They say buying a house is stressful. However, knowing the key steps involved helps you understand where you are at in the legal process and what is still left to be completed before you get the keys for your new home. Understanding these key steps will help to take some of the pressure off.
The entire process begins with your financing and the importance of ensuring your mortgage is in place and available before you embark on your house-hunting adventure.
This is a two-part process. Before you buy a house, it is essential to have saved up enough money to afford the deposit (which is often 10% but could be as little as 5% depending on your mortgage product), legal fees and other costs, such as searches, stamp duty land tax (SDLT) and Land Registry fees. You can obtain a quote from your chosen solicitor at this point to get an understanding of their likely fees and associated costs of the purchase to help with budgeting your finances at this stage.
Equally as important is having your mortgage agreed in principle. That means you must speak to your lender or mortgage adviser, give them details of your circumstances and ask them to confirm that they will be able to provide you with a mortgage. This, of course, is subject to the preliminary information you provide to the lender being supported by documentary evidence.
Depending on the condition of the property you propose to buy, it is important to budget for any immediate repairs you might need to carry out when you’ve purchased the property.
This is possibly the most important part of the entire process. Your offer is critical to your success as the price point of your offer must be sufficiently attractive to the seller so that they feel inclined to accept it.
Importantly, once you discover that your offer has been accepted, you should request that the estate agent removes the property from the market. If the property remains exposed to the market, there is the possibility of you being gazumped. This is where someone else offers a purchase price greater than you and the seller withdraws their acceptance of your offer to progress with the other higher offer.
You should appoint a conveyancing solicitor once you have confirmation from the estate agent that your offer has been accepted. They will advise you of the conveyancing process, taking you through to completion. If you have not obtained a quote already, they will also confirm the likely costs involved in the house purchase process to help you budget to meet these costs.
Your solicitor will also ask you to provide proof of identity and source of funds. Solicitors are under a regulatory obligation to ask you for this information. Also, if a relative is helping you with your deposit, your solicitor will ask them to provide proof of identity and source of funds. Again, this is a regulatory obligation solicitors must fulfil and is often a requirement of lenders.
Your solicitor will obtain searches to ensure there is nothing adversely affecting the property. The searches include a local authority search to discover if there are any adverse planning or other notices affecting the property. A search should also be conducted with the water authority to determine that the water and drainage servicing the property are public. An environmental search will also be conducted to find out if there is any flood risk to the property or if there is any potentially contaminated land in the vicinity of the property.
The searches help to identify any potential issues that could affect the property's value or marketability. They can also help to uncover hidden costs.
As the transaction begins to progress, your solicitor will review the contract for your purchase. This will include checking the title to the property, ensuring the seller owns it and has the right to sell it to you. Your solicitor will also check what rights and obligations affect the property and how this may impact your intended use. In addition, your solicitor will check to ensure all planning permissions and building regulations are in order.
It is likely your solicitor will raise additional enquiries with the seller to ensure that any gaps in the information provided by the seller are plugged. If you have any particular questions you would like your solicitor to ask, you should bring those to their attention.
Before finalising the contract, you may wish to have a survey conducted over the property. This will help establish the value of the property and indicate whether there are significant repairs required or outstanding structural issues.
There are three main options available:
Valuation report: Also known as an RICS Level 1 Survey. This is the most basic of surveys and most suitable for properties in good condition or recently built properties. It will highlight any significant defects and identify urgent repairs.
Home buyer report: Also known as an RICS Level 2 Survey. This is a visual inspection that identifies potential issues that could affect your decision to purchase the property. It includes an inspection of the property’s services, structural problems, damp-proofing, insulation and general condition of the property. A homebuyer report is most suitable for conventional properties that are in reasonable condition.
Building Survey: Also known as an RICS Level 3 Survey. This is a detailed inspection of the condition of the property. This type of survey will:
You should consider this type of survey if you are buying a large, older or run-down property or if you are planning substantial works to the property post-purchase. The more detailed the survey, the more expensive it will be. There are also other, more extensive, surveys available but sellers will resist these surveys because they can be disruptive.
Once you exchange contracts with the seller, you are obligated to buy the property. You will have an insurable interest in the property from exchange of contracts and therefore, you are also responsible for arranging buildings insurance on the property from this date also. This is to protect against damage or destruction.
Your solicitor will prepare a report on title for you. This goes through the information the solicitor has received to date and goes through the terms of the contract with you. The report will enclose the documentation you need to sign in order to proceed with the purchase.
It is important that you read through the report carefully and raise any final questions or concerns with your solicitor before you sign the paperwork. Once signed and exchanged, the contract will be binding on you and the seller, and you will be obliged to proceed with the purchase.
When the contracts have been signed and are ready for exchange, you will pay the deposit (normally 10% of the purchase price) and agree a completion date.
Your solicitor will arrange to draw down your mortgage in readiness for completion. In addition, your solicitor will provide you with a completion statement setting out the balance required for completion – this will include any further money you are putting into the house along with the associated costs of purchase, including the SDLT payable. You must pay this before your solicitor can complete the purchase with the seller’s solicitor.
On completion, your solicitor will pay the balance of the price to the seller’s solicitor. Once the seller’s solicitor has received the funds, they will then call the estate agents and authorise the release of the keys to you.
Once completion has taken place, your solicitor will pay the SDLT on the purchase and then register your ownership with the Land Registry. In addition, they will inform various third parties about the change of ownership. Examples of third parties who are likely to be notified are the freeholder or management company.
If all the steps of your legal “to do” list are complete, you will now be the owner of your new house. Ownership will be registered in the Land Registry, you will be in possession of the property and the costs will have been paid. It’s now time to enjoy peaceful possession of the property until it comes time to sell!
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The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
