First timers in a rising market

“An Englishman’s home is his castle” is a phrase often used to describe the attitude to homeownership in the UK. In Germany, only 50% of people own the house they live in but in the UK it is 70% and the ambition of most people is to be a home owner. The Government encourage us to aspire to home ownership and over the years have introduced a number of items of legislation designed to “assist” First Time Buyers to enter the market.

Incentives

There was a stamp duty exemption for First Time Buyers between March 2010 and March 2012. More recently, the Government introduced the Help to Buy Scheme in which they assist First Time Buyers in buying new build houses and this has been expanded to cover second homes (eligibility categories have been widened even further).

Mortgage lenders also like to be seen to be helping First Time Buyers and they often introduce new products especially for this category of customer. The Halifax has recently introduced a mortgage product where they pay the stamp duty up to £2,500 for First Time Buyers.

One would expect that with all these incentives, getting onto the property ladder would be relatively easy. However, it is becoming even more difficult because what is given with one hand is often taken away by the other.

New strict affordability lending criteria which have been forced on lenders by government legislation do make it more difficult to obtain mortgage finance and it is safe to say that the bigger your deposit, and the less you need to borrow, the easier it is to finance that first transaction.

Even if you have a large deposit and can secure the mortgage you need, there are still considerable challenges to overcome before moving in to your property.

Market Conditions

The state of the property market also has a major effect on the way the transaction will proceed. In a subdued or declining market, First Time Buyers can negotiate the price safe in the knowledge that their seller wants them to proceed and there is often time to consider everything about the transaction. If the survey brings up issues, reports can be obtained and you can often request a contribution from the seller towards any additional work that needs to be done to the property.

In a rising market such as those which have existed in the London area for the last 12 months (and which has now spread to the rest of the UK), the situation is somewhat different and First Time Buyers find themselves competing for properties against buy to let investors who have cash in the bank (probably earning very little interest) and who wish to see a greater return.

These buy to let investors are competing for exactly the same properties that would be ideal for a First Time Buyer. Indeed, a First Time Buyer may find themselves paying more rent on a flat that they could afford to buy (and on which they would pay less in mortgage payments) but the buy to let investor has got in there first.

The process of buying your first home in a rising market becomes even more stressful when market conditions give both the negotiating and “control” of the transaction to the seller and their estate agent.

It is an anxious time and even when you might have your deposit (and mortgage in place), you may find that the seller’s agent is either encouraging the seller to go with the investment cash buyer (who is a more “certain” and quicker choice) or that you are put under considerable pressure to proceed extra quickly because “there is another interested party” or the vendor demands that you exchange and complete within a very quick timescale (and threatens to sell elsewhere if you do not).

Moments like these can fill a buyer with panic, making them believe that they will lose the property they have tried so hard to find.

Don’t be bullied

Our advice is to try to stay calm. Do not be bullied by either the seller or the seller’s agent (very often the pressure is merely sales marketing talk or just an unreasonable vendor).

Your house purchase is the biggest transaction you have ever undertaken and therefore do not be pushed into making quick decisions that might be regretted over the forthcoming years. Rely on your solicitor, your surveyor and your mortgage advisor who will assist you in the best way they can. They will know that you will be under pressure to proceed. They are there to not only help you buy the property, but also provide you with expertise and peace of mind.

Over the years we have tended to find that the sellers who put the most pressure on are often the ones who are doing it (and using the market conditions) to try to force you to proceed because there may be something wrong with the property or they may wish you to overlook or cut corners because they are trying to hide something.

It is essential that you do not give in and that you stand firm against this type of sales tactics. Your solicitor will be acutely aware of the need to proceed quickly so that the deal is done and you do not lose your property. Remember that the solicitor is acting in your best interests (the estate agent is not they are acting for the seller) and should be completely independent. Work with your solicitor and surveyor, do quickly what needs to be done to proceed and make sure that the seller and the seller’s estate agent know the steps you are taking to progress. Hopefully if they know you are genuinely trying to proceed at the earliest possible time, they will be reasonable and give you sufficient opportunity to consider all aspects of the property purchase before you commit yourself.

One has to be realistic when buying a property, it is a stressful time but with the right advice and assistance and working with the right professionals, you should be able to reduce the stress and anxiety and maybe even enjoy the experience.

Contact Sean Sanders