US Expats | A guide to buying in London

With the US currency still strong against the pound more US buyers are considering buying home in the UK. What should you know up front before you take the leap? - read on to find out...

05, SEPT 2018
READ MORE

Buying in the UK is very different than buying in the USA. Almost every aspect of the process, from search through to legals, is handled differently, which can make things a little bewildering for potential buyers. For many Americans the idea of owning a UK home is quite enticing, and due to currency shifts it's more achievable at the moment than it has been for years. So, what should our US friends know before going any further? - let's run down some key facts to get you started...

NO MULTIPLE LISTING SERVICE


Let’s begin here as this is a huge difference between the US & UK markets, and it affects everything about the way you find, and then transact real estate. In the U.S., agents (known as 'realtors') share their listings on a shared database called the 'MLS', short for 'Multiple Listing Service'. This doesn’t exist in the UK. 

So typically, an American coming to London might contact a real estate agency looking to buy or rent, and then expect that they will be shown an assortment of properties based on their criteria. Seems a fair and reasonable assumption, right? ...They are then surprised and frustrated when the agent only shows them a few things, or shows them totally unsuitable properties that aren't remotely what they haven’t asked for.
Buyers often don’t understand why this is happening, and the answer is because of the lack of an MLS.


Agents and agencies here will only show you the listings they have in their particular office. So, what that means for you as a buyer is that you need to go from office to office to see more listings. The other thing to understand is when the agent from the agency is showing you the house or flat, they are representing the seller, not you. You are then left to negotiate terms on your own without an agent, which is not a strong position to be in.
The way savvy Europeans buy is to find an EBA (Exclusive Buyer Agent) to act on their behalf. EBA’s are independent agents who are ‘whole of market’ – they take your criteria, search the entire market for you, help you select the right property, and then negotiate and manage the transaction for you until you finally complete & get the keys. Using an EBA replicates the experience that Americans are used to, where you have your own agent who works for you, and you only.

Agents here will only show you the listings they have in their particular office. There is no system or database connecting them all together, so you'll need to contact a vast number of offices in order to see a wide range of listings.
NO ESCROW PROCESS EITHER


There is no escrow process like you're used to in the States. Even if you submit an offer and it is accepted, there is still a chance that you can be outbid by another buyer (a practice called “gazumping”). After an offer is accepted, the deal goes to solicitors for conveyance, which can take three months or more to close. There are means to reduce the likelihood of being gazumped to replicate the “locked in” aspect of the US escrow, but once again, it is useful to have an experienced buyer agent on your side through this process. Being gazumped is really not fun, and can be expensive - you might have racked up significant legal or survey fees before being thrown overboard for a higher offer.



For buyers, when you find a property you want to buy you’ll want to get to the first stage of conveyance (the legal process of buying) as fast as possible. When you get past this first hurdle, known as Exchange of Contracts (or more commonly just 'exchange'), that's when the agreement becomes binding on both the buyer & the seller – you can no longer be outbid!

Because of this setup it’s crucial that buyers be well positioned. Your buyer agent should get you through your pre-search hurdles before you go house hunting so you’re ready to act decisively, as and when needed. Things you can (and should) do ahead of time are organizing finance, engaging your solicitor (lawyer), and passing through the basic ID and pre-purchase checks required here in the UK. Getting these things done well ahead of time puts you in a better position when it comes to making bold offers, and being able to close them!

There is no escrow process like you're used to in the States. And, even if you submit an offer and it is accepted, there is still a chance that you can be outbid by another buyer!
HOW TO FIND & WORK WITH A BUYER’S AGENT


Most realtors here (known as ‘estate agents’) are what we would call tethered sales agents. They work for sellers, not buyers, and they receive a salary (and a small sales bonus) from whichever sales firm employs them. In the US it is common for realtors to work with sellers and buyers, and to be independent contractors running their own business, albeit under the umbrella of a brokerage brand – this is not so in the UK.



Because there is no MLS agents here don’t share listings, or work together like they do stateside. In the US the seller pays around 6% in fees, and that payment pays for both the buyer and seller’s agent (who share those fees). In Europe, though fees are about the same, everyone pays their own agent. The seller will pay his agent around 2 to 3%, and the buyer will do the same.



Now again, because there is no shared listings database, for a buyer agent to be effective for you they must be ‘whole of market’. They also have to be ‘untethered’ – able to work with any of the hundreds of little sales agencies, and off-market property vendors, to find you the best deal. That’s why Europeans favour using a proper EBA; they’re independents who work across the whole market, and only work for you. The good ones are really outstanding at what they do – typical savings from using the services of a buyer’s agent can be 10% or more. Most established EBA's (myself included) will publish our case studies, as we find that clients are often very surprised to see how it all works, and just how such savings could be made.

Europeans favour using a proper EBA; independents who work across the whole market, and only work for you. Good ones can be really outstanding at what they do – negotiated savings can be 10% or sometimes more.
WHAT’S THE PROCESS?


You’ll need to find and appoint a good buyer agent. This process is known as ‘retaining‘ your agent, which means appointing them to search and negotiate for you under mutually agreed terms. Most EBA’s charge a registration fee (typically no more than a few thousands pounds), and that is all that a buyer will pay upfront.
The buyer agent then gets to work immediately. They’ll start by defining the parameters of your search, and may have you to fill out questionnaires, sit down for one or more thorough chats, or conference over the phone or by Skype.


They’ll want to nail down your budget and expectations, as well as your timeline. Don’t worry if you’re not sure about some of these things – they will help you find the answers to all of these key questions, and will also assist you with introductions to brokers, solicitors and other professionals needed to get your ducks in a row for a successful purchase.


One thing foreign buyers often worry about is not knowing which areas to target. It’s the role of your agent to help you identify target neighbourhoods based on your budget & lifestyle, so don’t worry too much about that. Once the buyer has a clear brief they commence a market-wide search, scouring through thousands of properties and going out to inspect any that look like contenders. This process can take anything from 1 week to 3+ months, depending upon how challenging or rare the target property is.



Once the agent has searched high & low, and inspected the contenders in person, they’ll present you with a shortlist of the best ones for your review. If you’re in the UK your buyer agent will accompany you to view them on a ‘tour day’ they've set up for you. If you’re abroad this information can be presented to you via email, phone or video conference. Your buyer agent should explain the pros and cons of each, and seek your feedback. Hopefully you’ll find one (or more than one) that you love. If not, the process will be repeated until we do find 'the one'.


It’s your agent who will put forward offers and negotiate on your behalf. Before bidding they will choose a negotiation strategy best suited to the situation, and walk you through it so you know what to expect. They’ll also manage the transaction process, working alongside your lawyer, and helping you to get the last details in place - things like insurance, surveys, decorative works and any other bits and pieces.


Once the home is yours, well congratulations - you've pulled it off an can now live happily ever after!

As you can see, a lot of planning must go into a purchase. The more you know the better prepared you'll be and the better your chances of buying well and being happy with your decision over the long term. I have a handy checklist of buying costs, and some other helpful fact sheets that I give to new clients - email me via the contact page if you'd like to get a hold of this info, as it's crucial to get your numbers and timelines right from the outset. Additionally, Stamp Duty is a constant source of confusion for buyers and worth reading up on as it will be your most significant cost, over and above the purchase price. As such I've published a separate article on understanding UK stamp duty, and you can access that by clicking here.

The Author
I'm Jemimah

I'm an independant Property Advisor & Buyer, working with residential home buyers, and investors. Find out more about my work or contact me.

EXPLORE MOBILE VERSION
PLEASE UPDATE BROWSER