CONTENTS: INTRODUCTION, 1 - SO WHY BUY A PROPERTY?, 2 - IDENTIFY YOUR STATUS RANKING, 3 - CALCULATING YOUR BUYING POWER, 4 - UNDERSTANDING THE MORTGAGE GAME, 5 - INCREASING YOUR BUYING POWER BY INCREASING YOUR STATUS RANKING, 6 - INCREASING YOUR BUYING POWER WITHOUT INCREASING YOUR STATUS RANKING, 7 - GETTING VALUE FOR MONEY, 8 - REFERENCE CHAPTER
Whenever we buy something, however small, we always want value for money. If we are going to make the biggest purchase we’ll ever do, like a house, then we would be foolish not to expect this same value for money. There’s nothing worse than living in a house that you felt that you got stung on.
My definition of value for money in property is:
‘to buy a property that fits as much of your criteria with the buying power you have’
Or in other words:
‘A lot for not a lot!’
So how do you do this? Well, lets assume that you have already set out your criteria for the type of property you want (I’m not going to bore you and tell you that you should only go for properties with gas central heating, be close to a school or have off-street parking – this is a personal choice and I hope you would have thought about this already so I won’t patronise you!) This may be a 2 bed flat or house with an en-suite bathroom not more than 1 mile from the train station. Then you can get this property and value for money by:
- Looking For Properties That Are Not Advertised In Estate Agents Windows
- Buying A Property That Needs Renovation
- Buying A Property Outside Of Your Chosen Criteria
Now I would suggest follow this method in order. That is to say if you can’t find the property that is not advertised normally consider buying a property that needs renovation. If you can’t find a property that needs renovation then consider altering your criteria. Let’s look at this in more detail.
- Looking For Properties That Are Not Advertised In Estate Agents Windows
3 out of 4 properties are sold by estate agents. That means that 1 out of 4 properties are not! So how do you get to buy these properties, where do you look and where do they get sold?
|Where to look
|Local & National Newspapers
|Every local newspaper has a property section. If you look at the back there are houses for sale by private individuals. So why do people sell their house privately? This is because estate agents are expensive. They charge up to 1.5%+VAT of the purchase price. So if you have a house for sale for £200,000 and your not VAT registered the total cost for an agent to find you a buyer could be up to £3,525. Compare this to the cost of placing an ad for £10!
So flick through the locals and see what’s there. Also you could run a wanted ad in the wanted section of the property part of the paper. Simply say what you want with your maximum price you are willing to pay.
National newspapers also have a property section. The Times on a Friday and The Sunday Times have a very thorough property section. Also the Daily Express is a very property focused paper for a reason I’m not quite sure!
|This is where repossessions, run down properties and council sell offs are sold off to property investors. So why leave all the bargains for the property investors – we’ll have some of that!
There is a list of Auction Houses in the reference chapter. The golden rule of buying from auctions is have a price limit and stick to it! Auctions can be very exciting knowing that within 1 hour you could be going home with the home of your dreams. So do not get bowled over with the atmosphere of the auction.
I’ve never bought from auction houses but I have bid at some. I did break the golden rule, and I did bid higher than my price limit but I was still unsuccessful. So it can even happen to the so-called experts!
|When someone dies and they have property they usually leave it to their next of kin being their son or daughter. If the son or daughter no longer live in the area the property becomes a burden rather than an asset. They need to insure it, maintain it and be responsible for the letting of it with all the problems that letting properties bring.
Sometimes the son or daughter are looking for a quick sale just to get rid. This is where, if you can move fast and have your finance in place, a bargain can be had. So where do you find properties like this? The solicitor handling the death estate will know of this type of property. You should make contact with all the solicitors in the area of your choice that deal will probate death estate work. Explain to them that you are a cash buyer as you have all the finance in place.
|The internet is a great source of properties for sale. Admittedly the majority of the houses for sale on the internet are from estate agents but there are private entries too. Check out www.home.co.uk and www.loot.com. These sites have private individuals selling their own home directly without the use of an estate agent.
|Council Sell Offs
|If you are considering buying in an ex-local authority area then contact the council and ask them if they have any houses they wish to sell. Sometimes council’s do not have the finance to renovate some of their property stock so they sell them off instead. Be prepared to have to do some DIY to the house or flat if you are successful in finding something the council wants to get rid of.
|So after you have made contact with every estate agent in the area and they have not found you anything, its time to do some hard searching! If you want to own your first property in your chosen area then it requires hard work from YOU. Identify the properties that you like and that you think you can afford! Print up some leaflets expressing an interest in your property. The more hand written they can be the better. Tell them that you want to buy their property and you have the finance to do so.
Now I’m not saying not to go to estate agents. I have bought virtually all my properties from estate agents and bargains can be had. I am simply offering you an alternative to the standard estate agent.
- Buying A Property That Needs Renovation
I’m sure you’ve seen those property TV programmes about renovating and decorating your property. If you haven’t then where have you been! Basically the theory is simple. If you buy a property that needs renovation then the discount you will get is greater than the cost of repair. Let me show you this example:
I bought a 7 bed property for £42,000. I can already hear you say where the hell do you get a 7 bed property for £42,000! Well I’ll tell you. It’s in Corby in Northamptonshire. It’s a rough council estate and needed a lot of work. All the windows were smashed, the kitchen had been ripped out and the bathrooms were all dated and needed replacing. The total cost of repair was £9,000. It took 3 months to do. After repair I got it re-valued and guess what it re-valued at? Not £51,000, but £75,000.
So why does a property become worth more than the cost of a property plus renovation costs? Its simply because people are lazy. People will pay a premium if they can buy a property that needs no work and they can simply move in. My personal property needed complete redecoration. The lady I bought of had a fascination with the colour green and floral wallpaper. There was green carpets, green wallpaper, green kitchen units – it was quite a sight! The property had remained on the market for quite a while. I went in with a low offer and got it accepted. I re-decorated the whole flat in neutral and modern colours for £5,000. I got the house revalued after 6 months and it valued up to £325,000!
If you are willing to take on a project then you will certainly reap the rewards. The more work you are willing to do the better. But remember – you will be living in a building site for the duration of the renovation.
- Buying A Property Outside Of Your Chosen Criteria
|If you’re looking to move in to Knightsbridge, London and have celebrity neighbours but you earn £25,000 pa then you’ll probably find there are no properties on the market that you can afford! If you cast your net further a field you may find somewhere that you can afford.
I wanted to move to Epping, Essex but the houses that I wanted were all £400,000+. I found a nice house in the next town along for £240,000 that met all of my criteria apart from the area.
Do not get stuck on one area. Some areas are fashionable and carry a heavy premium. You could buy a house with a garden down the road for the same price of a studio flat in the fashionable area. There may be good transport links to your area of choice and if there is, the place you buy out of the area offers better capital growth than an area that is already fashionable.
In the reference chapter is a list of all the affordable areas. These areas are affordable as you can buy a property for four times average annual salary for that area or less.
|No. of Bedrooms
|Now I’m not suggesting that you, your partner and your 3 children consider living in a studio flat! But if you want an extra bedroom because you want a study then possibly re-think this. The living room may be quite sizeable and you could put your desk in the corner. The house may have an extra reception room that you could use or you could simply put your desk in your bedroom.
The number of bedrooms has a major influence on the asking price of a property. The less bedrooms you require the more affordable the properties become.
|No. of Bathrooms & WCs
|Okay, you do need at least one! But en-suites, shower rooms and downstairs WCs all cost. If its just you or you and your partner then having a guest bathroom is simply pure indulgence and unnecessary. Remember – this is your first property, you can start dictating luxuries further up the property ladder.
|Private or Ex-local authority
|There are some very nice council estates that are now privately owned. Before Tony Blair became prime-minister he lived in Islington in one of those 4 storey terraced houses. These houses a long time ago were council houses. Now they are all privately owned and are worth over £1m. My first home was in a council estate and I loved living there.
Check out the council estates in the area of your choice. Drive round them and see what feeling you get from them. You can get a lot more for your money compared to a brand new development. The gardens are bigger, the rooms are bigger and the surrounding areas are properly maintained as its council property.
|Flat or House
|If you cant get a house get a flat. If you’re not willing to deviate from any of the above then you have to get a smaller property. I know I would rather own a studio flat that was all mine than rent a 2 bed house that wasn’t.
|Detached, Semi or Terraced
|If you want a detached house with an acre but only have £100,000 to spend then it ain’t going to happen! You’re more likely to get a terrace so get you’re your head out of the clouds and come round to the idea. Again this dream house will be yours but you have to climb the property ladder and buying a terrace could be the only way to get on the first rung.
|Proximity to work place, train station or shopping centre
|Consider buying near the next train station further out or buy at the next junction of the dual carriage way further out. These transport links were built to be used so use them! It may only make a 5 minute addition to your journey.
|Gas Central Heating, Double Glazing and other improvements.
|All these improvements can be carried out at a later date when you have the money. If your looking for a property that’s already had all the key improvements that add value to a home then you will be paying for it.
Gas central heating, double glazing and nice décor do not cost a fortune. So if you can get a property without these additions you may be getting the property for a bargain price.
Okay, so you’ve found the perfect home. What happens next? Well you have to make an offer!
MAKING AN OFFER
If you suspect that there will be a lot of interest in the property because it is cheap do not be afraid to simply offer the asking price. This way there is no to-ing and fro-ing, the deal is done on the day and the property is removed from the market. If the agent’s get the asking price then there is no need for them to show the property to someone else.
If you’ve arranged your mortgage then give a copy of the acceptance letter from the lender to the estate agent. This will convince him that you can act quickly, you are serious about buying the property and you are not just someone off the street who has just seen this property and thinks they can buy it without giving it much thought. If you can show them your bank statement as well which proves you have the deposit then do so. Anything that will convince the vendor or estate agent that you are serious will make him unlikely to show the property to someone else.
If you suspect that demand is not high for the property but is still a good buy then ask the agent or vendor how long it has been on the market. If it’s been a while then go in low. I would say 75-80% of the asking price. Ask the person, “has it ever had an offer? What offers have been refused?” Then you will be able to gauge your entry offer. This is assuming you believe the person in the first place! If you have built up a relationship with an estate agent this should not be an issue, but always be aware.
When the offer is accepted they will almost certainly ask your for you solicitors details. Have your solicitor arranged prior to placing an offer. The agent will then write to your solicitor to confirm the sale and the solicitor will instruct you what to do from then on.
You have to be patient when buying a property. Under normal circumstances the purchase should take no longer than eight weeks from the date your offer was accepted. There are many things that can go wrong with a purchase and sometimes there is nothing you can do about it but sit back and wait. I have listed some of the things that can go wrong and what if possible, you can do about it:
What can go wrong
|What to do about it
|Vendor withdraws property from market.
|If the vendor has decided to keep the property there is nothing you can do about. If he has decided to sell to someone else then find out the selling price and go in even higher. If the property is worth more then pay it!
|Survey fails or undervalues the property.
|Find out what it failed on. Ask the vendor to remedy the problems. Do not, under any circumstances offer to contribute to the cost of any remedial work. This is because after he has remedied the problems he may not sell to you and you will find it difficult to get your money back.
If the property has been undervalued it is difficult to persuade the valuer to value it up but it is worth a try. Consider approaching another lender for revaluation or contributing the difference in the purchase price and the valuation.
|The mortgage company require further documentation at the last minute but you do not have the documentation or it will take a long time to get it.
|Kick up a fuss! If they’ve approved your mortgage but then want further documentation they should have asked for it earlier. Threaten to complain to the Financial Services Authority (FSA). If all else fails try to get a compromise. I.e. if they want your mortgage statement to prove you have kept up to date on your mortgage payments in the last 12 months offer them your bank statements for the last 12 months.
|The flow of documentation between solicitors is slow or non existent.
|Ring your estate agent and get them to chase for you. The agent’s wages depend on the sale of the property so he will have an interest in the sale occurring sooner rather than later. Ring your solicitor and ask what the hold up is. Ask your solicitor if there is anything you can do. If you really want the property, you have to be prepared to do some of the acquisition work yourself. If it is proving impossible to get certain documentation from the freeholders when buying a leasehold then consider losing the property. This is because when it comes to selling the property you will probably have the same problems and purchasers will get fed up and pull out.
If things are progressing normally however, then let your solicitor do everything as this is what you are paying him for. Only react when your solicitor has informed you of a problem or you haven’t heard anything for six weeks.
It’s advisable, prior to exchange of contracts, that you view the property to see that it is still in the state you first viewed it as exchanged contracts are legally binding. If kitchen appliances were included in the sale then check that they still remain there. Check that the carpets and curtains remain and the condition of the property has not deteriorated.
So, I hope you’ve learnt something from reading this book. Most importantly that almost anyone can buy a property with the right knowledge – GOOD LUCK!