Buying a house – what to consider

 Tips for buying a house 

• Get a loan commitment from your bank – before you start viewing properties. You may borrow a maximum of 85% of the appraised value of the property. The remainder you will need to pay with a cash down payment.  

• Review all your expenses and build up a financial buffer. In addition to the agreed purchase price, you will also have to pay for the recording the title deed and mortgage lien along with other closing costs.  

• Remember that you have a responsibility to have a proper home inspection done when you buy a house. You will not be able to claim compensation from the seller afterwards for defects you should have detected during a thorough inspection.  

Obtain a loan commitment 

When you are thinking about buying a house, it is wise to obtain a loan commitment from a lender. This means that you receive a promise from a bank to lend you a certain amount of money. Even if you have a loan commitment, the bank may later deny you the loan if it finds that the assessed value of the property you want to purchase does not justify the amount of the loan you are seeking.  

The loan commitment is valid for a certain period of time; the actual duration varies from bank to bank. The loan commitment is based on your income and living expenses, subject to the value of the property you are buying. 

You may borrow a maximum of 85% of the appraised value of the property. You will need to pay the rest in cash. You can finance the down payment yourself or borrow for it.

Further information about mortgages on the website of the Swedish Consumers’ Banking and Finance Bureau (In Swedish)

Review and consider all the costs 

Buying and owning a house costs a substantial amount of money. In addition to the purchase price, you will also need to pay the some of the transaction costs, i.a. the fee for recording the title deed and mortgage lien. Also, think about the costs you will incur and set up a contingency fund for unforeseen expenses. 

What does registration of the title deed into the land registry accomplish? 

Registration of title in your name into the land registry is proof that you own the house. Registration of the title deed is made at Lantmäteriet, the Swedish Mapping, Cadastral and Land Registration Authority. The fee is 1.5% of the purchase price or the assessed value, whichever is higher. 

What is a mortgage deed? 

A mortgage deed (pantbrev), sometimes called a trust deed, is a document used as security for your housing loan. It establishes that the real property you own is pledged (encumbered) as security to a specific lender. You cannot sell the property unless you can pay off the loan with the lender at the same time. The recording of the mortgage deed lien costs 2% of the amount of your loan. 

Monthly costs of home ownership 

There is more than just interest and repayment of principal that needs to be paid every month. Examples of other running costs are: 

• heating 

• household electricity 

• water and wastewater fees 

• rubbish collection 

• chimney sweeping 

• an intrusion alarm, if desired. 

There may also be costs associated with common areas, such as private roads or docks. 

The house may need renovation 

Even if the house appears to look nice and in good condition, major renovations may be needed, such as re-roofing or replacing windows. Carefully consider the renovation needs and costs of the house you are considering making an offer on. Going to many viewings is a good way to research areas or different types of houses. 

Have a financial reserve when buying a house 

It’s essential to have a financial reserve when buying a house. You may need to purchase things to do immediate repairs or maintenance of the house and grounds. Examples might include a lawnmower, washing machine and snow shovel. It’s also advisable to have a financial reserve for unexpected expenses, such as if your freezer breaks down. 

You have a duty to inspect and investigate when buying a house 

According to the Land Code (Jordabalken) the buyer has a duty to inspect and investigate when purchasing a house. The buyer will not be able to demand compensation from the seller afterwards for defects they missed and should have detected during a thorough inspection. You can hire a property inspector to help you fulfil your duty of inspection and investigation, but it is important to know that most conveyancing surveys do not cover the entirety of the duty of inspection. 

You may need to take a closer look at things that were flagged during the inspection or things that were not included in the inspection you ordered. Look at the property inspector’s contract for the service to see what is included in the home inspection. For further inspections, you may need to call in a professional such as a dampness expert, an electrician or a chimney sweep. 

You should also carefully inspect the house yourself and test things like the water taps to ensure that everything is in working order. Turn on the taps, flush the toilet, look under carpets and behind paintings and so on. You will also need to verify that there are permissions for things like individual drainage and whether there are any plans for new roads or buildings in the area, for example. If the building has its own well, it is a good practice to take a water sample. 

Do the inspection and assessment before you sign 

Inspect the building and property before you sign the contract to purchase. You may not be entitled to inspect the building after the contract has been signed unless there is a clause to that effect in the purchase and sale agreement. Such a clause should be open enough to allow you to withdraw from the contract and not proceed with the purchase without having to give specific reasons for doing so. 

Sample wording for such a clause:

“The buyer will be given the opportunity to inspect the property no later than __/__/20__. If the inspection or examination of the property reveals any matter which the buyer considers unacceptable, the buyer has the right to rescind the offer to purchase and the related contact by __/__/20__ at the latest, without being subject to any costs, liability for compensation for damages, or other recompense. If the buyer decides to rescind the purchase contract, the buyer must notify the seller in writing. The entire deposit shall be returned to the buyer immediately.” 

If the house has already been inspected 

Sometimes a house is marketed and sold “as inspected.” Even if an inspection has already been carried out, you as the buyer nevertheless still have the responsibility and obligation to inspect the house. Even though the seller has had a home inspection carried out, you do not have a contract with the property inspector. This reduces your possibilities of claiming compensation if the inspector has missed something that should have been detected. In addition, it is important to keep in mind that a home inspection ordered by the seller is not aimed at the typical risks a buyer faces, but rather is focused on the seller’s situation. Therefore, it is advisable to hire your own property inspector. 

The property inspector’s task 

What does the property inspector examine and investigate? 

The first step in the inspection is to obtain a general overview of the situation with the house, known as a visual inspection. This means that the property inspector examines things in the house by sight, smell and listening. Examples of things that are inspected are: 

• the exterior surface/façade 

• the roof 

• the walls 

• the attic/loft 

• the foundation and basic structure 

• bathroom facilities/WC 

• kitchen 

• windows. 

If there is a risk of moisture damage to the structure of the house, the structure needs to be opened up to check for potential problems. This is usually done by some form of drilling into the affected structure. Some carry out such an inspection at the first stage, while others do so only at an extended inspection when the risks found at the first stage are to be assessed. Look at the property inspector’s contract for the service to see what is included in the home inspection. 

Most conveyancing surveys do not cover the full scope of the inspection obligation. Essential elements that are often omitted from the property inspection may include ventilation, electrical wiring, wastewater plumbing and structural brickwork.  For these things, you may need to call in a professional to help with these. 

If the property inspector identifies any issues or concerns 

If the inspection shows that there are risks or existing problems, it is important to look particularly carefully. Some types of issues or concerns noted are straightforward problems that need to be rectified. Others are risks and indications of a problem that requires further examination or inspection. It is very important to understand the extent of any risks and the costs they may cause to be incurred. Again here, you may need to seek the assistance and advice of several experts in their respective fields. You cannot claim compensation after the transfer of ownership for faults/problems noted in the inspection report. 

Sign the purchase and sale agreement 

Once the property inspection is completed and you have come to an agreement with the owner, it is time to sign the purchase and sale agreement. It is not until you both parties sign the purchase and sale agreement that the sale transaction becomes legally binding. When transferring real property, such as buying a house, the law requires a written contract for the purchase to be valid. Read the purchase and sale contract carefully before you sign.