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Your questions answered by experts

Secondhand Values

I am in the process of buying my first house which is on a newly built estate. However, I am concerned because the surveyor has said that the price is rather inflated and would not be realised if the property was sold in the near future. What does he mean?

A Davies

Leicester

This is a common observation made by surveyors on the price of properties on new estates. Many of these new homes are sold by the builder who is able to offer prospective buyers attractive incentives such as large cashbacks and/or the payment of legal fees.

If you were to sell your home before the builder had finished the rest of the estate, the new homes would still be on sale with these incentives while yours would be secondhand with no incentives to make it more attractive than the other houses being sold.

You really need to decide how long you intend to stay in this house if the purchase goes ahead. If you view the property as a home rather than an investment, and intend to stay there for the foreseeable future, you should not be unduly worried by the surveyor's remarks.

Any work that you may do on the property in the future will also have an influence on its value, and additional features such as burglar alarms, fresh decoration and landscaping the garden may all serve to make your property more attractive to the prospective buyer.

TO FREEHOLD OR NOT

I recently bought a flat and have now been offered a share of the freehold at a cost of around pounds 3,000. I will have to take out a loan to pay for this but want to know if this will increase my property's value? The lease has 123 years left to run.

M C Jones

London

Given the choice, it will always be better to buy the freehold, although as the lease still has a considerable length of time to run any increase in the value of the property is likely to be marginal. Had the lease been shorter then it would have had a greater affect on the price and saleability of the property.

However, you would be advised to check the terms of your lease to see whether the terms of the ground rent provide for escalating charges. If they are due for renewal in the near future are you going to be faced with a hefty increase? If so, it might be worth investing in the freehold to avoid the ground-rent increases.

There are other things to bear in mind when deciding whether or not to purchase the freehold. Buying a share of the freehold gives you a say in how the property will be managed but also puts the responsibility on you to do this effectively and fairly. The responsibility for such things as buildings insurance and repairs would pass on to yourselves, and as joint shareholders it would be up to you collectively to decide what financial contribution each of you needs to make. If you are living in a block of flats you will need to decide who is responsible for repairs, but problems may arise if one or more of the shareholders disagrees. You may find that you need a management company to act on behalf of the residents.

IN CASE OF DISASTER

Why is it necessary for both the seller and buyer to have buildings insurance on the same property between exchange of contracts and completion? Surely this is a double indemnity and one or other policy would not pay out.

J Byrne

London

The duplication of buildings insurance on the same property between exchange of contracts and completion is more of a safeguard than a necessity and is common practice.

The reason for this is really for one's own peace of mind. If you can be absolutely certain that the people you are buying from will look after the property and maintain buildings insurance up to the date of you moving in then taking out your own insurance should not be necessary. However, it is always better to be on the safe side and ensure that you know the house is insured. Many lenders will insist that you as the buyer take out your own insurance as, once contracts have been exchanged, you are contracted to buy the property regardless of the condition that it is in, even though you have little control over the property until the date of completion. For example, if there was a flood you may not even be aware of the problem until the date of completion, and if the vendors had cancelled their buildings insurance early then the property would not have been covered for any damage.

Usually one or other policy would pay out in the event of damage being caused, or the cost may be shared between the two. As the period between exchange of contracts and completion is rarely much more than two weeks, the cost of insuring the property will be relatively small. Moving house can be a stressful time and by ensuring that the building is insured over this period both parties benefit from peace of mind, knowing that they are financially covered in the event of a disaster occurring to the property.

Answers were supplied by experts at Woolwich Property Services and Ekins, the group's surveying services subsidiary. The panel is headed by Alan Oliver, managing director of Woolwich Property Services, and answers published queries on buying and selling, valuations, surveys and market factors.