Don’t miss out on important aspects in the home buying process, warns Richard Sexton, as he highlights some of the pitfalls to be aware of when considering a new property
If you’re reading this you’re probably considering buying a new home. But before making the most expensive purchase of your life, you should learn the main pitfalls to avoid. While it’s relatively easy to prevent these errors, they’re excellent examples of how not to buy a home.
Prepare a budget
The first mistake people often make is not preparing a budget. Financial planning can be time consuming and a bit dull, but if you don’t know how much you can afford, you’ll probably end up overspending. You should be able to enjoy your new home without scrimping and saving just to keep it.
Most buyers will usually require a mortgage before purchasing, so it’s vital to know your credit score and how much you can borrow beforehand. It would be so disappointing to put in an offer on your dream home but have to back out because you can’t get financing. While it may be tempting to fantasise about mansions and country estates, when it comes to a serious search, you should stick to what’s comfortably affordable.
House prices
Staying within your means is the first essential, and the second is also to do with the asking price: avoid paying more than the house is worth. In a rising market, it’s very easy to pay over the odds, particularly with fierce competition. While fears of being gazumped by other buyers fighting for your property may tempt you to bid more, don’t be afraid to walk away.
The implications of overpaying can last a long time, especially if you use a large mortgage to pay for the property. Should the value of the property ever drop, you risk being left in negative equity – where you owe the bank more than the property’s worth, making moving home near impossible.
It’s important to research the local market before you buy. Look online to see how much similar properties have sold for recently. This should give you a good idea what your property is actually worth, ensuring you won’t pay over the area’s ceiling price. If you’re lucky enough to find a bargain, you may be able to make a healthy profit should you ever decide to sell – but don’t forget, the price of your next home may well have risen also in the interim.
Surveys
Having chosen a potential new home, don’t make the mistake of missing out on a survey. Many buyers believe the misconception that a mortgage valuation is the same as a survey, but these reports are purely for mortgage lenders. They won’t provide you with all the information you need to know.
A RICS (Royal Institution of Chartered Surveyors) Home Buyer report will reveal if there are any structural problems with the property which could cost you a fortune in future repairs. It can be a nightmare to fix problems like rising damp, dry rot or subsidence. You’ll have great peace of mind knowing your new home won’t fall down anytime soon. Even if you’re determined to buy a specific house, you can negotiate a discount to cover the costs, if there are major faults which need repairing.
Future development plans
Another common error is not checking future development plans in the area. A quick search online will usually reveal any big changes that could affect local property values. Plans for new schools, better transport links or major companies moving nearby will often boost values and improve the local environment.
On the other hand, if the area is close to a planned fracking site, property prices could tumble. Bad news could be the reason the current owner is selling up. While estate agents do have a duty to inform you of anything that may affect your decision to buy, this can be subjective so it’s worth doing your own digging as well. When you’re researching, it’s also worth checking the location of any public footpaths. If you value your privacy, you won’t want hordes of ramblers pacing through your garden every weekend – especially if you plan on sunbathing.
Flood zones
But while future sunbathing plans probably shouldn’t be an important buying factor, it would be wrong to ignore the weather completely. Watching the news this winter, you’ll have witnessed just how costly this mistake can be.
Flooding can cost a fortune in repairs and insurance premiums. It will cause terrible stress and you may be unable to insure or sell your property in future. If you live in a flood zone, you’ll get nervous every time it rains. Presuming you’re buying in the UK, that means nerves nearly every week. Checking the Environment Agency’s flood risk map takes minutes, but could save you from huge emotional and financial pain.
Neighbours
While researching where to live, remember nightmare neighbours could ruin any new home. Before buying it’s a good idea to check property boundaries and who owns any fences or hedges. If you’re clear about these issues before you move in, this should prevent disputes in the future. If you really like a property, you should consider introducing yourself to any potential neighbours to find out more about the area as well.
Getting a mortgage
Once you’ve picked your property, you’ll usually have to get a mortgage. A major mistake here is not shopping around for the best deals.
The Mortgage Advice Bureau estimates that there are 17,000 total mortgage product choices, so you’ll have plenty of options including smaller lenders, supermarkets and the Post Office, as well as the major high-street banks and building societies.
If you’re not sure, don’t be afraid to ask for independent financial advice. As you’ll probably be paying off your mortgage for many years to come, it’s important to think ahead and plan for the future.
If you’re a first-time buyer, you’ll realise just how expensive it can be to get that first foot on the property ladder. It would be an expensive error to ignore financial support, when you make your first step. Even if the Bank of Mum and Dad can’t afford to contribute, there’s a whole host of government schemes to provide a helping hand. These include the Help to Buy ISA and the Help to Buy equity loan and mortgage guarantee schemes.
The government is also planning to build 200,000 starter homes which will be available at a discount to first-time buyers. You’re allowed to use a combination of these schemes to get on the ladder which means they can give you a serious leg up, which you’d be foolish to ignore.
Other costs
It’s also important to prepare for some initial one-off expenses. When making an offer, you should check what’s included or you may need to budget more. It could be very costly to have to buy all new curtains, white goods, carpets and furniture.
Remember to factor in conveyancing fees, stamp duty and moving costs as well. If you like the current furnishings in the property, most sellers will be willing to include them for a marginally higher price. While you may need to make some additional purchases, these allow you to make your new house your own.
Finally, don’t forget about the upkeep costs for your new home. As well as the usual bills, you’ll have to pay maintenance costs for your property. While getting a survey should highlight obvious issues, every property will eventually require additional expenditure. Period properties will often have more charm and character, but bear in mind that they will be much more costly to maintain, requiring additional time and effort. You’ll also have to cover the cost of home and contents insurance, just in case something ever goes wrong.
While this isn’t an exhaustive list, if you avoid most of the common mistakes, buying a new home will be much easier and cheaper. Owning your dream home is one of life’s biggest accomplishments, so if you’re careful, it should be an incredibly satisfying and positive experience.
Richard Sexton is business development director of e.surv chartered surveyors
