LONDON -- Buying residential property in London can be a ruthless game -- especially in today's seller's market.
"Property buying brings out the worst in people," said Linda Coopersmith, a partner with Woodham Smith, a firm of London solicitors specializing in commercial and private property.
"Perfectly friendly, civilized neighbors turn into shifty, double-dealing people once they have decided to either buy or sell their house," she added.
The more fortunate foreigners who are transferred to London by companies get help, for a fee, from relocaters. These are professional hand-holders who are paid to help the employe find a house or apartment and to negotiate the purchase or rental charge from start to finish.
Other less-fortunate foreigners have to learn the hard way.
In England, unlike in many other countries, neither the seller nor the buyer is legally bound to complete a purchase agreement once an offer is made; the arrangement becomes binding only after the purchase contract has been signed.
After an offer for a house has been made, it may take as long as three months before a contract is signed. And during that period, another buyer can come along, offer a higher price and walk away with the property.
"I was 'gazumped' three times," said a French expatriate, so exasperated by her experiences that she mastered the British term for the occurrence -- a word in the Oxford Dictionary meaning "to swindle."
An American investment banker found himself gazumped twice, once 10 minutes before a contract was to be signed and a second time, by the same seller, five minutes before the transaction was to occur.
Relocation firms estimate that about 40 percent of their foreign clients buy, and the remainder rent.
Buying in London has been an excellent investment in recent years, and renting can be expensive, so many foreigners prefer to buy even though they expect to stay only two to five years. According to one savings and loan institution, property values in greater London in the second quarter of this year increased by 5.76 percent, an annual rate of 26.19 percent.
The relocation companies select apartments or houses from lists provided by estate agents, the London firms that rent and sell residential property.
The relocaters then check out the property and decipher for the client the jargon of the trade. "Needing some redecoration" may mean the paint is peeling off the walls. A "beautiful garden overlooking the apartment" probably means it's a basement flat.
Cathe LeBlanc, the founding director of Towne Property Consultants, said most of her clients are investment banks who pay a fee of 0.5 percent of the purchase price for every executive for whom she finds housing. Her fee for finding a flat for a potential renter is about $1,440.
Foreigners also can obtain mortgages geared to their short-term needs. These are offered not by the British firms that traditionally finance mortgages, but by several U.S. and British banks.
Chemical Bank, Bank of Boston, Citibank and Coutts all offer special "expatriate" mortgages to foreigners who are on assignment in London for two to five years.
According to the banks, the advantages are that a client can get a mortgage for a term of only a few years and pay only the interest on the mortgage every month, not a portion of the capital.
160,000 mortgage with 100 percent financing, for example, a purchaser with a regular 25-year mortgage would pay
1,585 a month, whereas a foreign national on an interest-only mortgage would pay
1,486 a month.
For an American who is required to pay U.S. taxes, all interest payments -- but not capital-related payments -- are deductible for federal tax purposes. A full mortgage also is available if the client agrees to deposit 5 percent of the purchase price in a U.S. bank as collateral.
Some banks have begun setting up offshore branches for U.S. clients, in the Channel Islands, for example. Americans working abroad are then paid part of their salary in the United States and part in Britain; but they are taxed by the British Inland Revenue only on the amount they hold in Britain.
This approach enables U.S. clients to make their mortgage payments for a U.S. bank directly to the offshore bank and thus avoid being taxed by the British Inland Revenue.