Cheap solicitor/Gatehouse bank/viewings questions and answers

This is a ‘holdall’ post covering a number of important questions and assumptions.

Companion video to the article

Is it better to go for a cheap solicitor?
Generally, solicitors work on an hourly rate. That’s why they love complex cases. However with conveyancing, it’s a standardised process and because of market pressure, solicitors have to offer a fixed fee. If the fee is relatively low i.e. £800, that reflects a few things:
– The solicitor is extremely efficient, so they can expedite a conveyancing case rapidly
– The solicitor charges less per hour, because they are prepared to do more hours to attract the work
– Or, they have problems finding work, so they charge less. If they have problems finding work, that suggests they are not especially good solicitors.

Recently we’ve had a few cases where clients want cheap solicitors. They assume that any solicitor will do. This is absolutely not the case. A lot of the conveyancing process is ‘back and forth’ with various parties answering questions and solving minor problems. If you commission a solicitor to handle the conveyancing for a property and they become unresponsive…it’s very difficult to remove them from the case.

Whenever there is a rising market, there is huge pressure on the seller to get quick completion. This is because every month the drags on, property prices rise and the seller has to find more money in order to purchase their new property.

My main message: Think very carefully about what solicitor you appoint. there is a clear correlation between cost of solicitor and quality of service. It’s probably a good idea to ask the selling agent if they have any solicitors they recommend, because it’s in their interests to get the conveyancing done quickly.

—

Gatehouse bank. Should you use them? Preface: this is just my opinion based on anecdotal evidence.

• Gatehouse bank are so problematic. Their business strategy seems to be:
• Offer very attractive deals,
• Issue agreement in principle offers very easily,
• Then when the mortgage administration process begins, they get very aggressive about declining mortgage applications on technicalities.

I’ve done a search for ‘Gatehouse reviews’ and I have to say, it looks very like there’s been some Astroturfing on Trust pilot. Essentially it’s the process of using either fake or manipulated reviews to create a positive impression. https://www.theguardian.com/commentisfree/2012/feb/08/what-is-astroturfing

When you look at Google reviews, which seem to be unsolicited the reviews are broadly discouraging. This reviewer highlights my points about Gatehouse:

Source: Google reviews 

Essentially they ‘de-risk’ they are lending during the mortgage application process. The problem: it means deals fall through because mortgage finance is rejected.
And everyone wastes a huge amount of time and money, except Gatehouse.

And of course, it’s a sharia mortgage which is technically completely different to every other kind of lending we see in the UK

From Uswitch:

How do Islamic mortgages work?
Just like buying a home with a regular mortgage, you will enter a contract with the seller and agree a price. Your Islamic mortgage provider will then buy the property from the seller. With a standard mortgage, the money would be transferred to you to give to the seller, and you would then be required to pay it back with interest.

With an Islamic mortgage, the bank owns the property and sells it back to you at a higher price. You can still pay this back in instalments just like you would with a standard mortgage, except that you do not pay any interest.

Irrespective of what happens to the Bank of England interest rate, you will not pay any interest on an Islamic mortgage. However, with a leasing or rental agreement on an Islamic mortgage, the rate could fluctuate according to market rental prices.

The process works like this:

• Find a property, and agree a price with the seller
• The Islamic mortgage provider will buy the property from the seller
• The Islamic mortgage provider will sell the property back to you at a higher price
• You pay back the higher price for the property in instalments

Source: https://www.uswitch.com/mortgages/guides/islamic-halal-mortgage/

Furthermore, one of my shareholders is a very successful mortgage advisory business.  They have direct experience with Gatehouse and they refuse to do business with this bank because of the risk of deals collapsing due to aggressive ‘risk management’ by the bank.

Upshot: Gatehouse is an Islamic bank who successfully serves a particular marketplace. Some of my clients have had good experiences with them.  Would I recommend clients use them? No.

—

Cooling market for first-time buyers in greater Manchester.  Is it true?

– Cooling market: you say the market is cooling…and yes it is at a high level. I wrote a blog post which touched on some of this macro level trends https://invesmore.com/2021/10/03/to-buy-or-not-to-buy-that-is-the-question/
However, on the bottom end of the market: first-time buyer and buy to let, the market is still incredibly heated. I put this down to a couple of factors:
— The trickle of Hong Kong buyers is now turning into a tide. Whilst I don’t track the Hong Kong situation very closely, having talked to numerous people from Hong Kong, the overriding sentiment is that it’s only a matter of time before there are aggressive restrictions on capital flight from Hong Kong.
– Supply of property is still relatively small.
– Junk* properties hang around, but good properties go nearly instantly
– There are still huge numbers of first-time buyers supported by government schemes and cash build ups from covid looking for property
So yes, overall the market is cooling, but not in the first time buyer segment in greater Manchester, or in any area with reasonable demographics, local economy and long-term positive prospects.

—

Viewber – Are there any good?

Viewber is a property viewing service.  Link: viewber.co.uk/ One has to have an accredited account before one can start arranging viewings on their platform.  Generally the only allow account holders who are property professionals.

So far my experience has been very positive.  We’ve run about 10 viewings through them.  The only issues I’ve had were 2 Viewbers uploading small video files, which show no useful detail of the property.

In my opinion, there is a counterintuitive reason for doing viewings:

• Viewings are needed so estate agents take an offer seriously
• If you make an offer, and it is accepted, you have to get a full survey anyway… And that’s when you can pick up on serious issues. Then you can pull out of the deal if for example there are structural problems like subsidence, or dry rot… Or something terminal.

For these reasons, the viewing report is helpful, but not necessarily absolutely critical.

For property we find, we have a very thorough screening process for any deals we share amongst our clients. Martin, our lead analyst is a qualified surveyor and I have had a lot of experience in construction.  There are obvious signs that a property may have serious issues including

• Crumbling brickwork
• Watermarks on the exterior of the building
• Damaged gutters
• Plaster and lath plastering i.e. uneven walls
• Signs of rising damp
• Japanese knotweed
• Signs of subsidence

If we identify a property built before 1900, were looking for signs of extensive renovation within the last 40 or 50 years.  That means the plaster and lath walls will been removed and it will have relatively modern wiring, in line with more modern building standards.

And when it comes to area assessment, our demographic and crime data is very accurate.  Combine that with Google Street view, one can get an extremely reliable understanding of an area without even visiting.

Broadly, viewings are useful, but not critical. However to satisfy estate agents, we have to do viewings.  And since a viewing only costs £36, it’s worth doing.

—

Is the market cooling in Manchester?

Overall, the market is cooling, but markets are made of submarkets.

The sub market investors are interested in is the first time buyer segment.  And that part of the market is extremely hot.

Good properties will sell almost instantly.  That means:

• Property gets listed on day one
• Day two, property will have 10 to 15 viewings booked
• Day six, property will probably have four or five offers
• Day eight: property will have been sold

However, as we know property markets are also very localised.  And the competitiveness within a local market seems to corelate with capital growth.  I.e. areas with intense competition show high capital growth. it’s all fairly obvious when you think about it.

In short, if you purchase well, 75% of your ‘wealth gain’ will come from capital growth.  And the inverse is true.  That’s why it’s a very bad idea to buy a cheap property in a deprived area in an economically failed city like Newcastle.

Thankfully Manchester is economically robust and the local first-time buyer market is still  buoyant.

What if I offer above the asking price and the surveyor gives me a lower valuation?

the price for something is what you are prepared to pay.  Let’s say you’ve decided to employ your money in real estate.  If you are, you’re in for the long term.  That’s why buying in areas with long term capital growth potential is so important.  If you pay ‘above the odds’ now, but capital growth keeps rising, that property you purchased five years ago will look cheap.

The reality with the Manchester market: it’s hyper competitive and there’s a lot of negative sentiment towards investors.  To overcome this negative sentiment, one has to make high offers.  Your competition will be that first-time buyer who the seller wants to help out, not the ‘evil investor’.

—

In conclusion:
– The market is intensely hot at the bottom end within greater Manchester
– If you accept that out of five offers, you might buy one property
– If you get a decent lender (probably not Gatehouse) and you’re purchasing at 65% to 70% loan to value, selling agents will have confidence in your offer.
– If you’re prepared to offer above the asking price and will accept a surveyor’s valuation lower than your offer, then that’s good.
– If you have a good, trusted solicitor who doesn’t mess you around, that’s also good.

And finally, if you’re coming back into the market because you think there are cheap deals, that’s not the case.
In reasonable areas, in the bottom of the market, there’s a lot of house price inflation, but if you believe my long-term view… That’s okay since there is a lot of upside with capital growth in Manchester.