Q&A: BUYING
Camilla Dell
MANAGING PARTNER AT BLACK BRICK
Q. Dear Camilla, I have had my offer accepted on a house, have had everything done but now the seller has decided to pullout with no explanation. Is there anything I can do legally to prevent this?
A. One of the fundamental problems of purchasing a property in the UK is that until you have actually exchanged contracts either party can pull out at any time. Even if you have incurred costs on the transaction, the seller is not liable to pay you back. Legally there is nothing you can do to change the situation, unfortunately.
However, to ensure that you don’t encounter this kind of problem again, there are a couple of things you can do.
Firstly, you should try to move as quickly as possible to exchange contracts and lock both parties into the transaction. You need to have all your finances in place, whether that be arranging a mortgage or liquidating any investments. You also need to have instructed a solicitor who has the capability and resources to draw up all of your paperwork at a moment’s notice.
It is especially important to move quickly now because a vendor may start to get worried about the market and think that he could be selling for more than you have offered. If he has too much time to think about the transaction, then that can put the deal at risk.
Alternatively, if you are worried about this happening again, you could instruct your solicitor to try to get the seller to agree to refund your costs if they were to pull out for any reason. It would be quite difficult to get a seller to agree to that but it may be worth trying.
Q. Dear Camilla, I’m expecting to get a bonus in a few months and have been thinking about what best to do with my extra cash. Should I get into the buy-to-let market – do you think that the returns are still worthwhile?
A. We certainly do believe that now is a good time to buy and agree that we have hit the bottom so prices aren’t going to fall any further. Therefore now is definitely a good time to try to pick up an investment property.
But the biggest barrier to entry is the lack of supply in certain areas of London. It’s all about trying to find the right property in the right location at the right price and this is just as important for investment properties as it is when looking for your own place.
In terms of returns, it is important to note that you don’t really buy residential property because it is a high-yielding investment. Gross yields are hovering around 4 per cent and for net yield you are looking at about 3 to 3.5 per cent. Commercial property commands much higher yields.
Buying a property for investment should be seen as a long-term strategy – the return on the investment will come from the long-term capital appreciation rather than the rental income.
Ideally, you should try to buy investment property with a 50 per cent deposit at the moment and mortgage the rest. With low interest rates, you should be able to find a good mortgage at a fixed rate with monthly payments covered by your rental income.
Property investment also adds an element of diversification to your portfolio, but it is certainly not a market in which you can make a quick buck.
Camilla Dell is the managing partner at search and acquisition consultancy Black Brick. www.black-brick.com.