Buying property FAQs
I've found my dream home and the seller accepted my offer. What do I do next?
After you've found a property you want to buy and the seller has provisionally accepted your offer, you should contact a solicitor or licensed conveyancer as a matter of priority to begin the legal process of buying your house.
How long will the legal process take?
If the seller has already vacated the property and you don't require a mortgage, exchange of contracts and completion may only take a few days. If, however, you need a mortgage and the seller is still in the property, exchange of contracts normally takes 4-6 weeks, then completion takes another 2-4 weeks -- so you're looking at around 6-10 weeks in total to complete the legal process.
Does the seller have to give me a Home Information Pack?
No. On 21 May 2010, the new Conservative-Liberal coalition scrapped Home Information Packs. Buying a house will become more expensive as a result of scrapping the packs. Previously sellers paid £200-400 to gather the information contained in them (e.g., searches of local land charges, water and drainage, local authority enquiries, etc). With the exception of Energy Performance Certificates (which are required by EU law and rate a home's energy efficiency) buyers will now have to bear this cost.
How big a deposit will I need?
Many sellers ask for a deposit equal to 10% of the purchase price, but your solicitor may be able to persuade your vendor to accept less. For most buyers, the amount of the deposit they pay will hinge on the size of the mortgage they need to fund the purchase. In recent times, mortgages over 90% of the purchase price have become less common. Added to this, there are fewer properties on the market now. Therefore, many sellers can afford to be picky and demand no less than a 10% deposit.
If you're worried about funding a 10% deposit, you should remember that if you're selling a property as well as buying one, your solicitor can apply the money received for the deposit on the property you're selling to fund the deposit for the property you're buying -- which could make all the difference!
Do I need a survey?
If you need a mortgage, your lender will ask you to pay for a mortgage valuation report (MVR) to confirm that the property is worth the amount that you have asked to borrow. You cannot rely on this report, however, because it involves only a limited inspection of the property and it will only identify obvious defects that materially affect the value of the property. The cost of a basic mortgage valuation costs about £100-300, depending on the size and cost of the property.
For added protection, most buyers pay for a more comprehensive survey to be done -- either a homebuyer's report or a full structural survey. A homebuyer's report costs about £300 to £600, depending on the price of the house. It's less comprehensive than a full structural survey, but usually adequate for a conventional property (i.e., constructed using standard materials and with few alterations or extensions) under 75 years old. For properties older than this, a full structural survey is widely recommended. It is a lot more detailed, however, and can cost twice as much as the homebuyer's report.
Most buyers ask their mortgage lender to arrange for the surveyor who does the MVR to do the homebuyer's report or full structural survey at the same time. This is generally the easiest and cheapest way to commission a report.
What searches are carried out and why?
Here's a rundown of the six main searches solicitors recommend (NB. other searches may be necessary, depending on the property and area you are buying in):
- Local authority search : this will show the planning history for the property (including any planning breaches), proposals for new roads or traffic schemes, tree preservation orders, conservation areas, etc.
- Drainage search : among other things, this will show whether or not the surface and/or foul water drains run into a public or private sewer.
- Land Registry search : this is carried out just before completion to find out if there are new mortgages registered against the property that were not previously disclosed.
- Land charges search : this search shows charges (e.g., mortgages, covenants, etc) on unregistered land and provides data on bankruptcy proceedings.
- Bankruptcy search : if you need a mortgage, the lender will ask your solicitor to carry out a search to show you're not bankrupt.
- Environmental search : this tells you if there are any landfill or waste disposal sites in the area, or risks from contaminated land, toxic emissions, flooding, or subsidence, etc.
What are our options if we want to buy a place together?
If you're a couple, particularly if you're married, you may want to consider buying a place as joint tenants . In this arrangement, both of you will own the whole property. If one of you dies the property will automatically pass to the other (which, in legal jargon, is known as the right of survivorship ).
Alternatively, you can hold property as tenants in common , which means that each of you owns a specified proportion of the property. For example, you might stipulate that you own the property equally; or that one of you owns a 70% interest and the other 30%; or specify that the proportionate interests in the property are divided in some other way. If one of you dies, the deceased's proportionate interest in the property (be it 50%, 30%, whatever...) will not pass automatically to the survivor. Instead, the deceased's will determines who takes the interest... provided, of course, they write a will. If they don't write a will, the interest is distributed in accordance with the laws of intestacy.
If you intend to contribute different amounts to purchase a property and become tenants in common you should consider asking a solicitor to draw up a trust deed. This document sets out your respective shares in the property and can be used in the event of a dispute or death of a party.
When do I need to arrange building insurance?
You should arrange for building insurance to take effect on exchange of contracts, since you bear the risk of loss if the property is damaged after this date -- even if the seller remains in the property. (If you need a mortgage, your lender may take care of this for you -- but always check well in advance of the date contracts are exchanged.) The insurance policy should cover the estimated cost of re-building the property if it is completely destroyed (e.g., in a fire), not the current market value.
What is an indemnity policy and do I need one?
An indemnity policy is a type of insurance taken out to deal with a defect in the title of the property being sold, e.g., a restrictive covenant or a missing document of title. As a way to complete the transaction, but also ensure you're protected, your solicitor may suggest the seller take out an indemnity policy, which will pay out if the defect becomes a problem. All such policies require that their existence not be disclosed to third parties.
What happens at exchange of contracts?
At this stage, the purchase and sale become legally binding. Once you have authorised your solicitor to exchange contracts, they will conduct a short telephone conversation with the other party's solicitor, agree a completion date and pay your deposit. If you withdraw from the purchase after exchange, you will lose your deposit and probably incur other financial penalties. Note also that the risk of loss in the property passes to you after exchange -- thus, you should arrange building insurance well beforehand to cover against this risk.
Can I access the property before completion?
Sometimes if the seller has already vacated the property you may be allowed access before completion. Usually this is permitted where work or repairs need to be carried out.
What happens at completion?
Completion signals the end of the transaction and the point at which you finally take possession of the property. Your solicitor will pay off your mortgage (if you are also selling a property), pay any stamp duty due and register the property in your name.
What happens to the keys?
These are usually left with the estate agent and the buyer collects them once the money has been paid on the day of completion. If there is no estate agent, the seller will hand them directly to the buyer.
Is there anything I can do to decrease my liability for stamp duty?
Possibly. If the purchase price is just above a stamp duty threshold (i.e., £125,000, £250,000, £500,000, or £1million from 6 April 2011), and includes fixtures and fittings such as carpets, curtains, a cooker, a fridge, or a freezer, you may legitimately apportion part of the purchase price towards these items. If this takes the purchase price for the building and land below the stamp duty threshold you'll decrease (or eliminate) your liability for stamp duty. Be warned, however: HM Revenue & Customs regularly checks these transactions and will challenge any that arouse suspicion.
Can I avoid paying stamp duty altogether?
If the purchase price is below the stamp duty threshold amount (as of May 2010, this was £250,000 for first time buyers and £125,000 for everyone else), then you can avoid paying stamp duty. And, as discussed above, you could agree a price for the building and land that falls just below the threshold , and pay an additional sum for fixtures and fittings.