Before you can put in a bid on a property, you need a
mortgage lender to confirm that it is prepared to lend you money. This is
called a mortgage ‘in principle’. Without this, your offer won’t be taken
seriously.
Properties are marketed with either a fixed price or ‘offers
over’, which is the lowest price the seller will accept. Check your mortgage
and deposit will cover the value of the property you would like to buy.
Be careful not to overstretch yourself. Remember there are
many other expenses you will need to cover, including mortgage fees, legal fees
and, on properties costing more than £145,000, Land and Buildings
Transaction Tax.
Once you have agreed a mortgage ‘in principle’ you may have
to pay a booking fee or other fee to reserve it.
Find a solicitor
You’ll need a solicitor before you can make an offer on a
property. Solicitors are responsible for putting in the offer, negotiating and
checking the contract as well as organising the transfer of the Title and
money.
When you have found a property you want to buy, your solicitor
will register a ‘note of interest’ with the seller’s agent. This
shows that you are interested in the property and want to be kept advised of
developments such as the fixing of a closing date to submit offers.
Submitting searches
Your solicitor will undertake searches in the
property and personal registers to ensure that there is nothing which might
prevent the seller from being able to sell the property.
The solicitor will also check with the local authority to
see if there are any planning issues that might affect the value of your
property and whether any roads next to the property have been adopted by the
local authority.
Most solicitors request payment for their work after
completion but you may have to pay a deposit, or pay for searches upfront.
If the sale does not go ahead, but you paid for the search
upfront, then you’ll have wasted your money, so it’s worth carefully
considering this in advance.
You can also instruct your solicitor to carry out the search
once the offer has been accepted but this will need to be agreed with the
seller as a condition of the sale going ahead.
As a result, the seller may be reluctant to agree to this as
the findings may give you a reason to ask the seller to lower their price, or
even back out from the sale altogether.
Home Report and survey
Before marketing the property for sale, sellers have to
arrange a Home Report to show to buyers interested in their property.
This must include:
Survey – an assessment by a qualified surveyor from the
Royal Institution of Chartered Surveyors (RICS) pointing out the condition of
the property, where repairs are needed and a valuation of the property. A
mortgage valuation may also be included. The level of information contained in
the survey is broadly equal to the Homebuyers report mentioned below
Energy Performance Certificate (EPC) – this reveals how
energy efficient the property is and where improvements could be made
Property Questionnaire – sellers have to provide an
accurate account of the property including its Council Tax band, any Local
Authority notices served on it, alterations made, parking, any history of
flooding as well as factoring in arrangements covering any repair and
maintenance.
When you receive the Home Report for the property
you want to buy, make sure to read it carefully. It will give you a good idea
of the running costs of your new home. You can also use it to ask the seller
about utility bills.
Your mortgage valuation report
Once you have a mortgage in principle, your lender will
arrange for a mortgage valuation to make sure the property you’re buying is
worth the price you’re paying. Your mortgage lender may rely on the mortgage
valuation contained in the Home Report if it includes one or needs an
independent one.
You will also need to decide if you wish to rely on the
survey contained in the Home Report or obtain your own survey. The
surveyor who prepared the survey contained in the Home Report has a statutory
duty of care to the seller who instructed it and to you as the buyer.
Surveys
If you decide to get your own, there are three types of survey:
Home condition survey – the cheapest and most basic
survey. Suitable for new-build and conventional homes, but not useful for
spotting any issues with the property.
Homebuyer’s report – a more detailed survey looking
thoroughly inside and outside a property. It also includes a valuation. Check
whether you can get the valuation and homebuyer’s report done at the same time
to cut costs.
Building or structural survey – the most comprehensive
survey suitable for an older building or one of non-standard construction (for
example, if it’s made of timber or has a thatched roof).
Making an offer
Once you have the survey results, and are happy with what it
says, you need to decide how much you’re going to offer. The amount you offer
will obviously depend on how much you can afford as well as any competing
interest in the property, property prices in the area and anything else you
wish to be included in the offer such as fixtures and fittings.
Your solicitor will do this in a formal letter. If there are
several competing bids, the seller’s solicitor will open them at the same time
on the closing date and ring your solicitor to tell you if you’ve
been successful or not.
You may wish to wait until your offer is accepted before
having your own survey done, in which case you make your offer
subject to survey.
If your offer is accepted
If your offer is accepted, the seller’s solicitor issues a
qualified acceptance, which means that the property will be yours if contract
details can be worked out. The solicitor will also hand over information about
the property such as the title deeds and planning papers.
Go through everything you receive with your solicitor as
they may raise queries about the paperwork. Neither you nor the seller is
committed yet.
Agreeing the contract
Once all the contract details have been agreed, the two
solicitors exchange letters. These letters are known as ‘conclusion of
missives’. Both parties are now legally committed to the sale.
After the conclusion of missives you may have to pay a holding
deposit to secure the deal. It is not all that common to be required to
pay this holding deposit as there are usually penalty fees in the contract to
deter either party from backing out at this stage.
Title burdens
Your solicitor will check the title deeds and
discuss with you the ‘title burdens’ – conditions attached to owning the
property ranging from where rubbish bins can be put to more serious
restrictions on how the property can be used and altered.
The seller then signs the transfer of the title deeds, known
as the ‘disposition’.
Contact your lender
Next, you or your solicitor should contact your mortgage
lender and let them know that the purchase is going ahead along with the
proposed date of entry.
This will allow your lender to issue their loan and security
instructions to their nominated solicitor. In addition, this will also allow
the lender to prepare the release of their loan monies to allow the sale to
complete on the date of entry.
The arrangement fee
There is often a fee to set up the mortgage – usually referred
to as an arrangement fee. In many cases this can be added to your mortgage, but
choosing this option means you’ll pay interest on it for the length of the
mortgage. As a result you’ll pay more in the long run than if you paid for it
upfront.
Completion and final steps
After your offer has been accepted, the sale will be
completed on the date of entry agreed with the seller.
The seller’s solicitor will ask your lender for the
remaining money owed (usually 90% if you had to pay a holding deposit) in
preparation for the date of entry. If you are a cash buyer you’ll need to pay
the rest of the purchase price via your solicitor.
The seller’s solicitor will also prepare the Land
Transaction Return for you to sign.
You’ll need to pay your solicitor’s bill at this stage,
minus any deposit already paid. . If you haven’t yet paid for searches,
their cost will be included in the bill along with other fees paid on your
behalf.
They will also arrange for the signed title deeds to be
registered with the Land Register.
Your solicitor will complete the transaction by paying the
Lands and Buildings Transaction Tax (LBTT) due. This is a new tax introduced on
the 1st April 2015 for homes costing more than £145,000 and must be
paid within 30 days of completion.
