Buying an Ex-Local Authority Property - The Buying Process
With ex-council properties selling for around 70 percent of the cost of similar privately built homes, part of the original saving made when council houses were sold through the Right to Buy scheme are still being passed on to new buyers.
Not only are ex-council homes generally cheaper to buy but if they were built before the 1970s, they're likely to be larger and well designed with lots of natural light.
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If a cheap property is what you want, it's important you consider any extra costs that might exist in addition to the monthly mortgage re-payments.
If the ex-local authority property you have in mind is a house then the owner will probably be the freeholder. If this is the case, you'll not only be liable for any maintenance, modernisation and repair costs, but also arranging for them to be carried out.
On the other hand, a flat will most likely be sold on a leasehold basis, with a long lease (usually 125 years). Blocks of flats often have service charges that will need to be paid and can be anything from a few pounds to several hundred pounds a month. Find out whether there are any major improvements planned as the expenses would have to be shared between the council and any private owners. If service charges are high and expensive improvements are planned, what first appeared to be a cheap property could turn into a financial nightmare.
The next step in the buying process is to find a mortgage. Not all lenders are happy to finance an ex-council property but a good mortgage broker will give you useful mortgage advice and help you find a lender who will usually deal with buyers of the kind of property you're looking at. The most difficult ex-local authority properties are, without doubt, those in high-rise blocks. Very few lenders are happy to risk a mortgage on a flat that's part of a building higher than five floors.
Of course, before you can come as far as looking for mortgage advice, you'll need to have found a property that interests you.
Unless you're a property investor, buying a home will probably be the most important financial decision you'll ever make, whether an ex-council property or otherwise. In order to ascertain how much you can afford to spend on a property, we suggest you use our mortgage calculator.
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When you've found and viewed a property you're interested in buying, remember to take into account the other costs that are involved in the buying process. These include fees to a solicitor or licensed conveyancer, the cost to have an independent survey undertaken (your mortgage company will probably insist on this), the fee payable to the Land Registry and Stamp Duty. If, after taking these costs into account, you still want to go ahead with the buying process, put in an offer on the property but remember to make the offer 'subject to contract'. This clause will enable you to pull out of the deal should anything untoward turn what should have been a cheap property into an expensive ordeal.
Many first time buyers make the mistake of believing that because their offer has been accepted, the property is secured for them. Unfortunately, this isn't the case. Until your mortgage is arranged and the contract signed, the owner can still choose to sell to another buyer. This is especially likely to happen if another buyer can close the deal quickly, something that buy-to-let ex-council property investors often can.
Once your mortgage has been arranged the contracts will be exchanged and the buying process, which can sometimes take longer than most are happy with, will be finished.
Property investors looking for cheap property that's part of the local authority ex-housing stock will obviously need to go through the same process, although unless they are first time investors, they may not need mortgage advice. Their personal feelings towards the property will be irrelevant - what's important to an investor is how much the property is likely to increase in value and what kind of rents can be expected. A good estate agent will be able to offer help by giving an indication of the prices similar properties have sold for and how much their value has increased over the last 12 months.
If buyers are careful when choosing a property, ex-local authority properties can still be good investments whether purchased for personal use or bought purely as a business endeavour. By ensuring you receive proper mortgage advice and understand the buying process, there's no reason why you shouldn't soon be celebrating the purchase of a relatively cheap property that will give you a respectable return on your investment.
All materials contained on these pages are provided for guidance purposes only. While every measure is taken to ensure that the information is accurate, ex-localauthority.com accepts no responsibility for their accuracy nor for the direct or indirect consequences resulting from the use of the site. We strongly suggest that you carry out your own checks and seek professional advice before taking any action. Content on the ex-localauthority.com site is intended for the personal, non-commercial use of consumers using the site. It may not be reproduced, redistributed, retransmitted or otherwise disseminated without the express written permission of ex-localauthority.com.
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