If you’re looking to buy property as part of your broader investment portfolio, you’re in a great position already if you’re fortunate enough to be in a position where you can afford to buy with cash. When the deal’s done, you’ll own your investment outright and won’t have to spend years paying off the principal and accumulated interest to a mortgage lender.
It is also true that you don’t have to carry out all the legal checks required compared to buying with a mortgage. And on face value this means that you might be able to complete more quickly and save some money. But is it advisable for you to cut corners in this way?
Mortgage lender checks serve an extremely valuable purpose: banks clearly take steps to guard their investments which in this case means ensuring a property is worth its selling price. You are taking a great risk if you do not carry out a similar process for yourself.
In a similar way, your conveyancing solicitor 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.
And while, for example, you’re not legally required to get a RICS home buyers survey for your prospective home, you should seriously consider why it is received wisdom to do so.
It’s a very false economy to look to save a little time and a few hundred pounds when you not only might overlook an issue such as a property or title defect which might end up costing you many £1000s 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 – and most people buy in this way – will be subject to carrying out mortgage lender checks on your home. 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 Get a 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, such as a Building 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 Get 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 and things like tree preservation and smoke control orders which can seriously affect your quality of life in your home.
It is advised that at the very least you buy 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 Carry out 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 do so 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.