Friday, October 27, 2006

Home is where the gazumping isn't - part the second

So let's say that you miraculously find something in this mire that both you and your spouse/partner like, or at least are willing to live in with a little fixing up. You need to make an offer. How can you make an offer that is likely to be accepted?

Well, first you have to offer a decent price, and that determination is the same as the US (do you think there's another bidder? How high are you willing to go? Is anything negotiable? blah blah blah). But there are other things you can do to be an attractive bidder (a visit to the salon?). First and foremost, not having to sell your own house before you can afford to buy is important here, unlike in the US. The English might be surprised to hear this, but in the US, it doesn't matter so much if you haven't sold your house yet. Here, however, they have these monstrous chains, dependencies on selling before buying. You could have a chain of 5 selling/buying players, and the tricky thing is, they all have to close(complete) AND MOVE on the same day. It is a preposterous proposition, but the English just put up with it. No bridge loans, no rent-backs, no human considerations. Therefore, not having a chain at your end as a buyer is an incredible advantage.

Another advantage which is similar to the US is getting a pre-approval for a mortgage. It's called something else here, in fact it's called 2 things, a DIP (Decision In Principle) and a something-else-I-can't-remember-the-acronym-for-but-it-was-enough-to-confuse-me-further. It helps because it is not unusual for people to make a high offer, and then be unable to actually come up with the money. How can that be? Well, you see when you make an offer and it is accepted, there is no contract signed, and nothing is binding. This actually contrasts dramatically with Scotland I am told, where your word is apparently a contract. Or in the US, where the process of making an offer includes the signing of a lengthy contract. But not here, and this is where the gazumping comes in. You've made your offer, had it accepted, put everything in motion to move forward, and some interloper comes along, makes what looks like a better offer to the seller, and WHAM! you have been gazumped. Your £650 house survey(inspection), £250 in legal fees to the solicitor(lawyer) for searches and such, and all that forward looking and goodwill, out the window. (Note that the exchange rate is nearly 2 to 1 US dollars to pounds sterling - we are talking lots of money here.) And there's jack(bugger all) you can do about it, except go on the Internet and denounce the estate agents or some such. Or near as I can tell.

I mentioned solicitors - yes, here it is necessary to engage a solicitor (as it is in Connecticut, but not in California). They do or see to the various searches for you, which can be numerous and are very interesting. Some of the more interesting information they obtain is whether there are old (usually coal) mine shafts and tunnels in the area, and possibly under your property (sinkhole, anyone?) Another interesting one was the Chancel Check, a preliminary check to see if your property is subject to assessments from the local parish containing a medieval church. It's related to some ancient rights of the Church(of England), which will apparently be corrected by 2010, or somewhere in that timeframe, to do with the maintenance of the older churches. One search report on water or sewer or something like that had a clear mapping, and then proceeded to say there might be lines they don't know about which are public. O Kayyyyyyy, soooo, what does that mean to us?

Since the offer isn't written in stone (or even on paper, though we did receive a written confirmation from the estate agents), the amount can change, based on the results of the survey, the searches, or any other new information the buyers (and maybe the sellers too) receive before the exchange of contracts. In a seller's market, of course, the survey would have to show up something really major to warrant the sellers accepting a lower amount, unless they're in a hurry to sell. Our sellers were originally in a hurry to sell, that is, to their previous buyers, because there was a house they wanted. Their previous buyers pulled out due to a sudden serious illness, and so they put their house back on the market. That's where we came along, made an offer in a hurry, and then the prior buyers proceeded to bid against us, or so they say. And the previous buyers weren't going through the estate agents, so they could offer less because if they bought, the sellers wouldn't have to pay commission. So we had to offer significantly higher just to be even. }sigh{

Obviously we got the house. But did I mention the taxes associated with buying a house? No, not a property tax where you have to pay ahead of time to be held in escrow, oh no. The equivalent of a property tax is council tax. What I'm talking about is something called stamp duty, possibly named that because when you find out how unfairly the scheme is meted out, all you can do is stamp your feet (personally, I think it should be called stamp and curse duty, but I digress). You see, if the house price is from £60K to £250K, the stamp duty is 1%. However, from £250,000.01 to £500K, it jumps to 3%. Not for the amount over £250K, but for the entire sum. Oh yeah, that makes a lot of sense. I guess they figure that anyone buying a house for a penny more than £250K must have money to burn. Never mind that the
median house price in England is £160K
(as of first quarter 2006), or the amount of borrowing is increasing, or that interest-only mortgages are quite the rage (in which, at the end of your 15-20-25 years of paying, you still owe the entire principal; but mortgage description is a whole nother kettle of fish and chips). I think these duties are not indexed to house price increases, nor even cost of living increases.

So I repeat this mantra "it's only money" and prepare to pay the bill. But wait, it ain't over till it's over, or as we like to say, till we have the keys in our hot little hands. We wound up in a chain of 2, that is, our sellers were buying a house, but their sellers were going into rental property. As it happened, however, the renter decided to push it at the last minute. I got a call from our solicitor on a Friday afternoon, saying that our seller's seller wanted to exchange contracts on Monday or the whole deal was off. Now, this may not sound absurd until you know more about what exchanging contracts means. It is at this point where you are legally obligated to buy/sell the house at the agreed price with the agreed contents and the agreed agreements. And just to show how agreeable you are as a buyer, you're to back it up with 10% of the purchase price. That 10% must be liquid assets to your solicitor at the point of contract exchange. Which means that if you are handing over a bank check here in the good ole UK, you need to give it to your solictors 3 business days before the contract exchange, since there's a 3 day waiting period. For a bank check. From a UK bank to a UK bank. Yep. 3 days. (Banking here may be another blog on another day.) So, now you understand what a ridiculous request this person made. Isn't there some saying like "Lack of preparation on your part does not constitute an emergency on my part" or some such? That's basically what I told our solicitor, who was a very reasonable and practical person, I must say. We decided to offer an exchange of contracts with a nil(nought, zero, nada, bupkus) deposit (I offered a pound, just as a token, in the American style). Well, the seller at the top of the chain didn't think that was so great, so we agreed to exchange contracts 2 days after that with a 5% deposit, which was all we could offer on short notice. That happened, we went down and signed papers on Monday morning, on Wednesday we were obligated to then complete the transaction last Friday (9 days later), which we did. (There was more to do with money movement, but it is not relevant to buying a house here, unless your money is not here, as ours wasn't.)

And presto, we are English homeowners. Easy as cake. Piece of pie.

How was that, Norbert?

P.S. Incidentally, your presence is needed neither at the contract exchange nor at the completion, in fact, I'm not sure there's a place at which to be present at either event. It is something of an anticlimax compared with holding that very big check briefly in your hand before handing it to the sellers as we've done in the US.

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At 12:49 PM, Blogger Sarah Nopp said...

I just wandered across your posts about Buying a home in the UK, and I have to say, thank you for a really funny rant!
I am a real estate agent in the US (south of Seattle). It is so funny to see how two countries with similar common laws diverged so greatly in the application of something as basic as real property sales.
The idea that there is no MLS is just staggering to us here in the states, which means no cooperative arrangements between different companies! And the idea that agents don't work for the Buyer or Seller directly. Mind-boggling!
Thank you for a fun read.
Oh- the US MLS system is not sationwide, just regional. I think there might be a couple with statewide systems. But good information is still easy to find.
Funny world.


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