Buyers racing to complete deals without proper due diligence of the total costs involved in the purchase
Purchasing a property is the most expensive asset you are likely to buy in your lifetime, yet individuals often seem to want to rush the process through as quickly as possible without obtaining necessary surveys and reports on the property.
However, it is difficult to understand why this is the norm. Most people are very happy to wait up to six months for a new car or four months for a new sofa, so you would assume that they would have no issue in their property purchase taking sufficient time to ensure full due diligence checks are carried out, leaving no stone unturned.
To make the matter worse, many people also face extreme pressures from Estate Agents and developers, who set unrealistic timescales and are only interested in getting the matter completed and the monies in their bank.
Educating the buyer
It is fair to say that buyers do not fully understand the extent of the costs that they may have to pay when purchasing a property and also to whom those costs are actually payable. As such, it is important for buyers to understand that in addition to legal fees and search fees there are other costs that may be payable when purchasing a property.
Buyers often do not know whose responsibility it is to arrange the survey for them or the different types of survey available to them. Most of them will simply pay for the mortgage survey and think that this is sufficient, not really understanding that it is nothing more than a valuation carried out for the bank only.
What’s more, confusion between surveys and searches is commonplace in the market. It seems to be quite ordinary that individuals are not given the option of upgrading the bank valuation to a home buyers survey.
Despite advising clients of the need to have their own survey carried out, they all too often do not act on this until such time as they read our report advising them that they must satisfy themselves as to the state and condition of the property. This often results in them organising a survey well into the transaction at an additional cost on top of the bank valuation. Often, such surveys recommend further reports to be obtained such as damp and timber reports, roof reports, drain reports and not forgetting gas and electrical certificates.
There is a further misconception from buyers, who seem to think that sellers have to provide up to date gas and electrical certificates and do not understand it is not a legal requirement. This needs to be addressed. There is always some resistance from sellers to provide gas and electrical certificates, and so much time is wasted trying to agree who is to arrange and fund the cost of these. I frequently wish that it was a legal requirement for all sellers to provide a gas and electrical certificate in the same way as they have to provide an EPC. It would certainly shave a week or two off the transaction time.
Another cost that is so often misunderstood are the fees payable on completion to the Landlord/Management Company when purchasing a leasehold property. These can often be quite expensive and despite us stating that such costs will be payable, clients do not budget for this expense, which can vary significantly.
You find most leasehold properties require the notice of assignment to be served on both the freeholder and management company, so clients end up having two sets of notice fees to pay. There are often other fees payable for Deeds of Covenant or the issue of share certificates. It is not possible to predict what these fees will be until such time as we are provided with the information, so all we can do is advise the client that these fees will be payable and can amount to several hundred pounds. In addition, there are apportionments of ground rent and service charge that are often also payable on completion.
Having professional input from the outset of a deal to signpost and predict potential additional costs during a purchase can truly make all the difference between a smooth transaction and one fraught with overrunning expenses. After all, you cannot budget for costs that you cannot foresee.
Linda Kirk is Director of Conveyancing at Adkirk Law