
- 17 Repayment mortgage
- 18 Endowment mortgage
- 19 Option Mortgage Scheme
- 20 Paying the mortgage
- 21 Costs
- 22 Warning
- 23 Advantages
- 24 Interpreting the report
- 25 Check Out These Articles Too!
When renting accommodation, such costs are relatively small. It is quite usual for new tenants to pay a deposit plus some rental in advance.
In the case of unfurnished rented accommodation, which is relatively rare these days, you may also need to purchase essential items of furniture and household equipment.
When buying a property, these nonrecurring costs are much greater. A deposit of up to 10 per cent of the value of the property , will almost certainly be required. There will also be building society inspection fees, the cost of your own private survey, if you decide to have one, and legal expenses. As with unfurnished rented accommodation, if this is your first home, you will probably also need to budget for essential items of furniture and household equipment.
Recurring expenditure for rented accommodation will vary considerably, depending on the terms of the letting but, as a broad indication, the following items must be budgeted for:
– Rent, and possibly rates.
– Heating and lighting.
– Service charge or repairs and maintenance costs, depending on the terms of the letting.
– Travel costs to and from work.
– Any other regular expenses e.g. tele phone bills, if applicable.
If you have bought a property the outlays will differ quite considerably. A typical breakdown might be as follows:
– Mortgage repayments- net of tax relief on the interest element.
– Heating and lighting.
– Repairs and maintenance costs, including private roads where applicable.
– Travel costs to and from work.
– Regular bills such as telephone.
– Life and property insurance premiums.
– Ground rent and service charges if the property is leasehold.
Having considered both initial outlay and running costs, the decision whether to rent or to buy is also heavily influenced by longer term factors. Owning property is likely to be an excellent investment and serve as a hedge against inflation, whereas payment of rent is an irrecoverable expense which can be expected to increase broadly in line with inflation. Unless you anticipate being extremely mobile, there is little doubt about the long-term financial advantages of buying rather than renting.
CHOOSING AN AREA
Another great advantage of buying a house is that, within the limits of financial resources, you are free to choose the area or district. Often, however, it is undertaken in something of a hurry and under pressure, perhaps due to a change ofjob which necessitates moving to a different part of the country at short notice. Remember, 10 the purchase of a house, once done, cannot easily be undone without a large measure of inconvenience and cost.
Explore the area to see if it will meet all your requirements: proximity to employment, transport, shops, schools, entertainment and so on.
Above: whether buying or renting property, it is helpful to set down your income and regular outgoings before committing yourself to any major expenditure.
Right: the advertisements in local estate agents’ windows are a good guide to the property prices in a particular area.
HOME BUYER’S BUDGET PLANNER
Electricity Gas Rates
Water Rates Telephone TV Rent
TRAVEL & TRANSPORT
TAKE HOME PAY
Travel & Transport
HOUSE PURCHASE PRICE
Deposit Solicitor’s fees Surveyor’s fees
Existing savings Mortgage required
Careful consideration should be given to the chosen area, the proximity of shops, schools, employment and transport. Explore the area in general, not just to decide whether you like it but to see if it will provide for all your requirements.
Notice whether the houses in the vicinity are well cared for. Do they have garages or parking areas or is there likely to be much street parking, car washing and maintenance on the road rather than in drives or garage forecourts?
Proximity to public transport could mean the difference between having to drive to the shops, or taking children to school, and being able to live without a second or even a first car. So check the standard of service- availability and regularity. Similarly, visit the local shops to see if they suit your needs and purse.
Consider also the siting of the property. If the house is at the top of a hill, it’s likely to mean a lot of strenuous walking and is not going to be suitable for a disabled or elderly person. A property on a main road could well be affected by heavy traffic -noise, vibration likely to cause structural defects, and lack of privacy are all possible disadvantages. If you have young children it could also be very dangerous.
Check the proximity to such noise-producing establishments as a sports club, public house, school or cinema. It may be wonderfully convenient to have them within walking distance, but quite another matter to have them within earshot!
Advice and information
Visit the local planning authority and ask about the area. Study the town map and ask the Planning Officer about schemes planned for the town in general. In this way you will be forewarned of any planning schemes which would ‘blight’ the neighbourhood in which you are interested. You will find out, too, about any redevelopment schemes or traffic management proposals which could eliminate kerb side parking within a reasonable distance of the house. Apart from newspapers, there are many other possible sources of information. Many local councils have information or publicity officers who may be able to answer your questions or send you town guides and other useful publications.
Naturally, a younger couple will have different priorities to those of retired people. The former will probably be vitally interested in the availability of pre-schooling, primary and secondary schools, recreation facilities and the like, while older people may be most concerned about the proximity of shops and public transport.
House buyers should first consider their minimum requirements so far as the number of rooms and the floor space are concerned. Obviously, a couple with three children would not consider a house or flat with one bedroom and, conversely, an older couple, having retired or nearing retirement, would probably look for accommodation of more modest size, say with just one spare bedroom for visitors.
If these decisions are made at the outset you will avoid unnecessary and abortive inspections and reduce the risk of being tempted into buying something unsuitable. Also remember that overheads generally relate to size and to the number of rooms except in the case of a flat, where overheads tend to be higher.
It is surprising how many people ignore these very important points, so sit down and make your own check list. The hour or so this takes will be time well spent.
FINDING A PROPERTY
It is possible that a friend or acquaintance may put you in touch with a prospective seller but there are other ways of setting about the task.
Property pages of the local newspapers are a good source of information 1 will also include details of the major estates developed by the big house builders. To make sure that you don’t miss an issue, arrange with the local papers to have a copy sent to you each week.
Estate agents can also save you a great deal of time and effort. Not only do they have offices in practically every high street but they carry extensive advertising in local papers throughout the year, and their sale boards appear in front gardens throughout the country.
Most people can tell you what an estate agent does but not everyone realizes that the estate agent is acting on behalf of the seller and is obliged to put forward the best points of a property and obtain the best price on behalf of his client. The seller pays the agent a tee for a successful sale so you, as the buyer, will not have to pay for am’ service.
An estate agent is not necessarily qualified professionally and does not offer any guarantee that his description of a property is accurate. He certainly does not pass comment on the fitness of the structure, even it qualified to do so.
Tell him what you are looking lor. in what price range and the financial limits to which you can go. and he will try to satisfy your requirements. But the maxim of caveat emptor, let the buyer beware’, should be constantly borne in mind.
As a prospective buyer you are not obliged to rely on one particular estate agent and you should look at the availability of properties as shown in the windows and advertisements of as manv local agents as possible.
In looking around, you can get a good idea of the prices applicable to various types of property in different areas. Prices vary so much even between one area of a town and another- and more so between towns and regions of the country – that it is impossible here to give reliable long-term guidance. The best possible guide is the advertisements in local papers and in the estate agents’ windows.
Many people prefer a new house but older properties should always be thoroughly investigated, as it is frequently possible to obtain better value on an older house.
WHAT TO LOOK FOR IN A PROPERTY
Obviously, your first inspection of a property will concentrate on whether it meets your basic requirements. Does it have the required number of living- and bedrooms and so on? Having found the place that to see meets this initial minimum it is sometimes easy to become starry-eyed about the property and miss main’ ot its drawbacks.
When to look. Most houses look at their best on a balmy summer’s day with sun streaming through the windows, so be wary about your feelings if you’re doing your house-hunting in the summer. It you like the feel of a particular property on a cold, wet winter’s day, however, there’s a good chance you won’t make a rash choice. Also in cold,-wet weather it is most likely that the heating system functioning, giving you an opportunity to note its effectiveness or otherwise. And in any event, never assume that because there are the requisite number of radiators throughout the property, the system func- tions efficiently. Check that it does! visable to seek an independent surveyor’s
Fuel, heating. Ask what type of fuel the heating system uses. There are differences between the cost of oil, electricity, gas and solid fuel, not to mention problems of delivery or supply. Also, it is going to be expensive to change from one system to another if your preference is, say, for gas where the existing boiler burns oil. Check the hot water system too- run the hot tap to see it it is delivering hot, not tepid, water. Also check that both hot and cold water taps run clean. Discoloration could indicate a rusting storage tank and
Damp. Look out for damp patches on ceilings and walls. These are obvious pointers to a leaking root or broken rainwater pipes and gutters or perished pointing to the brickwork. Are there areas of lighter wallpaper or ‘tide marks’ above the skirting boards? These are sure signs of rising damp.Timber defects. Are the floors springy,with large gaps under the skirting boards and the carpets or linoleum firmly fixed down? This could indicate timber defects,but such faults are not always easy for the layman to detect, and it is therefore report once you have decided on a particular property. It could save you a great deal of money.Power. Look for adequate electrical power points and check whether they are of the modern square pin type, although this is not an infallible pointer to the age of the wiring. Ask to look in the meter cupboard where it is often possible to see new wiring running into the fuse boxes.
Services and rates
Check whether all the main services run into the house. An ‘all electric’ house may have a gas point still laid onto an old meter position which the owner has removed. It is tar cheaper to reconnect to an existing supply than to have a new supply run in from the road or from even farther away.
If the house is in semi-rural or rural surroundings check whether it is connected to the main sewer. If not, it ma’ have a septic tank system of drainage or cesspool which has to be emptied periodically – another possible inconvenience and a costly item. Find out exactly what is involved.
Ask how much the General, Water and Sewage rates are, how much the heating
General condition of property
What is the general state of decoration throughout the house? If it is not to your taste, can you afford to change it quickly; if not, will you be able to live with it? More important, what is the state of the plastcrwork, doors, window frames, skirting boards and staircases? Replastering, and replacing damaged wood is a costly business.
Insulation. Find out if the loft is properly insulated and if the cavity walls have been insulated by foam or other filling and by whom, and whether there is a guarantee applicable. Check any double glazing. Are the units scaled? Note any signs o condensation.
If it is an old house, ask about any timber treatments or damp courses which may have been inserted, how long ago, and what guarantees go with them.
Check for subsidence, due to any form of mining in the district. Ascertain the responsibilities, if any, of relevant authorities.
Imagine yourself living in the house. Will your furniture fit in? Don’t be deceived by the apparently large areas available when a house is empty. Ask for the measurements of the various rooms. Better still, take your tape measure along and ask if you may measure them for yourself.
If any rooms have two or more doors, are they so positioned that draughts could be a problem? Or will they make the placing of furniture difficult?
Is the layout of the house convenient e.g. is the bathroom reasonably near the bedrooms? Is there a separate lavatory, or is the only one in the bathroom? Is there a separate dining-room so that you do not always have to eat in the kitchen? Such considerations may not worry you too much – but they can take on a new significance when you have guests.
It may be that at the present time your children are young and can be put together in one room, but think a year or two ahead. Are they going to need separate bedrooms then, and if so, are other bedrooms available?
Ask the vendor whether he intends to leave the carpets, curtains and other items; bear in mind that fittings screwed or otherwise permanently fixed to walls and floors may be fixtures and thus are properly part of the structure and should not be removed.
Consider too, whether they are appropriate to your needs. It is one thing, for instance, to inherit lots of well-designed and well-constructed storage units, and quite another to have the task of dismantling and disposing of flimsy, unwanted units and making good the walls.
Find out which way the property faces. A north-facing living room or kitchen, where a housewife may spend a lot of her time, is likely to be cold and dismal if it gets no sun at any time of the day.
If it is a terraced house, do neighbouring properties have extensions which could seriously obstruct light?
Obviously, common defects in other similar houses nearby may well affect the one you are looking at. Old slated roofs, for instance, which are gradually being replaced by new covering materials, could point to the need for repairs to your potential home.
If there is a garden is it of a practical size for your needs, which of the boundary walls are your responsibility, and what is their present state of repair?
Any of the structural aspects touched on here should properly be dealt with by a professionally prepared structural survey but they can be used as initial guidelines and bear on a decision whether or not to proceed further with a particular property.
FLATS WHAT TO CHECK
In the case of flats, how thick are dividing walls, or floors and ceilings? Try to make your visit on a weekday evening when neighbouring flats are most likely to be occupied and you can assess possible noise disturbance.
If the flat is at basement level, how much natural lighting can you expect — particularly on dull days? The placement of windows, their number and size are all relevant factors. Also, if there is on-street parking, how many of your windows could be obstructed by parked cars and, worse, large vans?
When budgeting, remember that not only will the annual outgoings include the mortgage payments and rates but also the
Left: possible noise disturbance is one of many considerations when buying a fiat. Right: building societies have been helping people to buy their own homes since the late iSth century 14 ground rent and a possible service charge, and perhaps costs for central heating, garage and even porterage. Take particular care to check the general condition. You may be liable for major repairs which could be very costly if the block has not been maintained properly in the past.
In the case of converted flats, and certainly with freehold flats, approach your building society before proceeding too far towards buying such a property to check whether they will accept it.
This is by no means an exhaustive catalogue of points to look for but rather a guide to potential problems. If you make your own checklist, which takes into consideration your own set of priorities, the chances are you will avoid many of the pitfalls which can trap the unwary.
MAKING AN OFFER
Another-advantage of dealing through an estate agent is the avoidance of any unpleasant haggling over price direct with the vendor.
The purchaser should have a clear and precise understanding with the agent as to what an offer for a property includes. A written confirmation of the price should be obtained from the estate agents, giving details of all items included with the property. This will range from light fittings, curtains and carpets, to outhouses such as greenhouses and sheds, and even garden plants, shrubs and trees. This written list will avoid any disputes later on and will be of great help to your solicitor.
Whatever happens, do not sign any documents agreeing to purchase; no reputable agent will press you to do so. If you put in an offer, be certain to state that it is ‘subject to contract’. But of course, you must go to your solicitor and set matters in motion as soon as possible. When you are quite satisfied that your prospective purchase is progressing smoothly do, as a courtesy, tell the other estate agents so that they can remove you from their mailing lists.
FINANCING THE PURCHASE
Completion of the house purchase process is quite simple for anyone able to pay cash. Provided that the vendor is not involved in a scries of sale and purchase transactions, each depending on the other it is just a matter of arranging to pay the purchase price through your solicitor when requested, so that the conveyance can be completed and the title deeds passed on to you for safe keeping.
Unfortunately few of us are in the happy position of being able to purchase a home outright, so here we explain how to go about raising the finance.
Homeloan. If you are a first time buyer, you may be able to raise some money through a government scheme known as ‘Homeloan’. Under this scheme you contract to save for at least two years through a building society, bank, national savings or other approved scheme. Depending on the amount saved, you receive a tax-free bonus of up to X^ioo and a loan of ^600 which is interest-free for up to five years. There are other restrictions and you have to fill in a special form before you start saving. A leaflet entitled Homeloan and giving full details is available from any participating savings organization or from a post office.
The first building societies were set up in the late 18 th century both to help people acquire their own homes and to provide a convenient savings medium. The societies received ‘subscriptions’ from their members and used the money to acquire land and property via loans to other members. In some cases the aim was political, for the ownership of property was the only means by which a man could gain the right to vote. Thus the franchise could be extended by encouraging home ownership.
By the late 19th century, the societies had lost any political aims and existed purely as savings and home loan institutions. Since then they have expanded rapidly as mutual, non-profit making institutions, owned by the members.
Most building societies adopt a policy of providing loans to investors first so it is worth becoming an investing member as far ahead as possible.
Societies will consider properties of most types and ages but where a property is of unusual construction, design or character, such as converted flats or maisonettes or properties not in a residential area, there may be complications. Ifthe tenure is leasehold , generally the lease must have at least 30 years to run at the end of the mortgage term.
Depending on availability of funds, some societies may be prepared to lend rather larger amounts than usual but a higher rate of interest normally applies to such loans. Often, when a borrower is not able to obtain a sufficient loan from a building society, insurance companies will provide a ‘topping-up’ second mortgage.
All the major, and most of the smaller, building societies belong to the Building Societies Association. This body recommends the interest rates relating to both investments and mortgages and represents the interests of member societies to government.
Building societies have to be satisfied that prospective borrowers can afford the monthly payments on the loan and generally the income of each individual applicant, whether the sole or one of two joint applicants, is divided into ‘principal income’ and ‘secondary income’.
This division is made irrespective of the sex of the applicants but according to the nature of the income.
The principal income may be defined as the income of the highest earner, which is likely to rise in the future.
Secondary income is normally defined as any additional income of a less permanent nature which can be expected to be available indefinitely in support of, or until, the ‘principal income’ has increased equivalently.
How much a society will grant depends on their individual lending policy, but as a rough guide most will make an advance of up to two and a half times the principal income, plus the secondary income. For instance, if a couple earn £6,000 and £4,000 with the larger amount being the ‘principal income’, the maximum advance most societies would consider would be £6,000 X2^ = £ 1 s.ooo plus £4,000 giving a total of £ 19,000.
A normal basic loan would provide up to 80 per cent of the purchase price or valuation but this percentage may be reduced where the property is old, higher priced, or where 16 there are other features which suggest that the security warrants a lower basic advance.
It may be possible to obtain a higher advance of up to 95 per cent, or in some cases 100 per cent of the purchase price or valuation , if additional security is provided. The simplest form of additional security is a ‘single premium insurance guarantee policy’ arranged by the building society.
CHECKLIST OF STAGES IN HOUSE PURCHASE
Talk to the branch manager of your Building Society, Bank or other source of mortgage, to discuss the type of home you want and to determine how much you can expect to borrow towards that end
Find the house/flat that you would like to buy – remembering to look not only at the property but at its surroundings. See main text for points to consider.
Make an offer ‘subject to contract’, then complete a mortgage application without delay and submit with a valuation fee.
Also, it is advisable to contact a surveyor and arrange for your own private survey. On the strength of his report, it may be possible to arrange a lower purchase price to enable you to carry out essential repairs, so it is well worth the cost.
The mortgagee will obtain a valuation report and if everything is all right will send you a mortgage offer.
Respond to this offer as quickly as possible – having first considered your own surveyor’s report and determined whether or not you wish to proceed.
Consult a solicitor in readiness for the next stage – the exchange of contracts – at which point you will need to pay the deposit.
Arrange and confirm your moving-in date, and arrange for both the connection of services and removals.
On completion day, the mortgagee will send a cheque to your solicitors and the property is yours.
Like building societies, local authorities lend only for the purchase or improvement of property for owner occupation. Although they tend to alter their interest rates rather more frequently than building societies these rates are generally higher and loans are usually made on a capital repayment basis.
Funds available through local authorities have declined in recent years and may be restricted to certain types of property.
In the past banks were involved mainly in granting second mortgages and bridging loans and did not normally grant first mortgages. However, banks have now become much more active in the supply of funds for the housing market. This applies to the big high street banks as well as the Trustee Savings Bank and a number of so-called ‘trusts’, many of which are off-shoots of American companies.
Most of these banks charge a higher rate of interest than the building societies though this is not always the case. They still account for only a small share of the total market.
Some life insurance companies will lend funds for the purpose of house purchase on first mortgages where the advance is repaid by means of an endowment policy issued by the company. Although an advance would not normally exceed 80 per cent of the property valuation, companies are sometimes prepared to make loans up to perhaps ,£50,000 on larger properties. However, the interest rate is almost always higher than that charged by building societies.
A number of life insurance companies also make funds available to ‘top-up’ a shortfall which may arise between the loan – from the other main source, such as a building society, and the total borrowing required. Because it is generally the policy of building societies to distribute their funds to assist as many people as possible, the amount available from this main source could be less than the purchaser requires.
If you need to borrow, say, ,£24,000 and a building society will advance jQ 19,000, a life insurance company may be willing to ‘top up’ the advance by lending the remaining ,£5,000.
The top-up loan would be repayable to the insurance company by means of an endowment policy and the interest rate would usually be higher than that charged by a building society. When considering the amount to be advanced the company would take into account the type of property, and the applicant’s financial status. In addition, the company would probably stipulate that the first, as well as the second mortgage must be arranged in conjunction with a combination of either endowment non-profit, endowment with-profit or low cost endowment policies.
Although finance companies may provide funds for first and second mortgages, their interest rates are generally much higher than the sources already mentioned and they will only lend over a fairly short term, at most about 15 years.
Their usual method of calculating interest is on a fixed balance whereas most building societies charge interest on the balance outstanding at the end of each year.
A private loan or mortgage can be arranged with a friend, relative or employer, possibly at a reduced rate of interest. Solicitors would normally prepare a document defining the terms of such a mortgage – a sensible safeguard against the possibility of later misunderstandings or disputes.
TYPES OF MORTGAGE
Potential borrowers should first see their building society manager or whoever is to make the loan and discuss the type of mortgage best suited for them.
This involves payment of a monthly instalment of both interest and capital necessary to repay the loan within the term of years originally agreed. These instalments may have to be adjusted if a change in the interest rate occurs. Your building society will inform you at the relevant time.
If you decide on a repayment mortgage, do not forget to consider taking out-mortgage protection insurance, details of which are given under Insurance.
During the early years of the mortgage, nearly all the monthly instalments are interest and you may find that even after tour or five years, you have paid off as little as ,£400 or ,£500, but the tax relief is at its highest during this time.
In this case the loan is repaid by the proceeds of an endowment policy issued by an insurance company. The policy provides a sufficient amount to repay the mortgage in one lump sum either on a specified future date or upon earlier death. The premiums on the endowment policy are paid to the insurance company and interest on the loan is paid to the building society or other lender.
Throughout the period of the mortgage the capital balance outstanding remains constant. If the mortgage is arranged with a building society then the interest rate charged on an endowment type mortgage is often a little higher than that made under the repayment system. Most major insurance company policies are acceptable, but check with the building societv or other lender before committing yourself.
The types of policies suitable as a means of repaying the mortgage are: Endowment non-profit. A fixed sum of money is paid either at a fixed future date to coincide with the mortgage term or upon the earlier death of the person insured.
Endowment with profits. The policy is similar except that by paying a higher premium the policy owner participates in the profits made by the insurance company.
Apart from there being a guaranteed sum sufficient to repay the mortgage an element of saving is introduced by means of the bonuses paid by the insurance office.
Low cost endowment. This form of policy is a combination of an endowment-with-profits policy to cover part of the loan, and a form of term insurance for the balance. The insurance company builds into the policy an assumption that bonuses on the endowment portion will accumulate during the period of the policy so that when the proceeds of the policy become available at the end of the term, the basic endowment sum insured, together with bonuses, should be sufficient to repay the mortgage.
The assumed bonuses are assessed at a conservative level below the amount of current bonus so, provided the bonuses exceed the assumed rate, upon maturity of the policy there would be a surplus available to the policy owner after repaying the mortgage advance. In the event of earlier death, the guaranteed sum available would be sufficient at least to repay the mortgage.
There are advantages and disadvantages to consider when arranging a mortgage in conjunction with an endowment policy. Tax relief is normally deducted by the insurance company from the premium of most life policies providing that the policy is arranged to cover the life of oneself or one’s spouse. Policies can be taken out so as to cover the joint lives of both husband and wife when the proceeds from the policy are paid in the event of death of either person.
One disadvantage is that the term of the mortgage cannot be extended if interest rates go up.
Option Mortgage Scheme
Whichever type of mortgage is selected, you will have to decide whether or not you wish the mortgage to be included in the Option Mortgage Scheme.
This scheme came into effect from I April, 1968, and its purpose is to assist house buyers with moderate incomes who pay little or no tax. The rate of interest paid is reduced by a government subsidy to the building society or local authority to give a benefit comparable to that otherwise provided by tax relief
Building societies operate this scheme in accordance with government legislation and a local branch of the building society or the local authority office will provide the details.
Paying the mortgage
Having organised your loan, don’t forget to make your payments regularly! For convenience, these can normally be paid through a bank standing order.
If, through some misfortune such as unemployment or illness, you find you are having difficulty making the payment, do arrange a meeting with your bank or building society manager as soon as possible. He should be able to re-arrange the payments to meet your circumstances and, in some cases, may be able to suspend payments altogether for a while. He will also be able to advise you on help you are entitled to claim from the Department of Health and Social Security.
Banks and building societies do not like to start legal action for re-possession of properties, and only do so as a last resort. However, borrowers who build up arrears without any explanation eventually force the lender to take this step, albeit reluctantly.
The surveyor plays an important role in the process of buying and selling a house. Where the property is being purchased with a mortgage loan the surveyor has two main but quite distinct functions: a the building society inspection and b valuation.
By law, a building society must have a property inspected by a qualified surveyor, who then advises the society as to its value and suitability for security against the intended loan.
The surveyor is not required to and does not carry out a structural survey. The applicant pays for the inspection when applying for the mortgage with the amount based on a sliding scale.
The purpose of the inspection is to give the building society a valuation and, depending upon the individual society’s requirements, various other information and observations. Until 1980, building societies and banks treated the report as a privileged document, produced for their purposes only, but now there is a growing tendency — at least on the part of the major societies — to issue the report to mortgage applicants. In many cases the valuer informs the society of essential and other repairs which he feels will be necessary to maintain the property and protect the value and financial security.
The undertaking of any such repairs or alterations may be stipulated as conditions of an offer of mortgage. However, where reports are still confidential the society concerned is under no obligation to pass on to you knowledge ofany or all the items of repair suggested by the surveyor, even though you, as prospective purchaser, will have to pay for the inspection. Nor is the society obliged to, and often does not, pass on other information and opinion presented in the report.
It follows that the issue of a list of repairs to be carried out as a condition of mortgage or merely for information is not necessarily a comprehensive list. Nor is it an implied guarantee of the property’s fitness in general or in particular.
For these reasons, such an inspection falls considerably short, both in fact and in law, of a structural survey and even if societies in general decide in future to release their previously confidential valuation reports, an intending buyer should still seriously consider the desirability of having an independent structural survey carried out.
More than one million homes change hands annually and in most cases purchasers do not take any independent professional advice on the condition of the house they intend to buy. Many assume that if the building society approves the mortgage, then the house is free from defects. This could be a very costly — even disastrous mistake.
A valuation is not a structural survey; the structure is not examined in depth and the valuer does not necessarily detail all the defects from which a property suffers. The valuer will take into account the age and nature of the building and there are various apparent defects which will influence the value of a property but others cannot be detected without substantial and, in some cases, specialist in-depth investigation.
The object of having such a survey is basically to find out if the house has any structural faults and thus help you to decide whether or not you want to go ahead with the purchase. With all houses, especially pre-1939 properties, a sensible 19 buyer must seriously consider the situation. Obviously, with a newly-built house, which has the benefits of the N.H.B.C. backing, there is far less risk of major costs having to be borne by the first purchaser due to serious structural detects appearing during the initial 10 years of the property’s life.
However, even in such cases, possible problems and the inconvenience involved in having defects put right should not be discounted and a structural survey could forewarn of trouble ahead. In any case, second purchase rights to redress do not extend to structural defects apparent at the time of purchase and which should have been reported by the previous owner or have been revealed by a survey.
It should be borne in mind also that building societies will not generally lend on any new property without an N.H.B.C. Certificate unless the construction has been supervised by a qualified surveyor or architect, acting for the purchaser.
Unlike building society inspections, there is no scale of fees for structural surveys and they will vary considerably, depending on the type, age, size and design of the property under consideration and indeed between one surveyor and another. It is always a good idea to seek a quotation from two or three individuals or firms, and you should always be quite clear in specifying just how detailed you expect the survey to be.
A structural survey will not be cheap and at the time of writing you would be hard pressed to get even a small, two-storey terraced property inspected for less than /joo while the average semidetached and detached houses will command a fee of between £, I oo and £200 or more. It may be possible to eftect a saving by arranging for the surveyor who carries out the building society inspection to do so in conjunction with a structural survey. Some societies will agree to this arrangement — but check that the surveyor is on the society’s approved panel before committing yourself.
The saving by this arrangement is relatively small. It will usually be conditional on the surveyor being able to carry out the structural survey at the same time as the valuation and it may entail waiting for the latter until the surveyor can arrange his appointments to accommodate the much longer time involved in carrying out a structural survey. Remember, there are no set fees for structural surveys, so one is completely in the hands of the surveyor in assessing the ‘saving’.
There is much danger in the ‘quick look by a friend’ approach. A look around by someone who is involved in building, and may indeed be very competent in his own line of business, can lead to a false sense of security and major defects being overlooked because insufficient time has been spent in seeking out their probable sources. Many a friendship has foundered on this particular rock.
There are several advantages in having a structural survey. Objectivity. The surveyor will view a property with an unbiased and objective mind. He will not be influenced by the furnishings or by the décor and he will not be emotionally involved in the social and financial pressures surrounding the purchase.
Expertise. He will employ his considerable experience and knowledge of building construction to appraise the whole building from roof to foundations and provide a list of any repairs, improvements and renovations he considers necessary and desirable, together with the likely cost. Advice. Your surveyor should also offer advice on the future liability for repairs, faults in design, layout or construction and give his opinion as to probable marketability m the foreseeable future, if and when it becomes necessary to sell.
A copy of the list and cost of any repairs can be presented to the vendoi via the agent with a possibility that the purchase price can be reduced by negotiation.
Interpreting the report
A structural survey report can appear to be a mournful catalogue of doom and disaster. The surveyor has an obligation to present the tacts of the situation and list all the defects and shortcomings which he has been able to find – that is what he is being paid to do and is accountable for to you, his client. However, do not automatically reject the property, since much anxiety can be alleviated in many cases by asking the surveyor for a personal interview to discuss the report. He can then be asked to expand upon particular points.
A surveyor can, of course, only see and report on those things which are capable of being seen. He cannot possibly inspect areas of the property which are hidden and inaccessible. He can and must, however, use his skill and experience to deduce certain conclusions which could follow upon matters of fact.
For instance, he cannot see under wooden floors if the owner refuses to allow either the fitted carpets to be lifted or boards to be removed. However, he can warn that dry rot could be present in such a floor if air vents have been blocked by soil and a rainwater pipe is soaking the brickwork.
A surveyor will comment upon – although not usually test – drains, electrical circuits, plumbing or central heating systems. He will, if requested and for an appropriate charge, arrange for such tests to be done. A formal valuation will usually also incur an extra tee.
Surveyors are individuals and expertise and opinions vary. Consequently, no two surveyors will necessarily pass the same comments, least of all in the same way. However, a good surveyor will be precise and concise in his reports and, most of all, he will provide an authoritative opinion and reach.1 definite conclusion if one can be reached.
As a buyer, you should expect to find ‘saving clauses’ in a survey report so far as concealed parts of the structure are concerned. But what is unforgivable is a verbose and woolly report which contains so many caveats or qualifications that its overall effect tends to be not only misleading but meaningless. A survey report should leave the purchaser in no doubt as to the wisdom or otherwise of proceeding with the purchase.
Since mid-1981 it has become possible to arrange for a report which falls between the building society report and a full structural survey.
CHOOSING A SURVEYOR
Unlike a doctor, a solicitor, or an architect, anyone can set himself up and call himself a ‘surveyor’, so it is prudent to seek out a properly qualified person. Such a person will either be a member of the Royal Institution of Chartered Surveyors and entitled to use the letters F.R.I.C.S. or A.R.I.C.S. after his or her name, or a member of the Incorporated Society of Valuers and Auctioneers.
If you have difficulty finding a qualified surveyor, contact the R.I.C.S., 12 Great George Street. London SwiP 3 AD or the Incorporated Society of Valuers and Auctioneers, 3 Cadogan Gate, London SwlX oAS. They will give you particulars of members who practise in the area.