This post was originally posted on the 29/06/2019 and updated on the 20/12/2019
3 first-time buyer errors can cost you a lot of money and a serious amount of inconvenience and distress:
1. Paying a non-refundable reservation fee
2. Buying without a suitable surveyor’s report
3. Not properly reading the conveyancer’s Report on Title.
These errors are not just made by first-time buyers – non first-time buyers can make them too.
They are property errors that are easy to make – but are also easy to avoid. The fact that they are easy to avoid is why it is unforgivable for you to make them – whether you are a first-time buyer or not.
They are possible at different stages in the house purchase process. If you buy a property, you are almost certain to come across at least two of the situations in which they can occur.
Most people will come across all three at some time or the other.
This blogs sets out the circumstances in which the 3 first-time buyer errors can occur – and looks at how each error can be avoided.
3 First-time buyer errors #1
Paying a non-refundable reservation fee
The risk of this error arises in two main situations:
- When you are buying a new home or
- Where you are buying a new property for investment purposes – such as new flat or house, a student room, or a new-build holiday property in the UK or abroad.
If you are buying an off-plan or new-build property, you will often be put under intense pressure by the site agent or selling agent to commit to buying by signing a reservation agreement, and paying over a non-returnable reservation fee – which can be as high as a few thousand pounds.
Such sales techniques are of course unfair an unethical.
Convinced that you will lose out if you don’t accept in the short timescale given, you will often be severely conflicted.
You may be tempted to sign-up even though:
(a) You are unsure whether the property is a good deal
(b) You have concerns about the safety of your deposit
(c) You are unsure whether you want to proceed at all.
When faced with a request for a reservation fee or “holding deposit”, your first response should be to resist the request.
If it is not possible to resist the request, ask for the payment to be fully refundable in certain circumstances, such as you not being able to get a mortgage or in the event of an unfavourable valuation.
♣What to do if the seller insists on a non-refundable deposit
If the seller will only proceed on the basis of a “non-refundable” payment, think twice about going ahead.
The safest thing to do is to walk away.
Only pay over a non-refundable amount if:
(a) The amount is reasonable (£500 or less in the average situation)
(b) It will go towards the purchase price if you proceed
(c) You are pretty sure you want to proceed, and will be able to do so.
Further, ensure that it will be fully safe, perhaps kept in a solicitor’s account, and refundable to you in full – ideally with interest – if the transaction does not proceed and you are not at fault.
Be especially cautious if you are asked to pay a non-refundable amount to secure a second-hand or overseas property.
In all cases, always consult with a conveyancer or solicitor prior to making any payment, and avoid payment by cash.
If you do have to pay by cash, ensure that you get a receipt.
If you make a payment on a non-refundable basis before taking advice, don’t despair. Seek expert assistance, you may have the legal right to claim back the non-refundable payment under the Consumer Rights Act 2015.
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3 First-time buyer errors #2
Buying without a suitable surveyor’s report
Of the 3 first-time buyer errors, this one is probably most likely to occur with:
- Cash buyers and
- Auction purchasers.
But it can occur with any buyer. Most buyers will obtain a surveyor’s report. However, the important thing is to obtain a suitable surveyor’s report – one relevant to the nature, age and condition of the property being bought.
A fundamental rule when a buyer is purchasing a property is “caveat emptor” or “let the buyer beware.” The burden is on the buyer to identify any defects in the physical state, structure or condition of the property.
It is therefore important for a buyer to carry out a suitable survey in respect of the property. The website of the Royal Institution of Chartered Surveyors (RICS) lists 3 types of survey:
Basic report – Level 1 – RICS Home Condition Report
More detailed report – Level 2 – RICS Home Buyer Report (with or without a valuation)
Comprehensive report – Level 3 – RICS Building Survey.
The RICS Building Survey is suitable for larger or older properties, or where major works are planned.
♣Why it is important not to overlook a suitable surveyor’s report
It is important not just to obtain a surveyor’s report but to obtain one which is suitable for your purpose.
If you are buying a property which has not been lived in for years, you will want to know if there are major structural or repairing problems. That will enable you to work out how much you will need to spend to bring the property back into a good state of repair.
You may feel that you don’t need to bother with a surveyor’s report since you will need to carry out major works in any event. But the risk in not obtaining an expert report is that you may overlook something major and expensive. You run the risk of under-estimating your repairing and refurbishing costs – paying too much for the property in the process.
You may be tempted to avoid the expense of a surveyor’s fee by not bothering to obtain a surveyor’s report when buying a brand new property and don’t require a mortgage. However, that is a high risk strategy and is not advisable.
If you are buying with a mortgage, and have any doubts about the report of the surveyor instructed by the mortgage company, think about obtaining your own surveyor’s report. Consequently, you will have your own report to rely on if at a later date you have to challenge the report obtained by the mortgage company.
♣What to do if buying at an auction or buying a new property
Another area of risk is if you are buying a property at an auction. You may have plans to repair or refurbish the property and may think a surveyor’s report is a waste of money in the circumstances.
But the property may have structural or other problems which are not apparent. Those problems could make the property un-mortgageable where you need a mortgage to complete your purchase.
There are similar dangers if you are buying new-build student accommodation or overseas property, especially off-plan or new-build holiday accommodation.
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3 First-time buyer errors #3
Not properly reading the conveyancer’s Report on Title
Of the 3 first-time buyer errors, almost certainly the one most commonly made is failing to carefully read the conveyancer’s Report on Title.
When you buy a property, you will usually receive a report of some kind from your conveyancer asking you to carefully read and approve it prior to signing the legally binding contract.
This report is typically called a “Report on Title”. It deals with a range of important matters relevant to your decision to proceed – including whether the legal title is “a good marketable title”.
The report will address key facts, issues or documents in relation to your purchase. Therefore, it will explain things such as the contract, purchase deed, title deeds, search results, lease (where applicable), service charges (where applicable) and replies to pre-contract enquiries.
It is one of many documents your conveyancer may send you during your purchase and is possibly the most important.
You may also find the following blogs useful:
Stress free property purchase (top tips to make buying less of a hassle)
Mistakes when buying a lease (protect your property against these woes)
4 property errors never to make (common errors that can be very expensive)
♣Why it is important to read the Report on Title
You should read the report fully and carefully (including any document to which it refers). Raise any questions or comments with your conveyancer. Avoid any temptation to skim-read or, worse still, sign the report without reading it at all.
Important or critical points a Report on Title may contain include:
- Concerns about the length of a lease or its covenants, restrictions or regulations
- Restrictive covenants limiting the use or enjoyment of the property
- Information about neighbour issues or disputes
- Rights of way or rights of light affecting the property.
You will be legally bound by any fact, issue or nasty surprise which you miss or misinterpret in the Report on Title. You will not have any redress against the seller. Accordingly, it is vital for you to read the report with great care.
If you have a specific plan or purpose for the property, always bring that to the attention of your conveyancer, and check that the Report on Title does not reveal anything for you to be concerned about.
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Rebel Property Coach
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