Natasha Afxentiou: Hello and welcome to OnTheMove, a podcast from OnTheMarket. I’m your host, Natasha Afxentiou and in this series we’ll guide you through everything you need to know about the home moving process from start to finish. We’ll be speaking with our guest experts who will share their tips and tricks to ensure you are equipped to make informed choices, breaking down industry jargon and clearing the path to your dream home.
Today’s episode is your Moving 101, where we’ll be explaining and mapping out the key stages of the moving process. So whether you’ve never moved before and don’t know what to expect, or you’ve forgotten what the process involved since the last time you moved, we’ve got you covered with the basics you need to know.
We’ll also be jargon busting by explaining those tricky common property terms that you might have heard and to do this, I’m joined by two special guests, Matt Thompson, Head of Sales at London based estate agency Chestertons, and mortgage expert business manager and senior mortgage broker, Sally Mitchell from The Mortgage Mum platform.
Thank you both so much for being here today. How are you both?
Matt Thompson: Pleasure. Very good thank you.
Sally Mitchell: Very good thank you.
Natasha Afxentiou: So before we jump straight into the topic for today, why don’t we start by giving maybe a brief background for our listeners, for both of you guys. So start with Matt maybe?
Matt Thompson: Yeah, sure. So I’m Matt Thompson, as you say. I’m Head of Sales at Chestertons. I started my career at a large, well-known agency in London. Started off as a Sales Negotiator, I worked my way up, I spent about 10 years there. So I worked my way up from Sales Negotiator to Assistant Manager to Manager. I then spent the next part of my career about five years at an independent, well-respected brand as Regional Director, before moving on to help business owners launch and set up their own self-employed agencies. And then moved to Chestertons about eight months ago as Head of Sales.
Natasha Afxentiou: And how about you, Sally?
Sally Mitchell: Completely different. Yeah. I’m Business Manager and Senior Broker at The Mortgage Mum. I come from a really different background, recruitment, a gallerist, I’m madly into art and also fashion buying. So how did I end up being a mortgage broker you might well ask. I love it. It’s the people aspect. It’s doing the deals, it’s helping people. There’s no job like it, and I’m so glad that I found it.
Natasha Afxentiou: Today’s our Moving 101 episode, so for those people who might not have moved before, or they can’t remember what the process involves since the last time they moved, we wanna start by giving an overview of what they can expect from the home buying process because it’s not just a case of finding something you like and then putting in an offer and then it’s done. There’s a lot more to it than that isn’t there?
Matt Thompson: Yeah, there’s quite a lot to it, as you quite rightly say, and I think, you know, you’ve got different types of buyers as well, right? So you have first time buyers, you’ve got people that are upsizing, you’ve got people that are downsizing, you’ve got by to let and et cetera. So I think there are lots of things to take into consideration and I would say certainly the first thing is, and I’m sure Sally will expand on this, is get your finance sorted. Make sure that you do have that Agreement in Principle because there’s no use having a look at properties if you don’t have, you know, your finance and your Agreement in Principle, because you may be looking at properties that are too expensive or equally you may not be looking at the right section of properties cause you might be able to afford more. So I’d certainly say get that piece sorted. The second thing I would say, is a lot of buyers and also sellers, they wait to instruct a solicitor or choose a solicitor until they’ve found a property or they’ve got their property under offer. And I would say get your solicitor sorted, reach out to a couple of solicitors and get yourself in the best position possible. If you’re looking to buy in London, let’s not forget, it is a competitive market, so you wanna make sure that you are standing out from the crowd. And then as you quite rightly say, the process is not straightforward. And buyers, you know, will come with a certain expectation of what they can get for their money and actually the reality of it is it will be a series of compromises and it may take some people longer than they anticipate to actually find somewhere. So definitely get registered with some agents once you’ve got your Agreement in Principle and a great start is obviously looking on the portals, like OnTheMarket, but I think registering with agents and actually really building relationships with agents and allowing agents to really get into depth in terms of what are the differences between your needs and wants, qualifying you in depth and allowing that relationship to build, is gonna be quite important. And actually getting out there and viewing as many properties as you possibly can is gonna be key to then figuring out what works, what doesn’t work, what am I willing to compromise on, et cetera.
I know that lots of people will probably think I’m just gonna know. I’m just gonna walk in and get that tingly feeling. The reality of it is that it’s quite rare. No matter what your budget is, that’s quite a rare thing. So I think that’s a good start. Get your mortgage Agreement in Principle. Get your solicitor sorted. Register with some estate agents. Allow them to qualify, build that relationship, get out there and start (get) boots on the ground.
Sally Mitchell: Yeah, I totally agree. I mean, I’d add to that, go back a step and look at affordability and budgeting. You really need to get all your ducks in a row before you even go for Agreement in Principle, you need to work out exactly what your income is, and it’s amazing how many people don’t really have a very good idea. Obviously they see their payslips coming through, but they don’t look at their outgoings. So we always say, ‘right, let’s get really frank about this and have two lists, I need and I want’. Because it’s amazing what you can actually lose from the ‘I want’. People don’t like it. Get forensic about it, really forensic and also then the sort of properties you could be looking at. It might be that it’s a nightmare because you’ve actually got a bad credit score hanging around in the background, which will mean that you are looking at mortgage products that are much more expensive than what are advertised in the mainstream.
It might be that you are going down a concessionary route or some sort of shared ownership, because that’s suitable for you, so you really need to get to grips with where you sit in the market, and then I think you can move forward. And of course find a really good broker, because they guide you to completion alongside the agents. It’s something that’s not really discussed. There’s no shame in not knowing where to start and how to get going.
Natasha Afxentiou: If we take a step back then, so I picked up on what you said there, Sally, you obviously want to make sure you’ve got your ducks in a row. So if you’re looking at your finances, you are looking at your income and also your outgoings. Are there any other bits of documentation that you need to think about, that you need to have in place when you’re going to your broker? Is there any difference for example, if you’re employed or self-employed, what are the other things that you need in place before you go and have that meeting?
Sally Mitchell: Absolutely. So every lender will want absolute cast iron proof of your income. If you’re PAYE that’ll be your last three months consecutive pay slips. If you rely on bonus, they will expect to see bonus on those pay slips, and they might even ask for your most recent P60 to demonstrate that it’s not just a one-off. You’ll be amazed how many people become very creative when it comes to their income because they really want to buy their house or their flat, and it has got to be absolutely a hundred percent cast iron with self-employed. There are a variety of ways of being self-employed, and we haven’t even talked about partnerships yet. If you are a limited company director, then we need to see salary and dividends and your share of net profit. You will need to have at least two years of trading with corresponding accounts and tax year overviews and SA302s. If you are a sole trader, then we need at least two years as well of SA302s and tax year overviews detailing how much you’ve actually generated from that self-employment.
Where people fall down sometimes, it’s worth flagging this up actually, (for) self-employed is that quite often when you’re self-employed, you are trying to mitigate tax. You are trying to make it look as attractive as possible for less tax to be owed. When you want to get a mortgage, you want to maximize your earnings, and we do get quite a few people coming to us saying, ‘well, it’ll be better next year because next year I’ll do my accounts totally honestly (obviously), but I will make it look as attractive as possible’, and that’s what you need to do. You need to make yourself look the very, very best bet for a lender to take a risk on. That’s quite important.
Natasha Afxentiou: We’ve discussed there, getting that mortgage Agreement in Principle, or mortgage AIP, in place. So for anybody listening who may not necessarily know what the difference is between that and your actual mortgage offer, what’s the difference?
Sally Mitchell: Well, I call it a Decision in Principle because I shorten everything to an acronym, and it’s a DIP. So if you hear people talking about DIPs, that is an Agreement in Principle, it’s just lenders call them different things. It is not in any way a promise, an offer, a contract. It is purely, if I can put this in layman’s terms, it’s ‘okay, we’ve had a brief look. You’ve supplied information. We haven’t necessarily checked that information. We’ve looked at your credit score, we can’t see any problems. So depending on the property, (which has a lot to do with it) and with a fair wind behind us, and if we haven’t changed our criteria in the meantime, then yes, we think we would be able to lend you up to X amount’.
DIPs don’t last very long, typically, they last three months. They don’t last very long at all. They’re brilliant. I call them the Willy Wonka Golden Ticket because all agents want them because it means that you are pre-qualified. Somebody has looked at your case and said, ‘yeah, there’s no skeletons here. It’s a perfectly reasonable option’. But it’s no promise. It gets you to jump the queue, and I’m sure Matt will hopefully agree, if you want to view properties, agents want to see your Agreement in Principle.
Matt Thompson: Absolutely. Yeah, without a shadow of a doubt.
Sally Mitchell: In reality it doesn’t actually mean a great deal. It means that you are slightly pre-qualified, but you’ve still got a long way to go.
Matt Thompson: I think it’s probably worth coming back to when we discussed the different types of movers that you have, the, the upsizers and downsizers, et cetera. If you have a property to sell we’ve also gotta remember that you do have to get a Market Appraisal on your property, an evaluation on your property, right? Now equally, you are not really gonna know what your affordability is until you’ve actually got a physical offer on that property, and that’s probably something worth discussing as well, because an agent, and I’m sure we’ll probably go into this a little bit more depth, but an agent may come out and say, ‘you will be able to get X’, but let’s not forget that that agent is just providing a market appraisal. Once you’ve actually physically got an offer from a buyer in your hand, then you can work out your affordability on your equity that you have in your property versus what you’re gonna buy and your agreement or decision in principle that you have. So that’s quite an important factor as well when we’re discussing what should we be doing. Well, if you do have a property to sell, probably the first point of action is get some valuation. And a lot of people start looking for property before their property’s on the market and actually, that’s the wrong way round to do it. Really what you wanna do is get your property on the market, actually physically get an offer on your property, then start looking for property.
Sally Mitchell: Yeah. And lenders will want to sometimes see the offer that has been accepted.
Matt Thompson: Correct.
Sally Mitchell: They won’t move forward unless they know that what you are selling has actually got a firm offer on it.
Matt Thompson: Exactly.
Sally Mitchell: It’s sort of chicken and egg, isn’t it? This is why you need help. You need a good agent and a good broker, and a good conveyancer as well.
Matt Thompson: Absolutely. Yep.
Natasha Afxentiou: What you said there Matt, I think that’s a really important point because sometimes people can often do things, maybe the other way around, which might not necessarily put them in as much of a great position because the last thing that you want to do is try and put yourself in a position where then you’ve fallen in love with a property, but you’ve not even got yours up on the market yet. You don’t even know what you can afford. So the last thing you wanna do is not have all these things in place and not have an idea of the direction that you can go in before you really get serious about finding the right place.
Matt Thompson: And it is a common mistake, and I do understand it and I do get it because you know what people say is ‘I wanna find somewhere before I put my property on the market cause I don’t wanna be left homeless’. Again, not quite understanding the process that you’d need to go through because by putting your property on the market and accepting an offer that puts you in the best position to then make offers on other properties because you become what we call proceedable. You’re proceedable at that stage. You are not proceedable if your property isn’t on the market. Equally, you’re not proceedable if your property is on the market and doesn’t have an offer. So again, you’re not putting yourself in the best position possible. And equally, I’m sure we’ll get onto talking about the process itself, just by receiving an offer on your property, again does it really mean much? I mean, of course you’ve got an offer on your property, but you haven’t exchanged contracts. You know, so it is not legally binding. Nothing is legally binding at that point.
Sally Mitchell: You get into chains, don’t you? If you’ve got to sell to put an offer in, it can just roll on and on.
Matt Thompson: Which then comes back to your point, Sally, which is why it’s so important that you do have the right people, the right agent that’s selling your property, that’s got the right skillset, the right mortgage broker that’s communicating effectively with you and the right solicitor. If you’ve got those elements right, then that’s great. What you obviously then can’t control, you know, if you’re talking about chains, is who are the other people representing the other parts of that chain?
Sally Mitchell: It can be very stressful. They say it’s no more stressful than getting married or death.
Matt Thompson: I’d agree.
Sally Mitchell: Maybe not the last one, I dunno about that one yet. You need somebody in your corner. Three people in your corner, really.
Matt Thompson: Yes, absolutely.
Natasha Afxentiou: Yeah. If you’ve got that support system around you, then it’s half the battle, isn’t it? You know, like we said before, you don’t know what you don’t know. If you’ve got those experts around you that do know exactly the ins and outs of the process, you are in a good position to be guided through.
Matt Thompson: Equally, we’ve gotta remember that the landscape has changed somewhat as well. So even if somebody has sold a property or bought a property within the last five years, 10 years, so on and so forth, the landscape’s changed. The mortgage market’s changed as we know the mortgage market’s changed recently, but also the conveyancing process has changed substantially as well. So just because you bought a property and some of the inquiries that are being raised, if you are selling, didn’t come up when you were buying, you know, some people can get a bit frustrated by that because they’re saying, well, this didn’t come up when I bought it. No, I totally appreciate that. But the landscape has changed quite considerably now, and actually the conveyancing process, you know, it can be a very complicated, time consuming, sometimes frustrating process. Hence why the advice is to any seller or buyer, get that solicitor sorted as soon as you can. And especially if you are a seller, I would get sell ready in the nicest possible way. I think sellers should demand more from their conveyancers or their solicitors. So ie. get all the paperwork before you’ve found a buyer. Again, put yourself in the best position that you possibly can. Because again, it’s a crazy system in the UK that we wait once we receive an offer to instruct this solicitor, but then that process can take a couple of weeks to fill in the paperwork. It can take them weeks upon weeks then of inquiries going back and forth to try and minimize that and put yourself in the best position. Time is the killer of all deals, right? Time is the killer. Longer something drags on, the more likely it’ll fall free.
Sally Mitchell: Yeah. And the more other people (get involved)
Matt Thompson: becausee if you likel the property, bet your bottom dollar there are other people queuing up to snaffle it away from you without a doubt. That’s really frustrating and disappointing and upsetting.
Natasha Afxentiou: Like you said, the landscape’s constantly changing, and I think what’s quite interesting is that at OnTheMarket, we actually release every month a Property Sentiment Index, which has a look at how movers are feeling about the market, so how confident buyers and sellers are that they’ll move in the next 3, 6, 9, 12 months. But then we also look at people’s attitudes to mortgages. So I think it’s really interesting to look at how many buyers out there are getting their ducks in a row, like we said at the very beginning, before they actually start to get on the move and start to proceed with their search. So in one of our recent reports, we actually saw that 22% of buyers as a UK average said that they already had their mortgage Agreement In Principle in place before starting their search, but then 27% of buyers as a UK average hadn’t even thought about or considered applying for their mortgage yet before they got on with their search. So if the process is done properly, and your ducks are in a row, then it shouldn’t be an entirely stressful process. It should also be quite exciting.
Matt Thompson: It should be a very exciting experience.
It should be very exciting, especially, you know, if you’re a first time buyer, or you are upgrading to get a bigger family home, it should be really, really exciting to move home. The reality of it is it’s very stressful. So how do you minimize that stress? Get all your ducks in a row, make sure that you know you’ve got your Agreement in Principle, make sure you’ve got your solicitor. Make sure you’ve chosen the right agent if you’re selling a property, et cetera, that’s going to minimize all of that so you can focus on what you should be focusing on, which is an amazing time buying your first home or upgrading or whatever it may be. It should be an exciting experience for people, not a stressful one.
Sally Mitchell: And it can be little things. I mean, we, we get silly things that hold things up like they’re not on an electoral role. I give a document checklist out of all the things I’m gonna need before I even take on the case and they have to go away and, and it’s like almost that homework and do it. So, you know, make sure your bank statements are registered to your actual address that you live at. Your proof of address, don’t gimme a driving license which is three years old from a property before. What is your credit score? And silly things like on your bank statements, we’re trying to paint a really attractive picture of you as a serious person to lend money to. So lots of people have funny things on their bank statements when people are transferring money between friends. Believe me, a major bank is going to go through your bank statements and if it’s got rude things or you know, ‘drug stash’ or whatever on your bank statement, it doesn’t paint the best picture. So clean up your paperwork. Make yourself look as attractive as possible to a lender. It’s little things like that. I mean, I find them hilarious when I read them. And lottery, you know, if you use the lottery occasionally, if you like the odd Klarna way of paying for stuff, because it’s offered at every single checkout on websites now, please don’t. Please don’t. They really don’t like it. So if you have done that in the past, get rid of it. And then let’s work with the last three months being clean, please
Natasha Afxentiou: I think another important thing to touch on is if you have a property to sell, you’re going to obviously want to make sure that you’ve had an appraisal and that you’ve had quite a few valuations, and it’s good practice to invite a few agents in to have a look at the home. But then once you come to that point when you are thinking, okay, I’m going to instruct my agent now, what would you say are the main things to think about in terms of choosing that right agent?
Matt Thompson: Well, I think, you know, the first thing that you have to remember is that you are interviewing people to sell potentially your largest asset. So this is a pretty serious interview process that you have to go through. There is a bit of a perception out there, and let’s deal with it, that most agents all do the same. That we go, we appraise the property, we put it on some of the portals, the phone rings, and we open the front door, right? And maybe there are some agents out there that do that. But the reality of it is, when you are looking to instruct an agent, you’ve gotta be looking at the skillset of that agent. You’ve gotta be looking at the exposure. So let’s deal with the first part. First part is if you’re selling a property, you want to get the best net result possible because you’ve got one chance in selling. So the first thing is, when you are interviewing those agents, what’s the exposure of those agents? So you can have a look at their database, how many people they have in their database versus your property price. You can look at their branch and their network of offices. So do they have access to a bit of a better market? London’s quite transient, people do move and then compromise on locations. So, for example, if you’re selling in Putney, just as an example, Fulham is a slightly more expensive area than Putney, so that agent may have access to a bit of a better market than some other agents by accessing and being proactive with their database, by speaking to them in such a way that may be able to encourage them over the bridge.
Other things to look at are the real skillsets which we’ve been touching upon, which is once your property is under offer, who’s demonstrated that they’ve really got the skillset to then get that property through to an exchange of contracts? Because so many things come up, right? You’ve got, and I’m sure we’ll touch upon this, but you’ve got mortgage valuations. So you’ve got down valuations that can happen, one in three properties in the UK effectively fall through. So again it’s all about expectations and management. How’s that agent actually dealing with that property once it goes under offer? And actually, lots of times if you’re looking at Victorian properties, lots of times when a survey comes back, it can be quite scary for the first time looking at it if you haven’t seen a survey before. It might say that it has damp. It might say that the electrics need doing. Reading that for the first time can be quite a daunting thing and quite overwhelming. But the reality of it is you’ve got to have somebody there being able to break this down and actually advise in terms of whether that is a serious point, or actually that’s just a standard point that comes up within every survey, so we don’t need to panic or worry too much about it. So I think the real skillset, in my view as an agent, it’s a complicated process to get you, as a seller, the very best offer, but it’s even more complicated to get it through to an exchange of contracts. So you’ve got to be interviewing as to how do you deal with applicants? How do you motivate applicants? What’s your view on the market? How are you gonna go about getting me the best net result? How would you deal with a situation if somebody came back and there was a down valuation? How would you deal with that? How would you deal with a scenario where the survey came back and it said that it had damp, we know it’s a Victorian property and that the Victorians didn’t damp proof properties. So how are we gonna deal with those elements to ensure that actually you are getting the best net result at the end? Does that make sense?
Natasha Afxentiou: Yeah. I think those are really important key questions to ask. Like you said, it’s a two-way street essentially. So if you think about it in that way, where you are asking those really important questions, You’re almost being told there and then really explicitly by that agent how they will work for you and that’s really important. It will give you context later on to know that actually, you’re in the absolute best hands. The agent knows exactly what to do when this comes up, rather than waiting to get to that point where you might be a bit overwhelmed or daunted by something that comes back in the survey. You’re not gonna think, ‘oh my goodness, how am I gonna deal with this?’, you’ve had that chat before. You know that the agent will guide you through it. You won’t hopefully be as overwhelmed at that point because you know you’re in a safe pair of hands.
Matt Thompson: Yeah, exactly, and that knowledge is extremely important. I suppose the only other obvious thing to mention, Natasha, would be has that agent sold similar properties? What comparable evidence do they have or have they sold that’s similar to yours? Other things like offer negotiation. Again, we are handling offers as agents, we’re negotiating. There’s a really big difference between submitting an offer and negotiating an offer. So again, that’s something to look at as well, and probably to ask, you know, how do you actually handle offers when they come in? How do you negotiate them? What’s your marketing strategy? Ask the agent, what’s your marketing strategy? What’s your plan A, B, and C, so if we don’t sell within the first two weeks, we don’t sell within the first four weeks, what’s your plan B? Yeah, what’s your plan C? There should be a plan all the way through to ensure that you are gonna get that best net result in the end.
Sally Mitchell: And if an agent can’t answer those questions, then it’s probably time to pass.
Matt Thompson: And the very, very last thing is please therefore use the right criteria to choose an agent. Use the right criteria to choose an agent, a mortgage broker, a solicitor, et cetera. Don’t use the criteria of ‘what’s your fees’, because that’s a false economy. If you’re gonna choose somebody just because they’re cheap, unfortunately you’re probably gonna get a cheap result in the end. That’s just the nature of the way that these things work. But interview thoroughly, have a list of questions, ask those questions, and off the back of those responses, just choose who you think is the best person to represent you and get you the best net result.
Natasha Afxentiou: Yeah, that’s a really, really good point. So I think you’ve actually touched on my next question there. So where you’ve mentioned fees, that’s a really important question to ask, but then like you said, you get what you pay for, so it’s not the be all and end all necessarily for you making that decision. But that is obviously one of the additional factors that you need to keep in mind in terms of your finances. So on top of your agent fees, are there also other things that perhaps some people might not think of as quickly? Things like a deposit? And then also something that may easily be overlooked or something that buyers may not be aware of if they’ve not bought before is Stamp Duty and what on earth that is and when you need to pay it? So would you guys say that there’s anything that buyers should perhaps keep in mind when they’re thinking about saving for their deposit? Or is there a rule of thumb in terms of percentage in terms of how much is a good amount of deposit to have on a property? What would you say is important to keep in mind in terms of Stamp Duty and at what point in the process is that actually paid? Because the last thing you want to do is have any surprises because we know that a deposit would come quite early on, but then at what point would you suddenly need to pay Stamp Duty? So you are in a position to be able to pay the expenses when they’re needed.
Sally Mitchell: Yeah, you definitely have to factor it in from the beginning. It’s something that we go through. We have to. We do a full affordability check on top of the cost of your mortgage, and obviously what deposit you’ve got there is Stamp Duty. We always say get a conveyancer, a proper solicitor, to actually give you the quote. We’re not allowed to quote on it. You can go online and do a Stamp Duty Land Tax calculator, which is the most exciting thing you’ll probably ever do on Friday. It can be quite frightening. If you are not a first time buyer and you are buying for 500,000 pounds, it would probably be 12 and a half grand. But if you’re buying at 750,000 it goes up to 25. It’s a big chunk, and in London it’s very, very easy to be looking at much higher for a property. So it’s something you need to factor in. It’s not something you can add to your loan. You can’t borrow it from your lender. You have to have it and it’s due, has to be paid within 30 days of completion, and your conveyancer will do it for you. So you have to have the money. It’s not something you can say, ‘well, I’ll find it in a couple of months. Something will happen. I’ll win the lottery. Or, Mum will’. You do have to have a plan for it, and then you’ve got your conveyancing fees as well, and sometimes with a completion statement, you’ll find all sorts of stuff that’s added on.
There’ll be searches, there’ll be surveys. You’ve got your Home Buyer’s Report or full structural survey, whatever you choose to do. There’ll probably be a product fee applied from the lender for the product you’ve chosen as a mortgage. Sometimes there’ll be things that you’ve agreed outside of the sale that you want to purchase from the property, goods and chattels, and it’s not unusual to see a completion statement come through, you know, £40,000. So it all depends on what property you’re buying, the purchase price, obviously, whether you’re a first time buyer, because if you’re a first time buyer, there’s no Stamp Duty up to £425,000. If it’s not your only property, you have to whack on a 3% surcharge on all your Stamp Duty calculations, so it can very quickly get out of control.
It’s not enough with most lenders if one of you is a first time buyer. If you’re buying as a couple, you both have to be. So you could be giving away your lovely £425,000 pound Stamp Duty tax free because you’re buying with someone who isn’t a first time buyer. All these things have to be taken into account. It’s not easy.
Natasha Afxentiou: Yeah, that’s a really good point in particular because that’s something that many first time buyers might not be aware of. You might go into it thinking, ‘oh yeah, great, what a result. I’m a first time buyer, I won’t have to pay Stamp Duty’.
Matt Thompson: Which is why I think it’s probably worth sitting down and making sure that you have got that spreadsheet of what your costs are going to be. Equally, you’ve got removal costs, right? So you’re going to be moving from somewhere, so you’ve got moving costs. So it is all of those kind of little costs that can add up at the end. So it’s not just about having your 10% or your 20% deposit of your overall purchase price. It’s all of those different elements, accumulate it. So it’s worth just looking at all of those bits and pieces.
Sally Mitchell: Yeah. It can add up, it really can.
Natasha Afxentiou: You’re listening to OnTheMove, the home moving podcast by OnTheMarket with me, your host, Natasha Afxentiou and my guests Matt Thompson and Sally Mitchell. So far we’ve discussed the basics of what you can expect during the process of buying a home, and the important things to think about when it comes to organising your mortgage. Moving on, we’ll be jargon busting some key property terms to get familiar with when moving home.
So before we wrap up for today’s episode, we’re going to finish off with a little Q&A style segment, which we’re going to be featuring across some of our upcoming episodes. So, to our listeners, please do get in touch on our OnTheMarket socials, such as Twitter and Instagram with any questions that you might like us to answer. But for today’s episode, we asked you to send in some of the property jargon that you would like explained. So I’ll run through a list of some terms, some of which we’ve actually mentioned already in today’s podcast, so it can be a little recap. And what we can do is one at a time, I’ll fire off the jargon and you guys can jump in and give us a very top line explanation of what those things mean for anybody who might not know.
Matt Thompson: Sure. Let’s do it.
Natasha Afxentiou: Right, nice and simple, what is a vendor?
Matt Thompson: Very simply, a vendor is just a fancy word for a seller. So it’s a party that’s selling a property.
Natasha Afxentiou: Perfect. So what’s a Valuation or a Market Appraisal?
Matt Thompson: This is quite important to distinguish actually, because what agents do is they provide a Market Appraisal, sometimes we call it Valuation, but not to be confused with a RICS Qualified Valuation, which I’m sure Sally can expand on, and the Valuation from the bank, which is an official Valuation on that property’s value based on comparable evidence et cetera. So the agent really provides the Market Appraisal not to be confused with the actual Valuation from the bank.
Sally Mitchell: The bank looks at the property in terms of ‘if we had to get rid of it, what would we sell it for’? And that’s what they base their valuation on. So quite often it can be very different to a Market Appraisal, but it doesn’t take into account things like whether it’s end of terrace or really bright and airy, or has had the kitchen done up beautifully, or beautifully decorated. They don’t care. If they had to get rid of it quickly, which is a nasty thing but it happens, what could they sell it for? And that’s what they base it on. You get a lower valuation from the bank. It’s not personal.
Natasha Afxentiou: So what are Arrangement Fees?
Sally Mitchell: Well, from my point of view, Arrangement Fees are what the lender will charge to engage you in a mortgage product. So when you take out a mortgage, it’s often called product fees, but it’s the same thing, Arrangement Fees and they can either be paid upfront or they can be added to the loan. If you add them to the loan though, be aware that you will be paying interest on them, and they can range from zero to most commonly 999, but with buy-to-let properties, they can be a percentage and they can run into the thousands.
Natasha Afxentiou: So we touched on this one quite heavily towards the beginning of our conversation, but as a recap, what is a Mortgage Agreement in Principle?
Sally Mitchell: Either Agreement in Principle AIP, or Decision in Principle, DIP, as I like to say, is basically just a very quick overview from a lender that they think you are, or aren’t, a good risk. So they will look at basic information that you have supplied that they haven’t necessarily checked, but will run through your credit score, do a quick credit search and based on that and what you say you earn, they’ll give you an idea of what they are prepared to lend.
Natasha Afxentiou: Okay, so what is Stamp Duty?
Sally Mitchell: Tax payable in the UK on the purchase of property or land. It can also apply to other transactions as well, some shares, other bits and pieces and licenses. It’s a varying scale. You do get a certain proportion of your purchase price Stamp Duty free and if you’re a first time buyer, that is a larger portion up to £425,000 at the moment. It is payable within 30 days of completion and your conveyancer is responsible for paying it to the Land Registry.
Natasha Afxentiou: Great, thank you Sally. So next up, what are Land Registry Fees?
Matt Thompson: So those are the fees that are due once you go through to completion, to effectively register the property as new ownership in your name.
Natasha Afxentiou: The next one is something that I suppose we need to be paying more and more attention to. What is an EPC of a property?
Matt Thompson: Energy Performance Certificate, which you’re absolutely right, we do need to pay more attention to. It will show the energy efficiency of that particular property and you can see on the EPC rating there are certain things that you can do to improve the efficiency as well. Some of those could be quite simple things like replacing the bulbs to more energy efficient bulbs and some of them will be more complicated, but it’s certainly something we should pay more attention to.
Sally Mitchell: And every property that’s rented, sold, or bought has to have one in the UK. You can get yours updated, upgraded by applying to an assessor. The Net Zero target from the government is Net Zero by 2050, and the government also wants all properties to be at least Grade C on the scale of EPC by 2035. Interestingly, if you have good energy efficiency in your property, then you can be eligible for a Green Mortgage, which is a big thing at the moment. I think in October there were 480 different Green Mortgages on the market, and the last time I looked there were 680. And the point of the Green Mortgage is that it’s a reduced interest rate. Get energy efficient, save the planet and save yourself some money.
Matt Thompson: Win-win.
Natasha Afxentiou: Yeah, definitely a win-win. Okay, next one. So when looking at the tenure of a property, what’s the difference between a freehold and a leasehold?
Matt Thompson: So freehold is effectively, you own the property and the land that it sits upon, whereas leasehold, you own the property, not the land, for a set amount of time. So effectively, the way that you can view a leasehold to some degree is that you are renting that property for an extended period of time. So if it’s got 900 years on the lease, you’re effectively renting that for 900 years.
Sally Mitchell: Flats tend to be leasehold if you come across a freehold flat, be very careful before getting excited because lenders don’t like them at all. And there’s also something called flying freehold that can cause problems as well, where you own the portion of property that is hanging out over the edge, but you don’t own the space underneath it. So that can cause problems as well. It can be done, it’s just going to take a specific lender to look at it.
Natasha Afxentiou: So what does it mean if a property is sold subject to contract or SSTC?
Matt Thompson: Effectively it really means that parties are still negotiating. So at that point, it’s not legally binding. So in the case of property, it will be sold subject to contract because the conveyancing and the legal process hasn’t been completed. So both parties are still in a point of negotiation.
Natasha Afxentiou: So by no means it’s not yet signed, sealed, and delivered.
Matt Thompson: Absolutely not. No.
Natasha Afxentiou: Okay. So the next one, so we’ve touched on surveys already in today’s conversation, but is there a difference between a Structural Survey and a Home Buyer Survey?
Matt Thompson: There certainly is. The Structural Survey is effectively a survey that’s conducted the most thorough survey, so it will do the external parts of the building, the internal parts of the building, the roof. It will cover everything in the most finite detail possible about the structural elements of the building, whereas a Home Buyer Survey won’t be so in depth and it won’t cover the structure of the building. You’d normally get a Structural Survey, if you’re buying a freehold and you’d normally get a Home Buyer Survey as if you are buying a flat. You know the freeholder is responsible for the structure of the building and you are just buying that particular flat. The Home Buyer Survey will cover then the internal elements of that particular property that you’re looking to buy.
Natasha Afxentiou: So the next one, what is the process of conveyancing?
Matt Thompson: Conveyancing is effectively the process of when the buyer and the seller agree in principle a certain price, they will then need to instruct their solicitors. At that point, it will be the seller’s responsibility to provide draft contract papers across Title Deeds, all of those bits and pieces, protocol forms, sellers questionnaires, what’s staying in the property, so on and so forth. And the buyer’s solicitor’s responsibility to raise inquiries to make sure effectively what they’re buying is what they think they’re buying, and there aren’t any hidden things within that. That’s really what’s called a conveyancing process. It will go back and forth from one solicitor to the other solicitor to ensure that both parties are happy to then proceed to an exchange of contracts.
Natasha Afxentiou: So one of the final two that we’ve got, what is gazumping?
Matt Thompson: Gazumping is effectively when somebody has agreed a purchase price, another party will come along and offer more money and effectively try and secure that property by gazumping that offer. It is something that happens in estate agency. It is something that estate agents get the blame for. Unfortunately, there isn’t anything that we can do because estate agents are bound by the Estate Agency Act, which effectively says that we must legally put any offer forward to our client. So there isn’t anything that we can do to necessarily stop somebody making an offer. All we can do is advise and guide throughout the process and give people fair opportunity to make offers when we request them to. It typically happens on properties where it’s a very popular property and you have multiple bids on it. Somebody loses out and it goes to another party, and then the person that’s lost out then comes back and offers more. Even though they’ve been given requisite time to make their best and final offer. That’s when it tends to happen. We tend to get the blame for it, but the reality of it is we’re bound by certain regulation and laws.
Natasha Afxentiou: Yeah, that’s an important point. So that leads us on just to the last one that came in. So what is your Completion Statement?
Sally Mitchell: That is a statement that’s issued by the conveyancer that details the input and output of all the financial details of a property purchase or sale. It’s normally given out between exchange and completion, and it will detail the property price, the mortgage advance, any deposit that’s paid at exchange, where the rest of the money is coming from, whether it’s your savings or the equity you’ve built up in your property fees, full searches, Land Registry registration, Stamp Duty, chattels, goods, everything. Absolutely everything. And then at the bottom is how much you have to pay. It can go on for quite a few columns.
Natasha Afxentiou: And then I’ll sneak in one more that was on the list actually, so what is your exchange of contracts?
Matt Thompson: The exchange of contracts is effectively when the conveyancing process that we’ve mentioned comes to a conclusion, and when actually the contracts go from sold subject to contract, to an exchange of contracts. That’s when it becomes legally binding. On exchange of contracts, you set a completion date, and then typically that can be any point in the future, but typically two, four weeks in the future. So it becomes legally binding and neither party can back out without a consequence. Up until exchange, either party could actually back out without any consequence.
Natasha Afxentiou: So it’s safe to say then I guess once you have exchanged, you can get pretty excited?
Matt Thompson: You can get very excited. Yeah. Very, very excited.
Sally Mitchell: You’re on your way.
Matt Thompson: Absolutely. Crack open the champagne.
Natasha Afxentiou: Yes, exactly. Well thank you guys, that brings us nicely to the end of the episode. Thank you both so much for coming on.
It’s been great to talk to you both today.
Matt Thompson: Yeah, pleasure.
Sally Mitchell: Thanks for having us.
Natasha Afxentiou: All that’s left for me to say to our listeners is thank you for joining us for this episode of OnTheMove. You can find all our future episodes on all the major podcast platforms and we’ll be sharing links to future episodes as they’re released on our social media channels too. On the next podcast, we’ll look at all the important things for first time movers to consider before taking the plunge. And for access to our show notes and any additional information on the topics that we’ve covered today, you can visit our blog at OnTheMarket.com. Thanks again for listening, and remember, if you are looking to get on the move, get OnTheMarket.
