Over the last few years, the property industry has been focusing on the need to provide more information to buyer’s ‘up front’ - in other words, before or at the time a property is marketed.
The reason everyone, including the Government, wants to get more information to buyers before they make an offer is that many purchases are taking longer than necessary, or worse, falling through because certain information about the property was not known before the offer was made
Not only is this stressful, but in a Government survey, it was estimated that “about one in four buyers (24%) and sellers (25%) had incurred wasted costs of more than £1,000. Where a transaction failure incurred costs, the average might be between £650 and £740.”
So, the more information buyers can secure about a property before they even view or make an offer, the quicker the sale is likely to go through and less money could be lost on lost sales.
One area where a great deal more information needs to be provided up front relates to the tenure of a property, which will typically be either freehold or leasehold. Freehold is fairly straightforward, as this means you own both the entire property and the land it sits on, whereas leasehold flats – or, in some cases, houses – usually have a more complicated ownership structure and additional legal considerations.
Some of these leasehold matters will affect the property’s value and can play a big part in your decision about whether to buy the property at all, so you really need to know about the terms of the lease before you make an offer, or even before you view a leasehold property.
Here are just some of the things you need to know:
This determines not only how long you will own the property for, but also whether a mortgage can be secured. Typically, properties need to have at least 80 years remaining on the lease in order to secure a mortgage, so if you’re planning to live there for 10 or more years, you will need to buy a property with a minimum of 90 years left on the lease - and ideally more, to give you a ‘cushion’ of ownership.
If the lease length means it’s not possible to get a mortgage, the property will be worth a lot less to a buyer and, given that many cash buyers are looking to buy at a discount, it may mean you can’t afford to sell.
Service and Ground Rent charges
Unlike most freehold properties, because there are communal areas and parts of the property that all individual flat owners benefit from, such as the roof, you will be charged a proportion of the maintenance costs for the whole building, typically referred to as a ‘service charge’. This can be £50 to £100 or more a month and can be especially high if the property has a lift. In addition, annual ‘ground rent’ charges are applied – this is the payment made to the freeholder for the land the property sits on. These can be tiny, from around £10 a year, or they could run into thousands of pounds.
The total cost of these service and ground rent charges could make a material difference to whether you are able to afford the property, after all your other costs are taken into account.
How the industry is improving things
In the past, even basic information about a property hasn’t always been supplied, such as the Council Tax band. But now, thanks to work that the industry has done, led by National Trading Standards Estate and Letting Agent Team (NTSELAT), much more information should now be available when you search on property portals like Rightmove and Zoopla.
And the good news is that there’s more to come, including whether the property is on mains drainage. There are many questions that can affect a buyer’s decision about whether to proceed, so the sooner this kind of information is available, the better – for both buyers and sellers.
Although this will require sellers and agents to collect and provide more information before a property goes to market, what’s critical is that this is likely to help reduce the time it takes to sell a property and, more importantly, ensure that fewer sales fall through after offers have been accepted.
To find out more about the additional information to look out for when searching for a property watch this video from NTSELAT.
And if you are looking to sell, then do give your local expert a call so we can make sure your property is marketed to buyers correctly from the start, with all the information they need to make a firm offer for your home.
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