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UK Property: Time to Buy?

The US dollar continues its upward push against the British Pound, leaving a number of US expats wondering if this might be a wise time to make a property purchase. Before wading into the UK’s messy real estate market we’ve asked London-based property buying expert Jemimah Barnett to lend her advice on what’s crucial to know before jumping in… Buying in the UK is a world away from buying in the US; almost every aspe

Published on September 11, 2019

Buying in the UK is a world away from buying in the US; almost every aspect of the process from search through to legals is handled differently. This can make things a little bewildering for potential buyers! What should prospective purchasers know before going any further? Let’s run through the key points of difference to get you started...

The UK market isn’t centralized

The most significant difference between the US & UK property markets is the lack of a central database that underpins the industry. The US system is highly organized: the MLS (multiple listing service) is a database housing the details of the property stock centrally, and it’s accessible to all qualified brokers. This is a good system - it democratizes the market, and allows a purchaser to work with any broker that they like and trust, who will be able to show them all of the available and suitable options. Simple, and effective.

A comparable central listing system doesn’t exist in the UK

An American coming to London might contact a real estate agency looking to buy or rent, and then expect that they will be shown an assortment of all the available properties based on their criteria. It can then be surprising and frustrating to be shown just a handful of properties, or shown things that are totally unsuitable. Buyers often don’t understand why this is happening. The answer is that there is no comprehensive database of listings being shared among the agents.

Be strategic & organized in your search

Due to the lack of a central database, agents and agencies here will show you the listings they have in their specific office. What that means for you as a buyer is you’ll need to go from office to office, company to company, to see more listings. Thankfully these days you can do some of this work online using portal websites (the three major ones being Rightmove, Zoopla and On The Market). Many of the larger agencies will advertise their properties on all of the large portals, though smaller firms may use just one, or even none - simply preferring to list their properties on their own website or in the window of their local ‘shop’. To be sure you’re covering the whole market effectively I’d recommend deciding on a clear target area, and then searching online for all of the estate agents covering these postcodes. Use the major portals to cover the big-name agency stock, and then email or call the smaller agencies to make sure you’re seeing whatever they may have as well. Be very, very clear with the agents about your search criteria and budget; unlike the US there is no minimum qualification required to work in the sector. Whilst there are certainly agents that are highly qualified and delivering great service, you may notice that it’s quite hit and miss on this front.

Kynance Mews Kynance Mews, London

...Or get some assistance

Whilst in the States each party would normally have their own representative, here in the UK not all buyers engage their own agent, preferring to do the legwork themselves... That can create an asymmetry in knowledge and negotiating power, with foreign buyers having little visibility on either the price or the process. If you do plan to level the score by engaging your own buying agent, make sure they’re independent, and preferably only work with buyers (in order to avoid any conflict of interest).

Most buying agents are ‘whole of market’ and will take your criteria and search out all of the options for you. After helping you to select the right property they’ll negotiate the price and terms on your behalf, and manage the transaction through to completion, when you’ll get your keys. This replicates the experience that Americans will be used to, where you have your own agent who works for you, and you only. European buyer’s agents will charge similar fees to what Americans are used to, the main difference being that in Europe each side - buyer and seller - pay their own agent. Rates tend to be a little leaner in inner London where there is more competition, and unlike the US, rates often scale down as you rise up the value chain.

Making offers, and what comes next

Offers are not legally binding in the UK, so either party can back out right up to the point of ‘exchange’ (the first step of the legal process of sale, and the point at which the buyer pays their deposit). For buyers, when you’ve found The One you’ll want to get to this first stage of conveyance as fast as possible so you can’t be outbid.

This can sound a bit scary; even if you submit an offer that is accepted, there’s still a chance that you could be outbid by another buyer putting forth a higher offer (a practice known as ‘gazumping’). Before panicking, there are ways to mitigate against this and they mostly involve being well prepared. If you have a buyer’s agent they’ll take you through a process of preparing for a purchase well ahead of making offers, so that you’re able to move as quickly as possible when the time is right, avoiding any upset. You’ll need to have completed the foundational steps of organizing your finances, and working through the necessary ID & money laundering checks with the solicitor you’ve chosen to act for you.

Once an offer is accepted the deal gets kicked over to the lawyers who begin to work toward exchange (the deposit and initial contract stage). Pick a solicitor who you trust to be both comprehensive, and speedy. Expect to pay a deposit of 10% at this stage, which will occur within weeks of being “offer agreed”. There isn’t a formal escrow process here, nor do we digitize the processes Americans might recognize as disclosures. This slows down the sale process such that it is common to have a 6 or 8 week lag between exchange and ‘completion’ (the finalizing of the sale, and payment of the balance purchase funds).

Taxes & costs to plan for

I often joke that in the UK you get clubbed on the way in the door, but then they’ll mostly leave you alone after that. The costs of purchasing in the UK (and Europe generally) will be higher than Americans are used to. On the flip side the ongoing costs of ownership are comparatively low, with annual taxes in particular often being far less than foreign buyers expect. I recommend setting aside 15% of your total budget to cover all your costs: taxes, legals, surveys, agent fees, insurance. The bulk of this allocation goes to Stamp Duty Land Tax (known simply as stamp duty); it’s a one-time purchase tax that dwarfs all other purchase costs. You can work out potential Stamp Duty liability for an estimated purchase value at stampdutycalculator.org.uk. Your solicitor will take care of the registration and payment of this tax for you, and you’ll send those funds over along with your final purchase balance.

Ongoing costs of ownership will be local property taxes (known as Council Tax), which tend to be around £2000 per year in London, and vary a little by borough. You’ll also need to plan for annual property insurance and utilities, and if you’ve purchased an apartment you’ll almost certainly have ‘service charges’ to pay for the upkeep of the apartment building and amenities. Service charges can vary widely depending on the size of the building and what’s on offer to the residents - be sure scrutinize these costs at the time you’re making offers so there are no surprises down the line.

Assembling the right ‘team’

In the course of purchasing you may need help from various pros, including: lawyer, surveyor, insurance broker, mortgage advisor, decorator and builder/handyman. If you’re not a local, how can you find competent and trustworthy professionals to work with?

To find a great solicitor ask for recommendations from a buying agent who works in your target area and price bracket, or choose a well reviewed conveyancing solicitor from Chambers.com. When hiring a surveyor get a few quotes, and don’t cut corners - visibility on any potential issues before purchase is crucial. The most comprehensive type of survey to undertake is a ‘full photographic survey’, and you can find and contact qualified surveyors in your area using RICSfirms.com. For mortgage or insurance brokers, ask a reputable estate agent to give you a few suggestions, and make sure they are ‘whole of market’ and that you’re clear on what and how they charge. The most challenging pros to find tend to be reliable contractors and tradespeople; I recommend browsing Houzz.co.uk and reading the reviews of a number of local teams, before inviting a couple of the best rated ones down to give you a quote for the job. Houzz is one of the few platforms that actually check the pro reviews, so you’re less likely to end up with a dud firm. With trades, the most important thing is to be very clear on the scope of work. If a quote or job spec seems ambiguous, ask for further clarification - a clear understanding of scope and costs is of benefit to both sides. This is also true for working with an interior designer or architect; be sure to select one you communicate well with and really nail down the scope of work before you get begin the project. Great design teams can also be found through Houzz, and with architects make sure they are RIBA qualified - you can check this at architecture.com.

Jemimah Barnett is a property buyer’s agent based in London. Visit her website www.jemimahbarnett.com to find out more about her services and advice for prospective purchasers.

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