Posts Tagged ‘property buyer’

Can’t find a property buyer?

September 28th, 2009

The property market continues to be slow in the UK, some increases in price have been reported in the summer months, but many analysts expect to see prices ease back a little over the winter. So how do you find a property buyer when the market is so slow?

One option is to sell your house as “half price”, no doubt you will get a queue of property buyers, but financially this would not be acceptable to most people, we all want to get the best possible price. However for those who are creative, and may be flexible in their approach to selling their property there are some solutions that may work, we outline two of them here.

Solution 1 – Sell your property fast but with part payment delayed

This works by selling your property at a price close to “today’s valuation”, let’s use a figure and assume the valuation is £200,000. The agreed sale price is £190,000, with £140,000 paid immediately, the balance of £50,000 in 3 to 5 years time. 

The balance payment of £50,000 is secured by placing a charge against the property immediately after the sale is completed, this ensures that the vendor’s final payment of £50,000 is registered against the property which cannot then be sold without being paid to the vendor.  Additionally there will be a legal agreement drawn up with the buyer and vendor outlining the terms and date for repaying the £50,000.

Advantages to the vendor, they get to sell their property fast at close to valuation, releasing the majority of the equity.  The vendor will also avoid paying any agent fees by selling in this way.  The only real disadvantage is the equity tied up, the vendor will have to wait for 3 to 5 years for the remaining equity.

… read more about fast property sales on our blog here

 

Solution 2 – Sell your property and move on with delayed completion

This will only be of interest where you do not have equity in the property that you need today, or may be no equity in the property.  The buyer will take out what is called a lease option on your property, they will agree a fixed price to buy your property at a future date.  In the mean time the buyer will take on legal responsibility for everything from your mortgage interest to property insurance and maintenance.

Depending on the timescales involved, which can be anything from one to five years or more, the price eventually paid can be anything from a little below the current valuation to a price higher than the current valuation.

The advantage to the vendor is they get to sell and move on right way, within weeks.  This could be an ideal solution if you are relocating overseas, moving back in with family, divorcing, etc. The main disadvantage is that you will have to wait for any equity you have in the property, which can be anything from one to 5 years or more depending on the terms you agree with the buyer.

… read more about selling property with delayed completion on our blog here

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Posted in Fast House Sales, Property Buyers

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Investing in buy-to-let – managing the property

September 9th, 2009

Having successfully purchased your buy-to-let property the next step is managing the property for long term profitability … as an investment property buyer you have to be involved, otherwise your profits will fall and worse still you may lose your investment and end up in prison!

There are several areas of focus to consider, there are legal issues, tenant management and property management.  We will focus on each of these separately.

Legal issues

As a landlord you will have legal obligations, these are more than your responsibilities to the tenant under the terms of your tenancy agreement, and failure to comply can result in a criminal offence being committed.  The most important issues are those relating to safety, as a landlord you will need to ensure periodic gas safety checks and electrical safety checks carried out by approved gas and electrical contractors. Then there is tenant deposit protection, as a landlord you have to arrange for an approved third party company to hold the tenant deposit.  More recently energy performance certificates are required for any property before it is let. 

All in all there are quite a few legal obligations on the landlord, ignore them at your peril!  All of these issues can be organised by a letting agent, alternatively you can save costs by arranging directly with approved companies, a quick search on the internet will reveal a plethora of choices.

Tenant management

Most tenants will respect your property, but much will depend on your relationship with them.  An absent landlord who never checks up on their property is at greater risk of a tenancy going wrong.  We suggest periodic visits to the property, check on its condition and that everything is satisfactory for the tenant – let the tenant know you are there to deal with any problems, either property or tenant related.  It is also advisable to maintain business-like communication with your tenant, be polite, avoid misunderstandings as these can soon deteriorate and create problems later in the tenancy. 

Before letting to a tenant you should also carry out adequate reference checks, these should include tenant credit checks to ensure the tenant does not have any major financial issues, otherwise you could end up with unpaid rents later in the tenancy. We recommend www.Credit-Check-Services.co.uk for carrying out these checks.

When using an agent or managing the tenant directly, always ensure a full inventory check is carried out.  The inventory check must be signed and agreed by the tenant at the start of the tenancy, otherwise you will find it difficult to claim for any damages (should they occur) when the tenant moves out. The inventory list should not only document the items within the property but also the condition of everything from windows and walls to carpets. 

Property management

Ensuring the property is maintained is fundamental, ignoring a missing roof tile, a small leak, etc, could result in higher costs in the longer term, properties need to be maintained.  When carrying out any decoration or refurbishment go for durable quality appropriate to your rental market.  Think to yourself, how will this look after 3 years of letting, will it need replacing, are there more cost-effective options.  You need to expect some wear-and-tear, the property will need redecorating from time to time, so the lay out and materials used need to be chosen for minimal maintenance costs whilst ensuring tenant appeal for your target market.

Overall managing the property is a mix of good business sense and compliance with the legal obligations of a landlord, if you ignore these you will at best lose money, at worst end up in prison.

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Posted in Buy-to-Let

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Cost of Mortgages Increasing

August 13th, 2009

According to the Bank of England the cost of fixed-rate mortgages increased in July 2009 to an average of 5.7% which compares with an average rate of 5.54% in June 2009.  The result is that fixed-rate mortgages are at their highest since October 2008.

These changes to fixed rates are key indicators as to the health of our banking system.  Despite efforts by the Government and the Bank of England to apply pressure on banks to lend at more reasonable rates we are seeing an increase in fixed-rates.  This would suggest that the banks are paying a higher cost for fixed-rate funds in the markets – it is not just LIBOR to be considered here, each bank will have its own “credit rating” and thus the cost at which it borrows will be affected by its perceived risk rating in the markets.

There was an article a few months ago where a large corporate company actually had a better credit rating than the bank from which it used to borrow funds.  The result was the company bypassed the bank as they could source funds at a lower rate than the bank.  This is a classic example of where the bank’s credit rating is a key factor in the cost at which it borrows money and in turn the cost that they charge “us” for a mortgage.

But it is not just interest rates that are being affected.  In the last month there has been a trend to lower LTV (Loan To Valuation) in the buy-to-let market.  For example in June 2009 it was relatively easy to get a mortgage loan based on 75% LTV. By the end of July it was difficult to find banks who would lend at 75% LTV with most now offering 70% LTV maximum. 

Overall it seems that the banking system and its ability to lend is still far from where it needs to be with no sign of a change in the near future. Until the banks can lend more freely we are going to see more pain in the property market.  Right now it is still a tough market for the property buyer.

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Posted in Mortgages

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Mortgage Recycling

July 22nd, 2009

The phrase “mortgage recycling” describes what is starting to happen in the UK as a means to get round the inability of banks to provide mortgages.  You could call this an environmentally friendly way of helping buyers to get their own home and bypassing the banking system until such time as it recovers.

Mortgage recycling is where the buyer takes over the mortgage from the existing borrower and then moves into the property, thus there is no need for the property buyer to apply for a new mortgage.   In some countries such as USA and Australia, the buyer can have the vendor’s mortgage “reassigned” to them, thus making the process of mortgage recycling quite straightforward.  In the UK it is not possible to “reassign” the mortgage, it remains in the name of the original borrower, which until recently has made it difficult for mortgage recycling.  But there is now a solution to this, and here is how it works:

1 – The buyer finds a property they would like to buy, but it has to be a case where the existing vendor has little or no equity in the property, or they are willing to leave any equity they have in the property for a few years.

2 – The buyer takes out a lease option agreement where they have the right to buy the property at any time over say the next 3 years (the term can vary).  The lease option contract will stipulate that the buyer will insure and maintain the property and pay the vendor the equivalent of their monthly mortgage payments – including any future increases or decreases in these payments.

3 – Whilst living in their new property under the lease option agreement the buyer works on improving their financial situation to take on a mortgage when the lending market improves.  The idea is to have a lease option term that allows sufficient time for an adequate deposit to be saved, credit rating to be improved, etc.

4 – At or before the end of the lease option period the buyer obtains their mortgage and completes the purchase of the property. 

The above steps are a very brief outline of how this works, more information can be found at simple2buy.co.uk/forum where experts are on hand to explain the process … more commonly referred to as “rent to own”.   It really is a great way for people who cannot get mortgages today to get on the property ladder, and also for the vendor to release themselves from the ties of their property.

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Posted in Rent to Own / Buy

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Buy-to-let mortgages for investment property buyers

July 20th, 2009

Mortgages are no longer the preserve of banks and building societies.

For around one year now it has been difficult for may to obtain buy-to-let (BTL) mortgages. Private investors have seen their deposit requirements increase from a typical 15% to an average of 30% today (lowest deposit offers are 25% but fees and terms are less favourable). So for the private property buyer it means you need a lot of cash to take on a property investment. The banks are really making it tough for everyone.

But the market is starting to change. A private investment fund is now offering BTL mortgages at 85% LTV, a deposit of just 15% needed. The only catch is their fees are high at around 6% of the loan compared to 3% to 3.5% fees charged by the banks. But then the private fund is currently offering a 5.2% five year fixed rate, which seems very attractive compared with the 3% to 4% (above) base rate trackers offered by the banks.

So if private funds can lend at much higher LTVs (smaller deposits) why can’t the high street banks? There are several reasons for this. One is, according to the Council of Mortgage Lenders (CML), the banks can not raise funds at sufficiently attractive rates to pass on to property buyers. Another possibility is the bank risk profile, as many still have a lot of high risk debt including many mortgages with negative equity they need to improve their overall loan books. In effect with the banks taking on very secure mortgages (e.g. 75% LTV) they can offset the more risky loans, so overall their lending risk profile is reduced. The bank’s risk profile is a key factor for their ability to raise funds in the money markets, no one wants to lend to a bank that may subsequently go out of business.

So, overall we have good news that private funds are entering the mortgage maket. Maybe in the future the banks will see more competition, which hopefully will be better for those wanting to take out a mortgage.

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Posted in Buy-to-Let

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House Buying Companies

July 15th, 2009

With the increase in the number of people facing difficulty in meeting mortgage and other financial commitments it is inevitable that repossessions increase as lenders refuse to help with refinancing.  For some lenders it is a case of survival, they need to reduce their riskier mortgage lending so that their overall risk enables them to secure funds in the market place, but in the short term it means much pain for many people with mortgages.

In extreme cases there are solutions, in effect handing over your property to a house buying company who will then rent the property back to you.  Historically this has been and issue as some of these companies have gone back on rental agreements, evicting the former house owner, and then selling on for a profit.  In some cases these companies have even gone bankrupt.

Step in the FSA (Financial Services Authority).  As of 1st July 2009 new regulations came into effect to help prevent vulnerable homeowners being mistreated by some of the “less honest” rent back companies.  Although to be fair, most of these companies did operate fairly, but for the homeowner wanting to sell and rent back it was a bit of a lottery as to who you sold to, so well done to the FSA for taking action to address this.

For those who just want to sell and move on there are also companies who will purchase property outright, in some cases “cash property buyers” who will purchase a property within days.  But as the property market is still falling don’t expect to get the maximum price, these companies are often traders who then sell on to private investors, there needs to be a discount to cover the cost of buying and re-selling.

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Posted in Fast House Sales

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House prices fall again

July 14th, 2009

We blogged earlier the report from Nationwide that they recorded a 0.9% increase in house prices for June (you can read the post here http://www.repaymortgage.co.uk/blog/2009/07/03/house-prices-rise-again-in-june/ ).  But the Halifax have now published their data stating a FALL of 0.5% in June 2009.

Clearly there is a discrepancy in figures, but it is the trend that is key here.  Even though the Nationwide reported an increase, it was at a lower rate than May 2009.  So taking account that we are in the midst of the peak time of the year for house buying we could well see further falls in prices as the buying season slows down toward the last quarter of the year. 

As a property buyer then maybe you should be negotiating a discount on asking price reflecting the weak market.  As a property seller, unless you really do need to sell,  maybe you should take your property off the market until such time a it recovers – at the very least it will save you the cost of HIP fees.  If you really need to sell fast then you could also consider a cash property buyer, this way you can avoid HIP costs (as your property is off market) although you will get a lower price for the fast sale.

Overall its still a tough market for house sellers, hopefully the market will start to recover in spring 2010.

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Posted in Fast House Sales, Property Buyers, UK House Prices

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Finding a property buyer

July 3rd, 2009

Easy isn’t it, go to your local estate agent, get them to find one for you?  Sadly it is getting ever more complex. Before the internet people relied on local estate agents and local newspaper ads to sell or find a property to buy.  This worked well, it was the way 99% of us purchased or sold a property 10 years ago, but times have changed so much.
Almost all estate agents now use the internet to advertise properties, websites such as Right Move or Find a Property (there are many of them) allow people  to search for a property that meets their requirements.  Every day thousands of these buyers are searching the internet for properties to buy, so wouldn’t it be good if you could also go direct to these property buyers?
Well there are ways, for example you can advertise privately on websites such as Gum Tree, you can also go direct to private property buyers (investors) who will make you an almost instant offer for your property – although at a discount to current market valuation.  Some of these private buyers are “cash property buyers”, thus they are able to purchase in weeks and sometimes days.
If you want to maximise your sale price, and are prepared to wait, then the ideal buyer is a “home buyer”, it may sound obvious but this is someone who wants to buy as “their home” and most often this means they are buying with emotion as well as affordability.  The greater the emotional commitment to buying your property the higher the price they will pay.  So, when you sell, remember to hit the emotions, make them feel this is the property that meets their needs.

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Posted in Property Buyers

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How to sell your house fast

July 1st, 2009

It is a tough property market at the moment but some people make it tougher for themselves.  The very first step to achieving a fast house sale is knowing what your property is worth.  A good Estate Agent will be able to give you a valuation but you need to make it clear to them …. what price do you suggest marketing the property for, what price do they think they can actually sell for, and finally what price a RICS (Royal Institute of Chartered Surveyors) will most likely value the property.

Knowing these 3 figures is key:

The price an Estate Agent will market your house for is the “asking price” and it is always negotiable in the eyes of the buyer, especially in a market where prices are falling.  Don’t place hopes on achieving this price, especially if you want a fast house sale.

The price the Estate Agent thinks you will achieve.  This is after negotiation with a prospective buyer, the price that you receive an offer to purchase.  Again beware, the Estate Agent will often talk up this price to one they they “hope to find a buyer for”, it is by no means certain.  For a fast sale you are very unlikely to achieve this price.

The third figure is the RICS valuation, this is the most important figure as it is what the buyer’s mortgage will be based on.  The RICS valuation is accepted as the open market value of your property at the current time.  If you sell for the RICS valuation in the current market it can be considered a fair deal for both buyer and seller.

Now back to our headline, how to sell your house fast.  You need to understand where the market is heading, are prices static, increasing, or decreasing.  At the time of drafting this post prices seem to be stabilizing, or possibly falling slightly.  On this basis you need to price your property to sell by offering a discount to the current RICS valuation.  Pricing your property in this way will make you stand out from the crowd.  You will also need to market your property through as many channels as possible, do not rely on one Estate Agent, try multiple agents, you can also try to find a private property buyer through an online search.

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Posted in Fast House Sales

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