Buying a house is probably the biggest purchase you’ll ever make. But use an estate agent’s mortgage adviser and you could be throwing away any advantage you have.
Around 65% of households in the U.K. own their own home with many more hoping to step onto the ladder. And for anybody that’s ever taken part in the process, they’ll know the stress involved when it comes to moving. According to this list, it’s in the top 5 of the most stressful things to do. I rank it 4th after having 1 child, 2 children and then 3 children.
I found that when I moved house, it was a lot like my wedding day (I don’t mean plenty of drinking and my wife looking disappointed at the end). By that, I mean that all these strangers pretended to be excited by our big occasion, but in reality, they just saw us as some kind of cash cow. They kept milking until we ran out of money and then lost all interest.
I know the process in Scotland is slightly different, but buying a house in England is incredibly painful.
We seem to have a system where we pretend we’re all much cleverer than we really are.
- Estate agent turns up and values your house for £200,000
- They say they will market it for £215,000 to try and achieve £200,000
- The buyer looks around and knows it’s overpriced so offers £195,000
- A bit of back and forth and you settle on £200,000
Everybody’s happy. The seller reached their expected price and the buyer thinks they got a discount. And all it took was a couple of weeks of pointless negotiation and lots of waiting around.
Why, after all this time we still work this way, I have no idea. I think in some ways it makes it look as if the estate agent has earned their money.
The start of your house buying journey
First of all, you need to have an idea of how much you can spend. There’s no point looking around a swanky pad in Kensington if you can only borrow £150,000 (unless you want half of a porch). You should be able to get a good idea from some online calculators. Once you know your budget, let the excitement and searching commence! And remember those first few minutes as that excitement soon wears off.
The dreaded estate agent
In the majority of cases, you’ll search for a couple of weeks (or a couple of minutes in my wife’s case) and find a few potential houses you want to take a closer look at. So your next step is to speak to the estate agent. All estate agents I have ever dealt with don’t just take you to the property and leave it at that. Oh no. They want to know the ins and outs of a duck’s arse. You have to pass over all kinds of details just for a quick viewing. And expect to be informed about the “special” services they offer.
Most larger chains of estate agents can offer you all sorts of extras, such as preferred solicitors. Of course, choosing them will make your house purchase a much smoother task. Or so they claim as this isn’t guaranteed. In fact, I’ve read some horror stories as some estate agents will choose large chains of solicitors who can be very difficult to deal with. The only thing that can be guaranteed is the estate agent will receive a kickback from the referral and you will probably have to pay more for the services.
The estate agent’s mortgage adviser
Another service that may be offered is access to an ‘independent’ mortgage adviser. You’ll be promised that they have nothing to do with the estate agent and will be working with your best interest at heart. They will try desperately to get you to have a meeting with this ‘independent’ mortgage adviser. This is a man or woman, that is so independent that they share an office for several days a week and they go out together on the same office parties.
If you choose to meet and discuss your finances with the mortgage adviser, they will know all your financial details and come away knowing the maximum amount you can afford to borrow.
Now, take a moment. Do you think that this adviser will keep the information to themselves? Or do you think they might let slip to his mate Gary, who sits opposite and was the best man at his wedding, how much you can spend?
If an agent knows you have an extra £5000 to spend on your dream house, do you not think they will squeeze it out of you? After all, would you be willing to lose out for what is comparatively a small amount?
They’ll push you
Some estate agents may even tell you that they will not be willing to pass on any offer you make until they have seen your AIP (Agreement in Principle) or you’ve spoken to their adviser. Unless instructed by the buyer, they are not allowed to do this and must pass on every offer.
They work for the seller
Remember, as a buyer, you have no contract with the estate agent. That means they are working for the seller and aim to get them the best price. And usually, the more the house sells for, the more the estate agent earns in commission. That’s true for a mortgage adviser too. Unless their only income is from a fee, the more you borrow, the more they earn.
Now, don’t get me wrong as this doesn’t happen in every case and I’m sure there are genuine independent mortgage advisers that work with estate agents. Plus, I don’t fancy being sued. But do you want to take the risk?
My last experience
In 2017, we looked to move to a new build house. We couldn’t afford it on just our salaries, so had to look at the government’s Help to Buy equity loan scheme. Usually, I arrange my mortgages myself, but this scheme is a minefield so I had to get help from the estate agent’s mortgage adviser. After around a 90-minute meeting, we found out that we were £15,000 short of the asking price. To be honest, I thought that the houses were overpriced by close to £50,000 anyway, so we were always going to offer less.
Even though I thought it was too much, we offered £30,000 under the asking price. The estate agent got back to me after a day and said, after a lot of haggling, the seller would accept £15,000 under the asking price. To me, that’s far more than coincidence. And I knew that another house at the same price had sold for less. And I felt stuck, as I’m sure everybody knew how much I could afford to spend.
In the end, I decided to not go through with the purchase. I thought the property was overpriced and it was still for sale 6 months later.
Where possible, I would always look at finding a good mortgage deal by yourself – they’re not as complicated as they seem. Failing that, speak to an independent mortgage adviser who has absolutely no conflict of interest when it comes to your house purchase.
If you’re interested in reading more about mortgages, take a look at how a quick check could save you £1000’s.