Property Buying Guide
Making an offer – factors to take into consideration
The first step when buying a home is to make an offer on the property you wish to purchase. Normally, you will make this offer via the estate agent that is representing the seller.
Agreeing a purchase price ‘subject to contract’
If the seller accepts your offer, the sale will be agreed ‘subject to contract.’ At this point the sale of the house or flat has been agreed in principle and the seller’s estate agent will normally take the property off the market.
However, although you will have agreed in principle to purchase the property at a particular price, neither you nor the seller is legally bound. Either party can walk away from the deal without any legal repercussions. This continues to be the case until contracts have been exchanged. The advantage of this is that you will have time to assess the property (eg through having a survey commissioned) before you are committed to the deal. The disadvantage is that if the seller pulls out after you have spent money on a survey and legal fees, but before contracts have been exchanged, you will not be able to reclaim from the seller any of the costs that you have incurred.
Instructing a solicitor and making enquiries about the property
If you have not already done so, at this stage you should instruct a solicitor to represent you in the purchase of the house or flat. The seller’s estate agent will ask for the address of your solicitor so that they can send him or her details of the agreed sale price and the contact details of the seller’s solicitor.
Your solicitor will then contact the seller’s solicitor to request a draft contract and other documentation about the property. The contract sets out the terms of the sale, and includes details about the property, what items are included within the sale, information about the buyer and seller, and the sale price. Your solicitor will review the draft contract to ensure that its terms are fair to you.
Your solicitor will also review other documents relating to the property, some of which will be obtained from the seller (eg Title deeds, Property Information Forms), and others which will be obtained through carrying out searches of various databases (eg a local authority search) and making enquiries. Your solicitor will be looking to see if the seller is entitled to sell the property and whether there are any legal problems with the property that might make it an unsuitable purchase.
Before progressing to the next stage of the conveyancing process – exchange of contracts – your solicitor will, amoung other things, need to be satisfied that
o the terms of the contract are fair to you
o the seller has ‘good title’ to the property (ie that he or she actually owns it)
o you understand the impact of any covenants affecting the property
o relevant searches have been carried out
o it is agreed what fixtures and fittings will remain in the property
o planning permission and building consents have been obtained where needed
o any mortgages against the property will be fully paid at the time of completion
It is vital that your solicitor undertakes a thorough legal review of the property you are intending to purchase. This is because the legal principle underlying conveyancing is ‘caveat emptor’, which means ‘buyer beware’. In other words, it is largely the responsibility of the buyer to find out about problems with the property, rather than the seller to reveal them to you. That said, the seller is required to answer questions truthfully.
If you are financing the purchase of the property with a mortgage, in most cases you will need to have a written mortgage offer in place before the exchange of contracts. The mortgage provider will send the mortgage offer to your solicitor, who will usually be acting for the mortgage provider as well as you in the conveyancing.
The importance of having a survey carried out
We strongly suggest that you obtain a survey on the property by a chartered surveyor before contracts are exchanged. You should not underestimate the risk that there could be hidden physical problems with a property, and without a survey, it is extremely difficult to assess whether this is the case. A buyer of a property buys the property as it is – so if you later uncover a problem the seller never mentioned, in most cases you will not have any legal recourse against the seller.
Usually, if you are obtaining a mortgage on the property, your lender will commission a property valuation. Many clients are happy to rely on this. However, we recommend having your own survey commissioned, as the bank’s or building society's surveyor is answerable to the bank, and is focused on valuing the property (which is all the bank is concerned about) rather than assessing any structural or other problems with the property. In addition, you may not have legal recourse against the bank’s or building society's surveyor in the event that a serious flaw in the property was omitted from the report. In most cases, it is possible to instruct the mortgage provider’s surveyor to carry out a survey on your behalf at the same time he carries out the valuation for the mortgage provider. This can often be a cheaper option than engaging your own surveyor.
Exchange of contracts
You are ready to move to the next stage of the conveyancing process – exchange of contracts - once (a) your solicitor’s enquiries and investigations about the property are complete; (b) the survey has been completed to your satisfaction; and (c) and the mortgage paperwork is finalised. At this stage, your solicitor will send you a report on the property along with the contract and a request for the deposit to be paid. The report may indicate that there are further points that should be raised with the seller’s solicitor. Before you sign the contract, your solicitor will discuss with you its terms to ensure that you understand what you are committing yourself to.
Once you sign the contract and the contracts are exchanged, you will be legally bound to purchase the property. You therefore need to be certain that you wish to purchase the property before signing the contract.
At the exchange of contracts, you will be required to pay the deposit on the property. Typically, this is 10% of the purchase price. However, it is open to the parties to negotiate a different percentage. The deposit is normally held by the seller’s solicitor as stakeholder until the sale has been completed. If you withdraw from the transaction after the exchange of contracts you will usually lose your deposit.
Once contracts have been exchanged, depending on the terms of the contract, you may be liable for the property. In these circumstances, it is therefore important to arrange building insurance before the exchange of contracts. This is sometimes done in conjunction with obtaining the mortgage.
After the exchange of contracts your solicitor will complete the necessary paperwork in preparation for completion. The date for completion of the transaction is agreed by the parties prior to contracts being exchanged. Typically completion takes place between two and four weeks after the exchange of contracts. However, the timing is dependent on the parties and can be far quicker if both parties desire.
On the date of completion, your mortgage lender will release the money (where a mortgage is being used to finance the purchase) and your solicitor will transfer the money and your contribution to the seller’s solicitor. The seller should leave the property by the time specified in the contract, and you will be able to move into your new home.
Your solicitor will arrange for the payment of Stamp Duty (where required) and then register your ownership at the Land Registry.
For more information about buying a property and the services SheridanLaw offers, call us on 020 8541 1181 or email us at firstname.lastname@example.org