WEBVTT - Avoiding the Hidden Pitfalls of UK Homebuying

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>Welcome to Maren Talks Your Money, the personal finance edition

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<v Speaker 2>of Meron Talks Money and these bonus podcasts we talk

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<v Speaker 2>about the best strategies for making the most of your money.

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<v Speaker 2>I'm Maren Zumset Web and with me senior reporter and

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<v Speaker 2>author of the Money Distilled newsletter, which is brilliant. Do

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<v Speaker 2>sign up. John Steppeck Hi, John, Hi, ma'am right. We

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<v Speaker 2>are doing a housing series at the moment and we

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<v Speaker 2>have got a really great guest on today. We are

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<v Speaker 2>speaking with Anthony Emerson. Anthony is the director of mortgage

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<v Speaker 2>brokers Trinity Financial, London based firm specializes in bespoke mortgage

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<v Speaker 2>advice and Anthony is here today telling us all the

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<v Speaker 2>things that they don't tell you about buying your first home. Hi, Anthony,

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<v Speaker 2>thanks for joining us today.

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<v Speaker 1>Hi, and thank you for having me.

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<v Speaker 2>Okay, so here I am. I'm a young person. I've

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<v Speaker 2>been thinking about buying my own home forever. I enjoyed

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<v Speaker 2>saying I'm a young person. That hasn't happened for a while,

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<v Speaker 2>but you know there was a day. So here I am.

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<v Speaker 2>I'm a young person. I've been saving up I've built

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<v Speaker 2>up a deposit. I've been you know, nagging my grandparents.

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<v Speaker 2>My parents, They've all handed over a couple of grand

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<v Speaker 2>here or there. I've finally got enough. I know what

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<v Speaker 2>I'm looking for. I've been dragged around the place by

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<v Speaker 2>a state agent. Possibly I should have used a buying agent,

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<v Speaker 2>but there'd be a different podcast. And I've found the

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<v Speaker 2>place I want. I'm pretty excited. What happens now.

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<v Speaker 1>Now is the time that you really have to start

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<v Speaker 1>drilling down and deciding on exactly what mortgage product you

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<v Speaker 1>want to do, exactly what kind of loan size you

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<v Speaker 1>want to take. I think too many people, when they're

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<v Speaker 1>focusing on trying to go and buy a house, focus

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<v Speaker 1>on all of the costs up friends, and they try

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<v Speaker 1>and find out how much they can borrow, how much

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<v Speaker 1>that would cost, which is fine, but they should use

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<v Speaker 1>that as just a guide, and then once they find

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<v Speaker 1>the that they want, that's the point at which they

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<v Speaker 1>need to have a conversation with their mortgage broker or

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<v Speaker 1>if they've gone to a bank, direct their bank to

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<v Speaker 1>sort of say, well, what is your plans with this house,

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<v Speaker 1>what do you want to do with it? How much

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<v Speaker 1>money do you want to spend on it. Let's look

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<v Speaker 1>at your deposit. Can we borrow a little bit more

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<v Speaker 1>and hold back some of your deposit to facilitate those works?

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<v Speaker 1>What kind of rate do you want to have? Because

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<v Speaker 1>until you know the property you want to buy, you

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<v Speaker 1>don't know what you want to do with it, and

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<v Speaker 1>you also don't know how you'd like to finance it

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<v Speaker 1>and do work, etc. So it's at this point now

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<v Speaker 1>when you found a house that you want to buy,

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<v Speaker 1>that you will now know more about it and you

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<v Speaker 1>can make a better choice as to the products and

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<v Speaker 1>the mortgage that you take out.

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<v Speaker 2>Yeah, there are also a lot of costs that people

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<v Speaker 2>don't necessarily think of when they're looking for a house.

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<v Speaker 2>They think, oh, you know, I've got a deposit of

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<v Speaker 2>thirty thousand pounds, the house cost two hundred thousand pounds, etc.

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<v Speaker 2>Look at it like that, and they're not necessarily taking

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<v Speaker 2>into account how much they're going to have to pay

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<v Speaker 2>in stamp duty, how much their survey is going to

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<v Speaker 2>cost them, what they're paying the estate agent. These other

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<v Speaker 2>things that are cash costs right.

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<v Speaker 1>There are I mean, you've got to pay your conveyancer

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<v Speaker 1>to do all their searchers and to do the conveyancing process.

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<v Speaker 1>The surveyor needs to be paid for to at least

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<v Speaker 1>have a basic mortgage survey. A lot of the times nowadays,

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<v Speaker 1>the lenders are trying to give you a free survey

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<v Speaker 1>as a bit of an incentive to take up their

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<v Speaker 1>policy rather than somebody else's. But if you want to

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<v Speaker 1>have a more detailed server or need even have eyes

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<v Speaker 1>on the survey that the bank conducts themselves, you need

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<v Speaker 1>to facilitate some sort of money for that. Now, there

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<v Speaker 1>are generally three types of survey levels. You've got a

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<v Speaker 1>basic mortgage survey, you've got your home buyer survey, and

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<v Speaker 1>you've got a full structural survey. To do a full

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<v Speaker 1>structural survey and only really advocate that on a house

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<v Speaker 1>where it's a freehold house where you own the entire property,

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<v Speaker 1>because there's no point in doing a full structural survey

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<v Speaker 1>on a flat because the surveyor won't have access to

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<v Speaker 1>all of the other points of the property to be

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<v Speaker 1>able to do the inspection. That can only inspect within

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<v Speaker 1>the walls of your property and maybe the communal errors

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<v Speaker 1>and maybe do a visual from outside. So I think

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<v Speaker 1>if you're buying a flat, nothing more than a hound

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<v Speaker 1>by a survey would probably be recommended.

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<v Speaker 3>Do you think surveys are worth it? Because I've bought

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<v Speaker 3>a few homes in my lifetime, and what I have

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<v Speaker 3>found is that even the best surveys miss lots of things,

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<v Speaker 3>and there's also absolutely no comeback whatsoever as far as

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<v Speaker 3>I can see from the stuff being missed. And then

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<v Speaker 3>most occasions have been better off getting a friend who

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<v Speaker 3>was a builder. They come around, kick the tires, make

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<v Speaker 3>sure it wasn't subsiding into the street, and then just

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<v Speaker 3>go ahead with the basic kind of mortgage survey. Is

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<v Speaker 3>that a typical experience because it looked to be like

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<v Speaker 3>a waste of a couple of grand.

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<v Speaker 1>It can be, to be honest with you, because the

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<v Speaker 1>survey reports are incredibly caveated to say, maybe I couldn't

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<v Speaker 1>see all of the subfloor, so therefore I'm not entirely

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<v Speaker 1>sure as to whether or not there was dry rot

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<v Speaker 1>or any of those things that they might not have seen.

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<v Speaker 1>And it's incredibly hard to fully inspect a property where

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<v Speaker 1>you don't have access visually or otherwise without drilling holes

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<v Speaker 1>and sending down cameras, et cetera. To be able to

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<v Speaker 1>do all of those things but there are quite a

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<v Speaker 1>few people who don't have the skills or indeed the

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<v Speaker 1>knowledge to be able to walk around at property and

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<v Speaker 1>spot issues. We do property day in and day out.

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<v Speaker 1>We've come across everything under the sun. If I walked

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<v Speaker 1>into a property, I'd have a very higher educated viewers

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<v Speaker 1>to exactly what those problems might be than your first

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<v Speaker 1>time buyer who's never ever done that sort of thing before.

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<v Speaker 1>So the survey could give you a little bit of

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<v Speaker 1>a guide as to where problem areas might lie, but

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<v Speaker 1>further investigation is always needed. So they would say, the

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<v Speaker 1>electrics look like they are quite dated, should probably get

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<v Speaker 1>an electrical inspection done. The plumbing looks like that there

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<v Speaker 1>might be some issues. You should probably have a drain

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<v Speaker 1>inspection done. There's areas of timber and damp. You should

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<v Speaker 1>probably have a timber and damp specialist come and do it.

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<v Speaker 1>So the value won't give you a cost and a

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<v Speaker 1>guarantee that is the problem and this is how much

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<v Speaker 1>a cost to fix because they don't provide that service.

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<v Speaker 1>So they always recommend you to go and have more

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<v Speaker 1>investigation with those specialists to be able to know is

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<v Speaker 1>it worth it to certain people? Yes, because of the

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<v Speaker 1>fact that if you don't know what you're looking at,

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<v Speaker 1>and you walk in and you go buy a property

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<v Speaker 1>and you find out that the electrics are shot and

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<v Speaker 1>the plumbing's not up to scratch, it could cost you

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<v Speaker 1>a significant amount of money and you might have had

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<v Speaker 1>that flagged. Yes, they missed some things, but I think

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<v Speaker 1>that's just a human problem. And also certain properties don't

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<v Speaker 1>allow you to inspect all areas.

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<v Speaker 2>What's your view on the idea of getting a mortgage

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<v Speaker 2>and principle first before you actually hunt down the house,

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<v Speaker 2>so that when you get to that today, the seller

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<v Speaker 2>knows that your genuine in these areas, I.

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<v Speaker 1>Think it's definitely worth doing. I think if you're going

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<v Speaker 1>to go down the road of trying to buy yourself

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<v Speaker 1>a house, surround yourself with the right people, get yourself

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<v Speaker 1>a broker, get yourself a solicitor that we'll be able

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<v Speaker 1>to help and advise you on it, and then do

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<v Speaker 1>all the fundamentals first so that you have no surprises

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<v Speaker 1>coming down the track. You know, speak to the broker,

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<v Speaker 1>lay out all of your information so that you know

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<v Speaker 1>how much you can borrow. You know where some of

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<v Speaker 1>the problem points might be in the way that you're

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<v Speaker 1>paid and the structure of your bonuses. We have problems

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<v Speaker 1>with people believing they can borrow when they're getting restricted

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<v Speaker 1>stock units as part of their bonus package. Finding out

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<v Speaker 1>too late that you can't actually use that might mean

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<v Speaker 1>that you've wasted all that time and effort searching for

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<v Speaker 1>a property that you can't fundamentally affward. So then we

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<v Speaker 1>always suggest that people check their own credit report, get

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<v Speaker 1>a copy of that to be able to provide to

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<v Speaker 1>the broker to say, these are all the debts that

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<v Speaker 1>I've got, because that credit reference agency is what the

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<v Speaker 1>lender is looking at, so there's any surprises on that

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<v Speaker 1>the lender is going to be able to see them,

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<v Speaker 1>and then go and get yourself in agreement and principle

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<v Speaker 1>for generally the highest possible purchase price that you could

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<v Speaker 1>afford giving your income in your deposit situation. At least

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<v Speaker 1>then you know where your ceiling is and you can

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<v Speaker 1>come in and find the property that is underneath that,

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<v Speaker 1>and you should then have no surprises. The agreement and

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<v Speaker 1>principle is always done with one lender, in particular the

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<v Speaker 1>lender that will probably give you the highest possible loan amount.

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<v Speaker 1>But when you find the property you want to buy.

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<v Speaker 1>That's the point at which you will know more about

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<v Speaker 1>how you want to structure that loan. How much money

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<v Speaker 1>might do you want to hold back from your deposit

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<v Speaker 1>to maybe do a bathroom refurbishment because the property needs it.

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<v Speaker 1>Whereas being able to borrow that money at the outset

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<v Speaker 1>and hold back some of your deposit to facilitate that

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<v Speaker 1>work might be worth you doing. Now, that might mean

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<v Speaker 1>you change leaning to value, and it might mean that

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<v Speaker 1>you change product, but it might be worthwhile for you

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<v Speaker 1>to do that because you can enjoy the house more.

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<v Speaker 1>And then we'll advise on people to be able to

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<v Speaker 1>sort of get that agreement principle, find your property product

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<v Speaker 1>that you want to be put into, and then we

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<v Speaker 1>start the application again. It might be the agreement prints

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<v Speaker 1>with that lender in particular. Then the full application, survey,

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<v Speaker 1>mortgage offer over to the solicitor to push to get

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<v Speaker 1>you to the point of exchange where you finally have

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<v Speaker 1>some knowledge that you've secured that house or flat.

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<v Speaker 3>What should you expect during that process? So you agree

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<v Speaker 3>a price, you get to your mortgage done, you get

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<v Speaker 3>to exchange. What happens next.

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<v Speaker 1>So once you've reached exchange you generally confirm with your

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<v Speaker 1>solicitor your solictor LEO is worth the vendor solicitor, and

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<v Speaker 1>between the two of them you agree an exchange date

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<v Speaker 1>a completion date from the point of exchange. Now, if

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<v Speaker 1>you're in a chain where there are a number of

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<v Speaker 1>different properties all linked together, you buying the first time

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<v Speaker 1>buyer generally is the first step in that chain, and

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<v Speaker 1>then after so that every other house moves on the

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<v Speaker 1>same day, everyone in that chain needs to be able

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<v Speaker 1>to agree the completion date, unless, of course, one of

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<v Speaker 1>those people are willing to sell the house and move

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<v Speaker 1>into rented accommodation or go live with family, or whatever

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<v Speaker 1>it might be. Once everyone's finalized that date, you agree

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<v Speaker 1>it your exchange, You pay your five ten percent over

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<v Speaker 1>to your solicitor, and you are then at the point

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<v Speaker 1>where you've secured that property up until the point of exchange.

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<v Speaker 1>The vendor or you could walk away with no redress

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<v Speaker 1>to the other party after exchange, there are penalties if

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<v Speaker 1>you walk away for whatever reason. From a mortgage point

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<v Speaker 1>of view, you just need to make sure your mortgage

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<v Speaker 1>offer is still valid until after the point of completion

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<v Speaker 1>is expected to happen.

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<v Speaker 3>And typically Howlong's an author are valid for on.

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<v Speaker 1>A purchase or a remortgage. A new mortgage offer is

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<v Speaker 1>generally valued for six months, but when you get given

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<v Speaker 1>the offer, there will be a date on that offer

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<v Speaker 1>that will state the valid period of that offer. And

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<v Speaker 1>it's something that just definitely needs to be put in

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<v Speaker 1>everyone's diary.

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<v Speaker 2>So before the actual exchanges was horror stories all over

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<v Speaker 2>the place on both sides about being dizumed, gazunders etc.

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<v Speaker 2>So someone who's been through this process over and over,

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<v Speaker 2>you've got any tips for us on how to avoid

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<v Speaker 2>that kind of nasty surprise and the negotiation process.

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<v Speaker 1>Unfortunately, there is no real way of stopping the gazumping gazundering.

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<v Speaker 1>It's very very poorly taken by all parties other than

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<v Speaker 1>the vendor because they're generally getting more money. But if

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<v Speaker 1>somebody has made a viewing on a house and the

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<v Speaker 1>vendors even allowing viewings to continue, it's a sale market

0:11:41.360 --> 0:11:43.880
<v Speaker 1>where if somebody comes in and offers you a higher price,

0:11:43.960 --> 0:11:46.760
<v Speaker 1>you can by all means take that price. It is

0:11:46.800 --> 0:11:49.920
<v Speaker 1>a problem with the UK buying system because it takes

0:11:49.920 --> 0:11:53.600
<v Speaker 1>so long. There could be massive shifts in the economic

0:11:53.640 --> 0:11:56.480
<v Speaker 1>stability of the country between the points of agreeing a

0:11:56.600 --> 0:12:02.839
<v Speaker 1>sale and actually completing. So that process allows for renegotiations

0:12:02.840 --> 0:12:05.960
<v Speaker 1>to happen, but their renegotiations happen for different reasons. You

0:12:06.000 --> 0:12:08.840
<v Speaker 1>could find a property that you have your inspection done

0:12:08.840 --> 0:12:11.480
<v Speaker 1>on it, and you find out that there is a

0:12:11.559 --> 0:12:14.440
<v Speaker 1>problem with the roof, and therefore you might want to

0:12:14.440 --> 0:12:16.640
<v Speaker 1>get some more detail on that, and you might want

0:12:16.640 --> 0:12:18.640
<v Speaker 1>to renegotiate the price because of the fact that the

0:12:18.720 --> 0:12:21.800
<v Speaker 1>roof has got some issues. Up until the point of exchange.

0:12:21.880 --> 0:12:24.360
<v Speaker 1>All of that sort of stuff can happen, and there

0:12:24.400 --> 0:12:27.160
<v Speaker 1>also might be a change in your circumstances, right because

0:12:27.240 --> 0:12:29.800
<v Speaker 1>a person might lose their job in between, not be

0:12:29.880 --> 0:12:32.080
<v Speaker 1>able to afford it, and they might want to pull out.

0:12:32.280 --> 0:12:36.840
<v Speaker 1>So it works both ways. But gazumping is not a

0:12:37.000 --> 0:12:38.720
<v Speaker 1>pleasant experience for anyone involved.

0:12:39.280 --> 0:12:41.760
<v Speaker 3>No, I mean, just to be clear. And Scotland the

0:12:41.760 --> 0:12:44.120
<v Speaker 3>system is different, so again you're locked in a much

0:12:44.160 --> 0:12:46.959
<v Speaker 3>earlier period. But what's talk about the system in England

0:12:47.000 --> 0:12:49.600
<v Speaker 3>and wheels here. But yeah, from that, so we get

0:12:49.640 --> 0:12:52.880
<v Speaker 3>exchange and then we get completion and you move in

0:12:53.360 --> 0:12:57.240
<v Speaker 3>and that shoe. You're happy, everything's done. Is there anything

0:12:57.280 --> 0:13:00.480
<v Speaker 3>else in the process that you'd like to highlights being

0:13:01.080 --> 0:13:05.160
<v Speaker 3>an area things often fall through or mistakes are made.

0:13:05.320 --> 0:13:08.040
<v Speaker 1>I think one of the difficulties is when you buying

0:13:08.360 --> 0:13:11.280
<v Speaker 1>in a long chain, you reliant on a number of

0:13:11.320 --> 0:13:14.839
<v Speaker 1>different third parties to all agree, and to get human

0:13:14.880 --> 0:13:18.800
<v Speaker 1>beings to agree is difficult with lesser numbers, but when

0:13:18.800 --> 0:13:20.800
<v Speaker 1>you get a lot of people involved, it can be

0:13:20.920 --> 0:13:23.520
<v Speaker 1>rather tricky to get that done. One of the things

0:13:23.520 --> 0:13:26.720
<v Speaker 1>that we see a problem with is land registry delays,

0:13:26.800 --> 0:13:30.120
<v Speaker 1>slowing things down. When somebody has bought a house, some

0:13:30.440 --> 0:13:34.000
<v Speaker 1>land registry delays or up to a year two years long.

0:13:34.480 --> 0:13:37.520
<v Speaker 1>So if somebody bought a house cash, has renovated it

0:13:37.600 --> 0:13:39.920
<v Speaker 1>and is trying to sell it within a six month period,

0:13:40.320 --> 0:13:43.560
<v Speaker 1>it's highly unlikely that it would even be properly registered

0:13:43.559 --> 0:13:46.760
<v Speaker 1>on land registry. That could cause a problem. If somebody

0:13:46.800 --> 0:13:50.040
<v Speaker 1>has carried out extensive works to the property, have they

0:13:50.080 --> 0:13:52.800
<v Speaker 1>got the right permissions? Have they got the right warranties?

0:13:53.240 --> 0:13:57.920
<v Speaker 1>Those things are sometimes overlooked by people who have just

0:13:58.000 --> 0:14:01.000
<v Speaker 1>decided while I'm doing the renovation myself, therefore these things

0:14:01.000 --> 0:14:03.720
<v Speaker 1>aren't applicable to me. But when you come to sell

0:14:03.760 --> 0:14:06.840
<v Speaker 1>the property, that person wants some sort of sureties that

0:14:07.040 --> 0:14:09.319
<v Speaker 1>things were done right and then you have the right

0:14:09.360 --> 0:14:12.840
<v Speaker 1>warranties in place, and that can cause extra costs because

0:14:12.880 --> 0:14:15.560
<v Speaker 1>they might need to go and get a retrospective warranty.

0:14:16.120 --> 0:14:19.320
<v Speaker 1>Extra delays, extra costs for you as a buyer because

0:14:19.360 --> 0:14:21.760
<v Speaker 1>your solicitor and now has to do these extra pieces

0:14:21.800 --> 0:14:25.520
<v Speaker 1>of work. So they're not huge sort of things, but

0:14:25.560 --> 0:14:29.560
<v Speaker 1>there are little niggling problems that can protrap that sort

0:14:29.600 --> 0:14:31.000
<v Speaker 1>of completion period.

0:14:32.280 --> 0:14:35.160
<v Speaker 3>Great well, thanks Gaing I and I really appreciate your team,

0:14:35.360 --> 0:14:37.720
<v Speaker 3>and I think hopefully I should give them everyone a

0:14:37.720 --> 0:14:40.320
<v Speaker 3>bit of view of the painful process of buying a housset.

0:14:41.040 --> 0:14:46.640
<v Speaker 3>It doesn't have to be painful, you'll tell us that.

0:14:49.680 --> 0:14:52.000
<v Speaker 2>Thanks for listening to this week's Maren Talk to Your Money.

0:14:52.040 --> 0:14:54.440
<v Speaker 2>If you like us show, rate review, and subscribe wherever

0:14:54.480 --> 0:14:56.520
<v Speaker 2>you listen to podcasts. Also be sure to follow me

0:14:56.560 --> 0:14:59.600
<v Speaker 2>and John on extraor Twitter at Marinus w and John

0:14:59.720 --> 0:15:03.120
<v Speaker 2>unders Sport stepech. This episode was produced by Summersidi and

0:15:03.160 --> 0:15:06.400
<v Speaker 2>morosesandam sound designed by Blake Maples. Special thanks of course

0:15:06.440 --> 0:15:09.360
<v Speaker 2>to Anthony Emerson. Questions and comments on this show and

0:15:09.560 --> 0:15:13.280
<v Speaker 2>all our shows are always welcome. Our show email ismerinmoney

0:15:13.360 --> 0:15:15.280
<v Speaker 2>at Bloomberg dot Net.