Buying or selling a house can be a time-consuming process, fraught with a host of pitfalls and stresses that can leave you frustrated. Fortunately, Simpson Millar's Conveyancing Services help to reduce the factors that cause these annoyances, ensuring a much smoother purchase or sale.
Whether buying or selling a home for the first time or going through the experience again, we think it's helpful to provide some useful information, letting you know what to expect.
How Do I Buy A House?
Buying a house can be both exciting and nerve-wracking in equal measures. As it is such an important step in your life, involving a considerable financial investment, it is important that you instruct a reputable firm of Solicitors to handle the transaction on your behalf.
Buying a home involves the following key steps:
- Choose a conveyancing solicitor - It may seem odd to find a solicitor before you have found a house, but it will help speed up the legal process if you have the right person in place undertaking preparatory work in advance of making an offer. The role of the solicitor is to carry out the conveyancing, which is the legal process of transferring the ownership of a property, This includes organising local searches with the relevant authorities to determine whether there are any adverse issues that may affect the enjoyment of your home; conducting further enquiries to determine boundaries, rights of access and whether any disputes are presently ongoing; corresponding with the seller's solicitor; applying to the Land Registry to record transfer of ownership and any other legal issues that require addressing. The key role of the conveyancer is to protect your interests throughout the entire house buying process. You can read more about conveyancing and what it entails in 'Your Guide to Conveyancing' and 'The Conveyancing Process'.
- Find a house you can afford - This is fairly straightforward. Work out how much you can afford to spend on a property, including deposits and mortgage repayments, and then tread the well-worn path of checking the local papers, estate agents and online resources until you find your ideal home. Be sure to give it careful consideration before reaching a decision and make more than 1 visit at different times of the day and week. Avoid being influenced into making a decision regarding a property you are not sure about.
- Make an offer - Once you have found the home of your dreams, the time has come to make an offer. This means approaching the estate agent, or the individual seller if they are marketing their house privately, and letting them know how much you are prepared to pay.
The following tips will offer some assistance when putting in an offer to an estate agent:
- Monitor the local property market to gain an understanding of the prices similar houses are going for and the speed at which they are selling - this will give you an idea of whether an offer lower than the asking price is feasible, strengthening your position when it comes to negotiating
- Find out from the estate agent what fittings etc. will be included in the sale and get written confirmation
- Make your offer to the estate agent. You are not obliged to pay the amount being asked for by the seller and, regardless of how much you offer, the agent is legally required to pass it on to the vendor. If the seller is interested they will instruct the estate agent to begin negotiations
- In open negotiations start low with your offer and be mindful of your budget so you do not exceed it. Although you are at something of disadvantage as, in the estate agent, you will be dealing with a professional negotiator, 5% to 10% below the asking price is generally recognised as a reasonable starting point
- In the event the seller refuses your first offer, you are entitled to make an increased offer and can continue doing so until it is either accepted, the seller accepts somebody else's offer, or you decide to look elsewhere. As always, ensure you remain within your budget
- If it is sale by tender, where you have viewed the property at an open day (popular in areas of increased demand such as London), you will be required to make a sealed bid. Although sellers tend to accept the highest offer, you should resist bidding more than you have budgeted for as a mortgage lender may refuse to provide the excess, leaving you to cover the shortfall yourself
- If the seller insists on a holding deposit as a condition of accepting the offer - where you must pay a small deposit to demonstrate you are serious about buying - ensure it is not “non-refundable”, which would leave the seller free to sell to somebody else and you in the position of having to sue them to get it back. You should give the holding deposit to the seller's solicitor for safekeeping and never to seller themselves
- Once the offer has been accepted, ask the seller to take the house off the market. This will help to prevent you getting gazumped - where the seller accepts a higher offer from somebody else. If they refuse to, find out why and remain wary until contracts have been exchanged and they can no longer renege without incurring a financial penalty
- Use a conveyancing solicitor that offers a 'no move no fee' policy - such as Simpson Millar - so if you do get gazumped, or your offer falls through for any other reason, you will not be charged for the cost of legal work already undertaken.
- Arrange a mortgage - Whether you have had an offer accepted or not, the chances are you will need to acquire funding (or additional funding if you are upgrading from an existing home) in order to buy your prospective home. The vast majority of house buyers will approach a mortgage lender to secure these finances, who, after performing credit checks, its own valuation of the property and any other relevant enquiries, will make a decision on whether to lend you the money or not.
- Commission a property survey - Commissioning a property survey by a qualified surveyor is not essential, but doing so could save you money in the long run. A full survey will identify any issues that might cause problems in future, such as structural damage that a simple mortgage lender's valuation would fail to pick up on, and any other deep seated problems that, while invisible to the naked eye, could require major repairs somewhere along the line. In such instances, the survey could be used to renegotiate the price in your favour.
There are 3 types of survey:
- Condition Report - Issued by the Royal Institution of Chartered Surveyors (RICS), a Condition Report provides basic information on a property's condition, highlighting any aspects that might require immediate attention
- HomeBuyer Report - More detailed than the Condition Report, the HomeBuyer Report presents a non-intrusive survey of the property which points out major issues, such as subsidence, which might affect your decision to buy. The inclusion within the report of a property valuation and reinstatement cost (the amount it is insured for in the event of loss) is optional
- Building Survey - A thorough examination of a property, the Building Survey is both the most detailed and most expensive of the available reports. It will not only give you an in depth analysis of any issues associated with the building, but also advice on getting them repaired, estimates of cost and the prognosis if repairs are not carried out.
- Exchange contracts - Once your solicitor has reported back with all the relevant information, you have read the results of any survey you have commissioned and both you and the seller are happy to proceed - this is your last chance to change your mind - the time arrives to exchange contracts. Your conveyancing solicitor and that of the seller will usually undertake this process by phone, in order to ensure the contracts are identical and the exchange takes place at a fixed time. Once this is completed, you are legally bound to buy the house and the vendor is legally bound to sell it to you for the agreed price. Failure on either side to adhere to the terms of the contract - such as pulling out - will result in a financial penalty for the party responsible.
- Completion day - This is the day that you can move into your new home. When the seller's solicitors receive the completion funds, they authorise the agents to release the keys for collection by the new buyer.
Your solicitor will then register the new ownership at the Land Registry and forward evidence to you once confirmation of the registration has been received. They will also arrange the payment of Stamp Duty on your behalf, notify the owner of the freehold if it is a leasehold property you have purchased, and send a copy of the title document to your lender, who will retain it until the mortgage has been repaid.
Is It Different If I Am A First Time Buyer?
The key difference between buying a house as a first time buyer and buying a house when you are already on the housing ladder is that you do not have a property to sell. This can be an advantage to you as you can move quickly and do not have a chain of other buyers behind you to slow the transaction down. This can aid your negotiating position, particularly when the sellers are keen to move quickly, perhaps if they have made an offer on another property and don't want it to fall through.
First time buyers don't always have access to large deposits but there are schemes available to help get you on the ladder, such as shared ownership and government Help-to-Buy schemes.
Family member such as parents and grandparents are also becoming a source for help with buying a property.
How Do I Buy A House At Auction?
The main advantage to buying a house at auction is the opportunity to pick up a property below the market value. That said, if you make the successful bid you are then legally bound to meet the completion deadline stipulated in the contract, whether you have obtained a mortgage or not and regardless of you discovering something amiss with the property later on.
What to do first
To buy a house at auction you should firstly do your research. This means getting your hands on the auctioneer's brochure, enabling you to look at the properties that are available prior to the auction. If a particular house catches your eye, you should then request a copy of the auctioneer's legal pack, which will contain information pertaining to it, including the title documents and copies of the searches carried out on the property and land. Viewing the legal pack is important, as it will contain the materials you and your mortgage lender will need to make an informed decision on purchasing the property. You should instruct your solicitor to review the pack at this stage, prior to making a bid, as they may identify legal problems affecting the property.
Arrange a viewing
It pays not to go into the auction blind, so arranging a viewing of the property beforehand is essential, as is organising a survey to ensure you are fully aware of any structural problems that may exist, the cost to repair of which would come out of your pocket if you discovered them following a successful bid. It might also be advantageous to commission a valuation, allowing you to gauge the property's actual worth before deciding how much to budget for.
Have your financials ready
It is important to have your financing arranged prior to the auction, as once your bid is accepted the clock is ticking down to completion. Failure to have the funds in place when the all-important day arrives will result in the purchase falling through, you losing your 10% deposit and the possibility that the seller will sue you for any financial losses they have suffered as a result of the sale not going ahead.
On the day of the auction you should have your 10% deposit cleared and ready, so you can pay it to the auctioneer upon acceptance of your bid. You should also register with the auctioneer, where this is necessary, so that your bid is valid and check the auction brochure to see if the information regarding the property has altered in any way.
Stick to your Budget!
Finally, when it comes to the actual bidding process, have a clearly defined budget regarding how much you are prepared to pay. Stick within this budget and resist the temptation to exceed it.
How Do I Sell My Home?
Selling a house, like buying one, has, in the vast majority of cases, a standard procedure to follow, ensuring the process runs smoothly and you sell your house in quicker time.
- Choose a conveyancing solicitor - A solicitor is necessary for undertaking the legal work that selling a house requires. For instance, they will draft the contract of sale, detailing exactly what the buyer will get as part of the transaction, which they will arrange to exchange with the buyer's conveyancer when the time comes. It pays to organise and have ready a conveyancing solicitor from the start so they can carry out the ‘know your client' checks that are necessary to open a file, as well as prepare the supporting information for the contract pack. This will help keep the process of selling your house moving, ensuring there is no delay between you accepting an offer and the commencement of legal work.
- Set a price - Research the local market to see how similar properties are priced, before getting a valuation from a variety of estate agents. You are not tied to the price the estate agent comes up with, even if you choose to use their services, and are free to take what you have learnt from all resources to settle on a figure of your own choosing. Remember to bear in mind that the price you ask for will not necessarily be the price it sells for. Buyers will often try and negotiate a discount, usually around the 5% to 10% mark, which means it could pay to add this percentage onto your final asking price.
- Secure the services of an estate agent - Not everybody uses an estate agent, choosing to market the property themselves, but there are certain advantages to using an agent, such as:
- They have the means to market your house to a wider customer base
- They are professional negotiators, which will come in handy when a potential buyer decides to haggle.
- Accept an offer - The estate agent is obliged by law to pass on every offer made for your property and it is up to you which ones you reject and which you choose to accept. Once you receive an offer that you are happy to take further, contact your solicitor to take care of the necessary legal paperwork. Accepting an offer is not binding and you are free to change your mind up until contracts are exchanged.
- Organise the paperwork - Once an offer has been accepted, your solicitor will need to obtain, from either yourself or the mortgage lender that is holding them, the title deeds to the property. If, for any reason, the title deeds are unavailable, the conveyancer will acquire a copy from the Land Registry. They will also seek a statement which details any outstanding amount left on the mortgage, where applicable.
- Prepare draft contract and answer enquiries - A draft contract will be prepared by your conveyancing solicitor and, together with supporting documentation, sent across to the buyer's solicitor, who will check it and reply with any pre-contract enquiries they or the buyer might have. Your solicitor will field and answer these enquiries on your behalf, contacting you if any of the buyer's queries require your consultation.
- Carry out any necessary renegotiation of contract or price - The buyer may choose to have a survey carried out on your property, which means you will have to allow a surveyor to access the house. Depending upon their findings, the buyer may request a discount, particularly if the survey reveals issues that will require costly repairs. Your conveyancing solicitor will advise on and negotiate, on your behalf, the amount - if any - you choose to lower the agreed sale price by.
- Exchange contracts - Your solicitor will prepare and read the contract down the phone to the buyer's solicitor, checking it is identical to the purchase contract; these will then be exchanged by post. You will face a financial penalty if you break the contract between exchange and completion. Once the contracts have been exchanged, you will receive the buyer's deposit. It is then time to prepare for your move.
- Completion day - On the day of completion, once your solicitor receives the monies from the sale, you will legally transfer the ownership of the property to the buyer. Your solicitor will also redeem the existing mortgage on the account, pay the estate agents and send the net sale proceeds to you.
Following completion, the buyer's solicitor will register the new ownership with the Land Registry.
These days its quite common to re-mortgage a property, either to release some of the capital tied up within a property, for example for home improvements, or perhaps to reduce the amount paid due to changes in interest rates, perhaps as a result of coming out of a fixed rate perod on an existing mortgage.
The legal process is relatively straightforward as the title of the property will already be in your name.
Often, the lender you have selected will offer to pay for the associated legal fees and you may feel that this represents good value and a cost saving.
However bear in mind that the lender is only looking after their own interests in doing this so it is often a good idea to have your own legal conveyancer review the documentation to ensure your interests are best served.
Where the remortgage does not include an associated offer in respect of the legal fees, you can instruct your own solicitor and they will act on your behalf and your mortgage lender.
The cost for doing this is significantly lower than if a house was being bought or sold so it is worth obtaining a quote for peace of mind.
If you'd like a quote for re-mortgaging your property then please give us a call on 0800 206 1521
A fixed-rate mortgage offers a fixed interest rate and monthly repayments that remain at the same level for a set period of time. This is usually for 2, 3, 5 or 10 years. Once the fixed-rate mortgage has come to an end, your lender will move you onto its standard variable rate (SVR), which, generally being higher than the previous rate, means a sudden increase in your repayments.
By remortgaging you can save money on the amount you pay each month, securing a better deal from another lender. To achieve this, it pays to start shopping around 14 or so weeks before your fixed-rate is due to end. This will give you plenty of time to find a cheaper rate and ensure a smooth transition before repayments on your current lender's standard variable rate begin.
Choosing the right deal for you is important when it comes to remortgaging your home and with options available such as applying for another fixed rate or taking on a tracker mortgage, which commonly tracks the Bank of England's base rate, picking the one suited to your budget and your requirements can be both daunting and confusing. You may find that a mortgage broker can help in this situation, but it is best to make sure that they are both independent (not tied to a single or a panel of lenders) and able to offer comparisons on direct deals, as opposed to just ones that can only be applied for through the broker. Establishing these facts beforehand will mean you get a mortgage broker who can offer you the best advice.
Remortgaging is not for everyone and it is always important to check whether it is the right thing for you and that it will actually save you money. Circumstances where it may not pay to remortgage include:
- A high early repayment charge, the prohibitive cost of which 'handcuffs' you to your current deal
- The outstanding balance on your mortgage is too low to make remortgaging viable, once the relevant fees have been taken into account
- The value of your home has decreased since taking out your mortgage, leaving you unable to secure a cheaper deal due to a higher loan-to-value ratio (the proportion of a property's value you need to borrow)
Is Conveyancing Different For Freehold And Leasehold Purchases?
The conveyancing process for a Leasehold purchase is different to that of a Freehold one as it involves a Landlord, who will own the property's Freehold, and a Lease which sets out your rights and obligations in relation to it.
The property is leased by the freeholder, granting you exclusive ownership for a term of years - anything between 99 and 999 years, depending upon the terms of the lease. Once the lease has expired, the landlord has the right to re-enter the property.
With regards to the Legal Title, in the case of a freehold property this is usually set out in the Land Registry's register of title. You may need to refer to historical title deeds for further supporting information regarding additional rights and obligations affecting the property.
With a leasehold title, the lease will set out the rights and obligations for ownership of the property, which can often stretch to 30 pages of conditions and provisos. Your conveyancing solicitor will consider this carefully and advise you on the terms of the lease, so you fully understand what is expected of you before you buy.
If you have a short lease it is worth considering an extension on it and a mortgage lender might insist on this before completion of the purchase. Simpson Millar is experienced in arranging these types of agreements. For more information, go to our section on Leasehold Agreements or get in touch via the contact form or by phone.
Why not get a conveyancing quote by calling: 0800 206 1521
If you are buying a leasehold property, it is important that your conveyancing solicitor reads the lease so they can explain clearly to you the complexities of the document and also liaise with your mortgage lender (if applicable), ensuring the terms of the lease accord with the conditions of the mortgage.
The specifics your solicitor should be inspecting the lease for include:
- Ownership of the freehold - whether an individual or company owns the land and building, and who they are
- How long is left on the lease - anything less than 70 years may affect the decision of a mortgage lender
- What clauses exist within the lease - the conditions that you are legally required to abide by, such as maintaining the inside of the property, ensuring it remains in good repair
- Service charges - the fees the freeholder/landlord will charge you on a monthly basis for services provided to the building or surrounding land - whether personally or through a management company - and if payment has been kept up to date by the party selling
- Conditions of sale - is freeholder consent needed for you to buy the property from the current owner, requiring a possible licence and further fees
With the extra enquiries and factors that need to be established increasing the timeframe of the leasehold conveyancing process, buying a freehold property is relatively straightforward by comparison.
Obtaining A Leasehold Extension
Extending the lease on your property can be of benefit if you wish to sell your home further down the line. The reason for this is that mortgage lenders are generally reluctant to provide loans on properties with short leases, which has the knock on effect of buyers tending not to want anything with less than a 70 year lease because of the difficulties they foresee in obtaining a mortgage, as well as the capacity to sell it in the future.
As the time left on a lease decreases, so does its value, making it more costly to extend. This would make it in your interest to act sooner as opposed to later.
Obtaining a leasehold extension, without proper legal advice, can be a drawn out and complicated procedure, which is why it is important to have an experienced legal professional on hand to ensure the process runs smoothly and to your satisfaction.
Factors such as property value, years remaining on the lease, ground rent and improvements you have made to the property will all play a part in how much it will cost to extend your lease and your solicitor will be able to explain these to you when the time comes. Legal costs and Land Registry fees will also need to be taken into account.
You can get a guiding estimate as to how much your freeholder is likely to charge for a leasehold extension from the Leasehold Advisory Service's Lease Extension Calculator.
With our considerable experience in leasehold law, Simpson Millar has the expertise to ensure extending the lease on your property is a pain-free and successful undertaking.
Equity Release Schemes
These types of schemes differ from a straightforward re-mortgages where capital is taken out of a property and repaid through either a longer term or an increase in payments, or both.
Equity refers to how much of your home you actually own, represented by its present market value minus the total balance of the outstanding mortgage repayments.Equity release schemes are available to any property owner above the age of 55 and is a way of accessing the value of your property (as you would were you to sell it) while continuing to live there. There are 2 options available for equity release; lifetime mortgage and home reversion.
- Lifetime mortgage - The most popular choice for those taking out equity release, the lifetime mortgage allows you to take out a mortgage on your main residence (usually up to 60% of the value), while retaining ownership. This releases an amount of equity which can either be taken as one lump sum or, dependent upon the conditions of the mortgage, in smaller instalments. The advantage of the latter is that interest will only be payable on the amount that is withdrawn, not the full sum. Although it is possible with some lifetime mortgages for you to pay off some or all of the interest along with the capital, it is generally the case that the loan and accumulated interest are not repaid until you either die or are placed into long-term care. This is done through the sale of the property.
- Home reversion - This option involves selling either a share of, or your entire home to a provider for less than its present market value. In return you will receive a lump sum or a regular payment, while continuing to live there rent free. Unlike a lifetime mortgage, which is generally available from the age of 55, most home reversions require you to be aged 65 or over (although some may offer a threshold of 60). Once again, repayment is made when you die or move into long-term care and your house is sold. The return the home reversion provider is entitled to corresponds to the percentage you sold them.
Undertaking equity release is a way of gaining extra income during retirement and can be particularly attractive if you do not intend to leave the full value of your property to any beneficiaries of your estate.
It is worth noting that neither scheme is without its downsides, which include:
- Interest rates on a lifetime mortgage will be far higher than those of an ordinary mortgage, meaning that if you are not making repayments the debt will build up quicker
- The price you get for your property in a home reversion scheme will be nowhere near its true market value
- The cost of arrangement fees can stretch into the low thousands
- The inevitable early repayment charges, should you change your mind (not applicable if you die or enter long-term care).
It is very important to obtain good legal advice for these types of schemes in order to ensure that they are appropriate for your circumstances and that best advice has been followed in selecting the company providing the scheme.
Consideration should also be given to ensuring a valid will is in place with these schemes to ensure that loved ones are also taken into account and that appropriate estate planning is in place.
Why Do New Builds Have Different Criteria When Buying?
The major difference between the purchase of a new build and that of an existing property is it is often the case that the new build has yet to be built. Your buying decision will be based upon the viewing of a show home and once you have made a commitment to a new build and paid a reservation deposit, you will be presented with a relatively short timeframe in which to exchange contracts - usually 28 days.
This means that your solicitor has to complete the necessary conveyancing within those 4 short weeks, otherwise you will lose your reservation deposit. To ensure this deadline is met, you should:
- Get a mortgage agreed in principle prior to reserving so that you are not delayed once the window for exchange is open
- Choose a conveyancing solicitor to handle the legal work beforehand, allowing the process to start as soon as you have reserved a property
- Ensure your chosen solicitor has both the experience and capacity to undertake the conveyancing to such a tight deadline. Previous work in conveyancing for new builds is essential. The expert team of conveyancers at Simpson Millar satisfies all these requirements.
After contracts have been successfully exchanged, it is often then a waiting game before completion can take place. If you are buying a property that has yet to be built, it will depend upon the rate of construction, with possible delays such as weather and supplier problems to be taken into account.
Dependent upon how long this takes, there is always the chance that your mortgage offer will expire, with no guarantee that the lender will renew it. This would mean you having to go through the process of applying for a mortgage again, this time from a different lender. Something you should do as soon as possible, because when the builder serves notice that the property is finished, you will have a period of around 10 working days to complete, with failure to do so within the allotted time resulting in daily interest charges, followed by eventual termination of the contract, loss of your deposit and the additional expense of the developer's legal costs.
How Do I Buy-To-Let?
If you want to buy a property in order to rent it out to a tenant, you should be prepared to look at it as a medium to long-term investment and unless you have enough money set aside to buy a house outright, you are going to have to apply for a buy-to-let mortgage.
Obtaining a buy-to-let mortgage is different to qualifying for a residential one, as instead of being assessed on how much you earn, the lender will make the decision on how much to loan based upon the anticipated income from rent. This will need to be at least 125% of the monthly repayments.
A larger deposit, of typically 25% or more, is also required to qualify for a buy-to-let mortgage, along with an Assured Shorthold Tenancy (AST) agreement, which the mortgage lender may ask to see before agreeing to the loan.
The buy-to-let market has recently changed, with new rules being introduced that have made it less desirable for some potential investors. These are:
- Stamp duty increase - As of April 2016, anybody buying a property priced above £40,000, additional to their own home, has to pay a 3% surcharge on the stamp duty.
- Mortgage interest tax relief - As of April 2017, the mortgage interest payments a landlord can currently deduct from their income for the purposes of tax will be reduced, continuing to decrease until 2020, when the relief will have fallen to 20%.
- Wear and tear allowance - This allowed a landlord to deduct 10% of the annual rent from their profits when filling out their tax return, and was intended to cover 'wear and tear' in furnished lettings, regardless of whether any money had been spent on such a purpose. This has now been stopped and landlords are only allowed to claim on like-for-like replacements.
- Right to Rent checks - As of February 2016, there are fines of up to £3,000 for landlords who let to adults illegally living in the UK. The Right to Rent scheme is designed to ensure landlords (or the letting agency acting on their behalf) check the IDs of all prospective tenants. Failure to do so, and being found to have let your property to somebody living here illegally, can result in a £1,000 - £3,000 'civil penalty' being issued.
With the possible introduction of further changes to the buy-to-let market, it is important you consider all the ramifications, both legal and financial, before committing to such a key investment.
Simpson Millar can help if you are buying or selling a house. To speak to one of our professional team of conveyancing solicitors, contact us today.
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Our expert team of Conveyancers and Solicitors are on hand to offer you the quality assured Conveyancing service that you expect. We can advise on any aspect of the process and are happy to discuss how we can help make the process as swift and pain free as possible – we want to get you into your new home almost as much as you do!
Call us on 0800 206 1521 to obtain your quote or alternatively fill out our enquiry form and one of our friendly team will be able to start you on the right path!