If you’re able to invest in property with cash – i.e. without having to leverage via a mortgage – you’re already in a strong position because you’ll own the property outright and won’t have to budget for decades of paying off the principal and accumulated interest.
You can also choose not to spend money on certain safeguards which would have been required by any lender if you’d bought with a mortgage. But regarding those checks, would you be wise to cut corners like this?
When you’re looking for a conveyancing quote you should always be seeking an experienced conveyancing solicitor who knows the ins and outs of cash purchases and investment purchases. You’ll be relying on them to spot any serious problems, such as with the title of the property, but in order to do their job, they’ll need to be furnished with good information, some of which would have to be paid for by you but which you’re well advised not to overlook.
Banks are understandably cautious when it comes to lending money and you should consider that if they wouldn’t take certain risks regarding an investment perhaps you shouldn’t either, in the same way.
In a similar way, your conveyancing solicitor or licensed conveyancer works to protect you by examining as much information about the property you’re intending to buy before giving you their all-important report on title, one of the key parts of any conveyancing process.
Now you don’t have to buy your own RICS home buyers survey by law, but your conveyancer can seriously benefit from the subsequent surveyor’s report of such a survey, particularly if there are found to be property defects, when they are making enquiries and finalising their report on title for you.
It’s a very false economy to look to save a little time and a few hundred pounds when you might overlook a serious property or title defect which might end up costing you many £1000s to £10,000s to rectify.
Additionally you have to consider what might happen when you come to sell up. Anyone looking to buy your home using a mortgage will themselves have to carry out the checks stipulated by their lender. These might uncover an issue which makes your home very difficult to sell and you’ll only find out about it at this point.
1 Home Buyers Survey
Anyone buying with a mortgage has to get a mortgage valuation survey carried out. This isn’t a detailed home buyers’ survey but it does at least briefly examine the condition of the property, so obvious issues might be spotted.
All home buyers are advised to get their own home buyers survey, which is much more detailed than a mortgage valuation survey and the surveyor is purely working for you rather than your lender. Your surveyor has years of experience and is highly likely to spot any serious problems a home has.
If you don’t get a survey and a defect such as subsidence is missed, it could end up costing you tens of £1,000s to rectify further down the line. A survey might cost up to £1,000 or so at most and if the surveyor misses a defect, they are indemnified so you’ll be compensated for any subsequent remedial costs.
Additionally, when you come to sell your property, you should consider not only that any buyers who are using a mortgage will have to get at least a mortgage valuation survey, as stated and may also get a home buyers survey.
If you’ve carried out a home buyers’ survey yourself, you’ve done as much as you can to avoid nasty surprises which might prevent you selling up further down the line.
2 Property Searches
Mortgage lenders require those buying with mortgages to buy a minimum of four property searches, the most important of which is the Local Authority Search.
These searches reveal highly important information about the land a property is located on and in the case of the Local Authority Search, you find out about local planning permissions granted and building works applied for – you might find out that you’ll have an incinerator built at the bottom of your back garden in a couple of years, for example – and things like tree preservation and smoke control orders might affect your quality of life in your home.
You should at the very least get a Local Authority Search therefore for your own peace of mind. This also counts for when you might want to sell up: anyone buying with a mortgage will have to book the searches, so forewarned is forearmed.
3 Other lender checks
Mortgage lenders are required to carry out many other checks – these are set down in the Council for Mortgage Lenders’ Handbook – and you should try to carry out these yourself.
These checks include: finding out if the property was sold less than 6 months before, which might indicate a serious issue; finding out if a property is concrete built; checking to see if there’s a formal management company in place (if leasehold) and whether, if the property is a new build, there is a proper new build warranty in place, such as from NHBC or Zurich Insurance.
Overall, you are well advised to conduct your cash purchase in a similar way to if you were buying with a mortgage and carry out the same exhaustive checks. If you don’t you should remember that in England and Wales, properties are sold caveat emptor, i.e. ‘let the buyer beware’, which means you can’t sue your seller after you’ve taken up ownership.
Our advice when buying any property is always to protect your investment as much as you can, given the sheer size of the finance involved and to remember that you can save yourself potentially a great deal of headache – and heartache – if you carry out the same checks that mortgage lender would.