New home buyers will come across the same phrases and statements used by house builders’ to market their homes and when dealing with distraught new home buyers. But what are the house builders really telling you?
“Attention to detail”
If we can save a few pennies by not doing something and we can get away with it, we will.
“An exciting development”
We hope to make a lot of money on this site
“All of our staff are trained”
We have told them what they can and cannot tell you
“Our friendly site team”
The site manager is always in the sales office chatting and drinking coffee.
Larger than the usual rabbit-hutch new homes we build“Our sales team are fully trained to offer you expert guidance and practical assistance throughout the buying process”
Our sales staff will try to sell you optional extras and force our choice of solicitor and mortgage broker on you.
New flood risk maps have been produced by the Environment Agency that, for the first time, also include areas at risk of flooding from surface water in addition to the risk from rivers and the sea. According to The Independent, new mapping techniques used by the EA have reduced the number of homes shown at risk of surface water flooding – when the drainage system cannot cope with extreme heavy rainfall – by 800,000 to 3 million with a further 2.4 million properties are at risk of flooding from rivers and/or the sea.
The new EA flood risk maps will give insurance companies more information to set premiums and could alter the risk profile of homes now shown as at risk of flooding, with some homeowners seeing their premiums increase.
For homeowners that search for the best deals using comparison websites, the average annual premium is £130 according to the AA. However, those that live in areas deemed at risk of flooding pay huge premiums and have excesses that can be thousands of pounds, with insurance companies setting premiums to fully reflect the risk of flooding.
In the past, homeowners in high-risk areas have been subsidised to some extent by those living in regions with a low risk of flooding. However, this has now become unsustainable, with the increasing frequency, number and cost of claims arising from damage caused by flooding since 2007. Some policyholder’s premiums have risen substantially, by as much as 35%, after a revised flood risk assessment by their insurers. Many homes that had been flooded in the past have become virtually uninsurable.
In a speech to the party’s national policy forum, Mr Miliband is set to confirm that increasing the number of new homes built each year will be a key priority for an incoming Labour government. He will confirm measures to force house builders to stop hoarding land with his “use it or lose it” proposal.
Other options also being considered include giving councils the power to fine companies that own large areas of undeveloped land or to require them to pay council tax or a special “land tax” on the undeveloped land in question. As a last resort house builders who refuse to build could find themselves facing a compulsory purchase order.
Mr Miliband will say: “We have to be willing to confront some of the obstacles to house-building. Across our country there are firms sitting on land waiting for it to accumulate in value and not building on it – landowners with planning permission who simply do not build. We have to change that… permission to build should mean landowners build.”
Mr Miliband recognises that the profits of the biggest four developers by volume – Barratt, Berkeley, Persimmon and Taylor Wimpey – have risen by 557% since the coalition took office. The number of homes completed by these firms increased by just 4,067 in 2012, and the number of affordable homes built last year actually fell by 26%.
Despite the apparent increased availability of 95% mortgages, many potential home buyers will be refused a loan. Whilst banks and building societies have relaxed their lending criteria to some extent, those wanting a home loan will still have to pass certain tests of credit worthiness.
There is evidence that an increasing number of mortgage applicants are being refused a loan because they have bad debts on their credit record. Lenders are refusing to say exactly what criteria they use to decide whether or not they will approve a loan because they believe people will cheat the system. They also get to keep the application fees, whether the mortgage application is successful or not!
Even a relatively minor one-off lapse can result in a mortgage application being refused such as:
- Missing a monthly payment on mobile phone or broadband or pay TV contracts.
- Going over an agreed overdraft limit.
- Failing to pay at least the minimum balance of credit cards.
- Even not having a credit card can count against you, as lenders may interpret this as an indication you cannot handle credit.
What you should do:
- Get copies of your credit rating from Equifax, Experian or Call Credit for a nominal fee.
- Cancel any credit and store cards you no longer use. Too many cards will look like you already have too much credit.
- Keep outstanding balances on credit cards to 25% of your total credit limits.
- ALWAYS make the minimum payment on all loans and credit cards. The more you pay off each month the better your score.
- Never take out any Payday loan.
- Never go over agreed overdraft limits! This can leave a negative on your credit file for up to six years.
- Make sure anyone else on the mortgage application has a good credit history too.
Finally save as much as you can for a deposit. Not only does this show the lender that you are responsible and can budget and plan, but the more you can save for a deposit, the cheaper the loan will be. Those with a 10% deposit will save around 1% on a fixed rate deal compared to buyers who need a 95% mortgage.
The standard and quality of new homes is not improving. Despite surveys and reviews, time and time again, house builders have demonstrated that they only care about profit and numbers. This was recently confirmed to a Taylor Wimpey new home owner last month, when the company’s regional director, visiting because the new home had over 400 faults including potentially dangerous electrical work, said: “we’re here to deliver profit for our shareholders” adding: “we don’t build perfect houses”
Remedial works cost builders money!
Indeed, many disappointed new homebuyers believe they should at least be forced to try to improve the quality of the homes they build! The reality is, it wouldn’t be too difficult to do. If there was a will, there is a way! It certainly would be unlikely to reduce the house builders’ profitability because it always costs less to do the work right first time, than it does to go back over and over again. All a successful business needs is great a product and satisfied customers. The house builders have neither, making their profit predominantly as a result of planning gain, land speculation and on the back of government initiatives such as New Buy and the Help to Buy subsidy!
For many, owning their own home is a distant dream, with many renting as they realise they are priced out of the housing market. But renting can give flexibility and an opportunity to live in an area that you might never be able to afford if you were trying to buy a home and you don’t have to worry about maintenance costs and interest rates!
So here are a number of things those renting will need to consider:
- When viewing properties to rent thoroughly look around before making a decision. View in the same way as you would if you were looking to buy, after all it could be your home for some time and it needs to be right for you.
- Be aware that all tenants have certain rights. The landlord is required to carry out repairs the property and act immediately if the boiler breaks down for example. However around 70% of tenants actually arrange and pay for any repairs themselves rather than asking their landlord! It is estimated that as many as 60% of tenants who do ask their landlord to make repairs are met with an obstructive or indifferent attitude. Tenants cannot be forced out during the first six months of the tenancy agreement and both sides must give two months notice before ending the tenancy. However, if you have broken the agreement (by not paying rent for example) the notice can be as little as 14 days. Continue reading
With nine million people caught by the double-whammy of soaring house prices and stagnant wages, landlords have a ready supply of lifelong tenants. Even with the government’s Help to Buy subsidies, many are still struggling to save the required 5% deposit and face renting for the foreseeable future.
Residential landlords are also able to take advantage of various tax breaks that are not available to owner-occupiers. The main break being that all costs for owner-occupiers are paid out of income after it has been taxed, whereas landlords can claim generous allowances via self-assessment to offset their tax bill. The generous tax treatment of landlords equates to a total subsidy of £5bn a year from every taxpayer. It is no surprise therefore; that around 4% of UK adults are landlords and 17% of our MPs are landlords, meaning it is unlikely the landlord’s current tax breaks will change anytime soon!
As a result of the government’s Help to Buy scheme together with a relaxation of lending criteria, Britain’s housing market is now booming. More sales will be recorded in 2013, than at any time since the 2007 boom. The increased demand for homes has, according to the Halifax, resulted in the ninth consecutive monthly rise in house prices, up 0.7% in October and up 6.9% over the last 12 months. The Halifax reports that the average UK home is now valued at £171,991. It has never been an easier to sell a home and estate agents are cashing in on the easy money, charging around 2% of the sale price. This can be a total of £6,000 (including vat) for a home that can sell for £250,000 in a matter of days, sometimes before they even put the property in their window!
However a growing number of sellers are choosing to avoid the traditional method and are marketing their homes online and saving several thousand pounds in the process. Most online services charge flat fees between £200 and £900 depending on the services offered and optional extras. With many homes selling in a matter of days, people thinking of selling their home are starting to ask themselves why they need an estate agent at all. The RICS say that around 5% of all completed property sales arise from low-cost online agents and private sale websites.
In the days of British Leyland, it was often said that a car with several faults was a “Friday Car” – meaning it had been built on a Friday, with workers not being quite as attentive to quality and what they were doing as perhaps they should have been. Fortunately, the car industry has come a long way since those days with both the quality and reliability of new cars much improved.
However the same cannot be said of the house building industry. New homes are still being built with as many, if not more faults and defects than they were 20 years ago. The situation is even worse in an “end-of-year figures” new home. These are homes that are sold and the construction process rushed to enable legal completions to take place so as many homes as possible can included in the house builder’s financial year-end report to the City and shareholders. Homes built in the run up to the end-of-year date are always of inferior quality, even worse than the national house builders usually build, with a lower overall standard of finish, incomplete works and forced drying out causing excessive cracking to finishes.
Rush job! Will it be completed in time for you to move in 4 weeks?
Each regional office will report how many homes they have built and sold, within the company’s financial year. The overall total is then recorded in the firm’s final annual financial accounts. Each region is given a target number of completions to achieve each year and everything (and anything) is done to ensure the required figure is reached. In the past it has been known that buyers were handed large cheques by directors as a “sweetener” to persuade them to legally complete on their new home – even though it was nowhere near finished or even ready for occupation. It was not unheard of for buyers to move in with their electricity and heating powered by a temporary generator or their water supply provided from a hose connected to a standpipe in the footpath! Another ruse sometimes used when a part-exchange is involved, was to let the buyer remain in their old home whilst their new was being finished. Quite frankly this practice was nothing short of fraud.
For many, buying the show home may seem a great idea. But anyone considering buying an ex show home should consider the many disadvantages as well as the perceived advantages.
The first thing to be wary of is to not getting taken in by the furnishings and the techniques the housebuilder has used. In recent times, many people have become obsessed with lifestyles and developers are using this to their advantage so potential show home buyers should be sceptical when viewing.
The most critical issue to buyers is nearly always price. A show home can, and usually does cost, more than the same house type on the development, This is because all the little extras that are in the show home are added to the price. Remember house builders never give bargains! The price will have been very carefully considered to get the maximum amount that can be realistically achieved, in the short time the sales staff may be on the development. You should be prepared to negotiate with the builder, as you will have not been able to choose your kitchen and other options and the home will be used to some extent.