Confusion among first time buyers could be a costly mistake!
The last thing you want when buying a home is confusion about the process.
But, sadly, new research suggests this is the case among a good proportion of first-time buyers, with many left ‘extremely confused’ when it comes to the various stages of buying a property, the responsibilities of the professionals involved and what is expected of them as buyers.
The research, by home move comparison site reallymoving.com, carried out a survey of 500 people who are planning to purchase their first home in the next three years. Those responding were asked a sequence of questions which you should know the answers to if you’re planning on purchasing a property.
Some 67% of first-time buyers incorrectly identified the surveyor or the estate agent as the one to carry out local searches on a property, such as environmental, water/drainage and chancel repair liability. This is, in fact, the responsibility of the conveyancer, with only a third (33%) calling this right.
Costs and budgeting are also major factors when buying a home, but the research revealed that first-time buyers could be underprepared or underfunded thanks to misunderstandings over the outlays involved with a property purchase.
Some 36% didn’t realise they bear responsibility for paying for a survey, believing this to be down to the seller, the buyer and seller together, or the mortgage company to cover the bill.
Meanwhile, only 63% said they knew that the buyer pays for a mortgage valuation, HomeBuyer Report or Building Survey.
Stamp duty confusion
Despite all the headlines about stamp duty being abolished for the majority of first-time buyers, many don’t know about this exemption, with 24% wrongfully believing that it is paid by the seller.
This suggests the Chancellor’s momentous tax giveaway has not had the effect it desired, with a lack of understanding about who actually pays stamp duty. Another 8% believe stamp duty is a payment the buyer makes to the seller, while a further 7.5% believe it’s something that is charged by solicitors.
The true reality of solicitors’ fees, however, will offer first-time buyers a more pleasant surprise, with the majority of respondents massively overestimating how much they will need to shell out on conveyancing. Asked how much fees would be likely to cost on a £250,000 property, nearly 70% (69%) estimated around £1,500 – significantly up on the actual average of £550.
Too much jargon
There is a lot of jargon used in the home-buying process, much of which can prove confusing to the uninitiated. Around 60% of first-time buyers said they planned to secure a mortgage in principle (where a lender agrees to lend based on an initial assessment of a buyer’s circumstances) before putting in an offer on a property, while 55% had a grasp on the true meaning of ‘exchange’.
Some 37% incorrectly believe it’s the date where they collect the keys and move in, when it’s actually only a legally binding contract between seller and buyer for the sale and purchase of a home, with completion happening at a later (pre-agreed) date.
Unexpected costs and transactions falling through could both be issues for first-time buyers if they don’t properly understand the basic fundamentals of the home-buying process.
Of course, purchasing a home is rarely completely straightforward, and anyone expecting a walk in the park will be left disappointed. However, those that are as well-prepared as possible are likely to be able to deal better with issues or bumps in the road if they do occur. First-time buyers also need to have a good understanding of the roles of the different professionals involved in a house purchase – from agents and surveyors to conveyancers and removals experts – to ensure the process is as smooth as possible.
What’s more, first-time buyers need to know who pays for what and what this is likely to cost to ensure they set a realistic and manageable budget and don’t spend what they don’t have.
If you're a first time buyer, you need to go into the process fully up to speed and with your eyes wide open to ensure you aren’t faced with any unexpected shocks along the way. Contact your local estate agent who can help you understand the process better, and explain each stage clearly to you.