House Buying Jargon Explained
January, 21, 2008
Do you know the difference between gazumping and gazundering, or Sole Agency from Stamp Duty? SaveBorrowSpend likes to find all this stuff out and put it in one place so you can understand exactly what that estate agent is talking about…
Agent – The (Estate) Agent is charged with selling what is probably your single largest financial asset (and trousering a healthy percentage fee in return). If you are unhappy with your agent there is an ombudsman scheme, is your agent a member?
Asking Price – This is the price the vendor and Estate Agent agree to market the property at (although they might occasionally disagree, with the Agent thinking the price is too high, for example). As a buyer you can make an offer of the asking price, or lower. (On the whole people don’t jump in higher than the asking price unless there’s already a bid on the table or you think the property is under-valued and your heart is set on it).
Banker’s draft – A method of payment; guaranteed by your bank and viewed as more secure than a personal cheque. You will normally use these to transfer money at Exchange and Completion.
Bridging loan - A special short-term loan provided by banks and building societies. If you are still waiting for the funds to come through from the sale of your current home, you may be able to take out a bridging loan to pay for your next property.
Cash buyer – Ah, the holy grail of house buyer! They’re flexible and can move quickly as they don’t need a mortgage and don’t have a property to sell (sometimes cash buyers can refer to people whose mortgage is already arranged but don’t need to sell a property). In a fast-moving market when you aren’t yet suited you might well lose out to the cash buyer.
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The Chain - You are selling a house, you are buying a house, your vendor is buying a house, their vendor is buying a house and so it goes on. A chain starts the moment someone is relying on the sale of their house in order to complete the purchase of another property. The longer the chain the more risky it becomes, and if one buyer is unable to sell the whole chain can collapse. I was once in a chain of nine, eventually with nails bitten to the core and a few more grey hairs it did all go through, but I wouldn’t want to be there again.
Completion – The best bit: when you get the keys! It should (normally) take place within two weeks of exchanging contracts, and happens when the full funds are received by the vendor. On the date of completion, you tend to sit around drinking coffee with all your goods in a removal van, waiting for your solicitor to give you the green light to pick up the keys, unless of course he is off having lunch (happened to me twice).
Condition of the sale – A legally binding clause in the contract allowing the buyer to insist on minor repair work or removal of certain items before the transaction is completed (for example, I once had to ensure my loft was empty as a condition of sale)
Conveyancing - The legal process of selling a house, usually done by a solicitor.
Deeds (title/transfer) – These documents contain all the information about a property: who the owner is and any rules affecting the property. They're often held by the mortgage lender (hey, remember who really owns your house!) in case they need to take possession of the property should you default on your repayments.
Deposit – The lump sum paid by the buyer when contracts are exchanged.
Double-fronted – The door of the property is in the middle with windows on either side, which in some period homes means two sitting and / or drawing rooms. The classic child’s drawing of a house is double-fronted... little do they know how sought after they are!
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Estate Agent Fees – I don’t really share the common dislike of estate agents, mainly because I understand The Game. For example, who’s paying them? The vendor is... are you the vendor? If that’s a no (i.e. you aren’t paying them) who’s side do you think they are probably going to be on? If you are the vendor, you can haggle over fees, check the contract and ask them how many viewings they’ve arranged. Like all walks of life you get good and bad, and the same goes for estate agents.
Exchange of contracts - A crucial stage of the buying process when the transaction between the vendor and buyer becomes legally binding. Completion will normally take place within two weeks of exchange. Basically contracts are passed to the relevant solicitors to confirm all the legal bits are in order; then everyone involved has to sign the contracts.
Exclusivity agreement – A legal contract is drawn up agreeing a sum the vendor would have to give you if they decided to pull out. This is seen as a way of trying to avoid gazumping, but these agreements are pretty rare. Would you sign one?
Fixtures & fittings – This is generally everything in the property that can’t be removed easily - light fittings, door handles, radiators, sockets etc. Tales abound of sales falling through over loo seats and vendors stripping out light bulbs. Property commentators will say that if you like a feature like a fireplace or a ceiling rose then check that it’s included in the sale.
Freehold – This means you own the property outright, as opposed to leasehold where you own the rights to occupy the property for a specified period of time (also see virtual freehold).
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Gazumping - Much-loathed practice of raising the agreed price of a property, usually just prior to the exchange of contracts. This often happens because the Agent has craftily continued to market the property and the vendor has received a better offer, even though you’ve forked out for some fees already. Gazumping is more common in a seller’s market and not actually illegal. You could try an exclusivity agreement.
Gazundering - The opposite of Gazumping: the buyer tactically offers less than the agreed price just prior to the exchange of contracts. Gazundering is common in a buyer’s market and isn’t illegal in England and Wales. Take it from me (I have personal experience of this one) it makes you feel extremely impotent and angry. Do you call their bluff or take it on the chin?
Halls-adjoining – In a semi-detached house, this means the front hall in your property runs alongside the hall in the property you are attached to. It’s generally seen as good thing, for example it means their TV isn’t in the room bang next door to yours.
Home Information Packs (Hips) – These are now required by the Government (since 2007) if you are selling your house. They are basically an information pack for potential buyers. Hips are largely viewed as unpopular in the property world and commentators are reporting that people are just ignoring them despite the vendor paying a preparation fee.
Land registry fees – This is a fee you are charged when you buy a property for registering the title of the property under your name. It’s absolutely normal and usually dealt with by your solicitor.
Leasehold – With a leasehold property (common in city centres, especially London) you are buying the right to occupy a building for a certain amount of time. You will have to pay ground rent and maintenance to the landlord. When making alterations to the property you will have to check the lease and the landlord may impose other conditions upon you. The experts advise that you should by a lease with over 70 years remaining to maximize resale value. There are also sometimes opportunities to buy the freehold on a leasehold property, so you might be advised to check that before putting an offer in.
Local Authority searches – “Oh my god they are building a by-pass and it’s going past my new house!” Hopefully the local searches will mean this can’t happen. It’s a check with the Local Council to see if for example any developments are planned locally or any of your prospective neighbours are building an extension. You will also be able to find out whether there are any planning restrictions which may affect potential plans you have for renovation or extension.
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Multi-Agency - The vendor is marketing through several agencies and is paying a higher fee to the successful one: sometimes seen as a sign that the vendor is especially keen to sell.
Negative Equity – Say you buy a house for £200,000, with a mortgage of £180,000, the moment your property value drops below £180,000 you are in a position of negative equity, i.e if you sold the property for £170,000 you would owe the mortgage company £10,000.
Offer – This is what your buyer has said they are prepared to pay for your property, and often the prelude to haggling. Accepting an offer might well depend on the buyer’s and vendor’s situation: for example a slightly lower offer from a cash buyer might be more tempting than the asking price from a buyer in a chain of ten!
Private sale - This is when people choose not to sell their property through an estate agent and therefore avoid incurring agent fees. There are packs available which give you all the details you need, even down to a “For Sale” board. It’s fair to say most people would prefer the security of letting the experts get on with it, but a private sale would certainly save you money.
Sealed Bid – This is a system (largely used in Scotland, but also in England and Wales in a bullish market) whereby all prospective buyers are invited to put in an offer for the house they wish to purchase. The catch is you won’t have any idea how much other buyers are offering. Essentially the Estate Agent opens the sealed envelopes on a set deadline and the winner is naturally the one who bid the highest.
Sole Agency - The vendor is marketing the property through one agent only.
Solicitor's fee – You’ll usually be charged a standard flat fee, plus VAT to cover all the legal stuff the solicitor does i.e. advising you, acting and investigating on your behalf, and completing the purchase.
Stamp Duty - Like just about everything else, the Government taxes you to buy a house, but calling it the “House Buying Tax” might prove unpopular. So they call it Stamp Duty. If you buy a property between £60,000 (where?) and £250,000 this is one percent of the property value. Between 250K and 500K it’s a hefty 3% and an eye-watering 5% over the 500K mark.
Suited – Estate Agent terminology (as in “the Vendor is suited”) which usually means that the seller is ready to move.
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Surveys – There are three different types of survey you can have carried out on the property you are buying, and they get more expensive the more detailed they are. Which one you opt for generally depends on the type of property you are buying.
1. Mortgage Valuation Survey – Basic survey designed primarily to satisfy the mortgage lender that the house is worth what you are borrowing from them to buy it (not necessarily the amount you are paying for it).
2. Home Buyers Report – This survey gives you details of the basic state of repair of the property and usually a basic valuation. The surveyor will only inspect areas which are reasonably accessible or visible.
3. Full Structural Survey – This is the most comprehensive survey. It involves a thorough investigation of the property and would normally be undertaken on big properties or houses with specific features, such as a thatched roof or underpinning.
Vacant Possession – The property is empty, so you can buy it and move in straight away (assuming you aren’t in a chain yourself).
Vendor – The term estate agents, solicitors and surveyors will all use to refer to the seller.
Virtual Freehold – Sometimes properties come with extremely long leases (i.e. 999 years). These are known as “virtual freeholds.”
Valuation – This is when you get Estate Agents round to give an estimate of how much they think your property is worth. A bit like when you are getting an estimate for building work, it’s a good idea to get several agents in to give you a valuation.
SaveBorrowSpend Philippa Adam
