The Buying Process

- How much can you afford?
- Find a property
- Decide to buy a particular property
- Make an offer
- What happens when your offer is accepted?
- The Legal steps and some points to consider


HOW MUCH CAN YOU AFFORD?
This is sometimes simplified by Lenders as a multiple of your income(s), but it is now becoming more usual to take a look at what you can easily afford considering your income and outgoings. It’s obvious that somebody with a large car loan can’t afford the same mortgage as a person on the same income without that liability. So look at your net income, and deduct your usual expenses, remembering that some of them will increase if you are buying a larger property (e.g. heating, Council Tax, water, insurance).

While you need to work out how you’re going to live in your new property, you also need to establish how you are going to afford the costs of moving home, which will include:

  • Valuation/Survey fees
  • Stamp Duty  
      • £0 - £125,000                          None
      • £125,001 - £250,000               1%
      • £250,001 - £500,000               3%
      • Over £500,000                        4%
      • There is no VAT on Stamp Duty!
  • Land Registry fees
  • Local Authority search
  • Any fees charged by a Broker or Lender
  • Legal fees
  • VAT
  • Removal expenses
  • Final utility bills when you move

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FIND A PROPERTY
Unless you are in a position where you have a relationship of some kind with the Seller and already know where you are buying, you will need to find a property by:

  • Visiting local estate agents
  • Reading the local newspapers, or
  • Visiting new residential development sites

 

DECIDING ON A PARTICULAR PROPERTY
You will take all sorts of aspects of the property into consideration when buying, but mainly the location, the state of repair and the tenure.

The location is not just the postal address (although some do attract a premium!), but also the property’s distance from facilities such as schools, surgeries, shops etc..
Most buyers who are not buying a property with a current guarantee will choose to instruct a professional Surveyor or Home Inspector to investigate the possible problems with their prospective purchase. The Home Condition Report (at time of publishing) will not be a mandatory part of the Home Information Pack, so the Buyer will still be responsible for this aspect of the purchase in most cases.
The Tenure of a property will be Freehold, Leasehold or Commonhold. When you buy a Freehold, you are actually buying the property and the land on which it is built, and no rent or service charge is payable in almost all cases.

Leasehold is the most common tenure when buying a flat, as it ensures that there are covenants within the Lease that enable each occupier to enforce these covenants against other occupiers. This is particularly important with Repairing Covenants. There will be a Freeholder who will charge a Ground Rent in a majority of buildings, but it is becoming more normal for Limited Companies owned by the Leaseholders to own their own Freehold and manage the building. There will also be a service charge for regular maintenance and repairs, cleaning, and gardening where applicable.

Commonhold is not at all common! However, it is where each flat-owner owns the freehold of their flat, but jointly owns the common parts with the other occupiers. No service charge or ground rent is payable, and the communal expenses are paid by the Commonhold Association made up of all the owners.

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MAKE AN OFFER
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.

If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.

If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.

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WHAT HAPPENS WHEN YOUR OFFER IS ACCEPTED?
So your offer has been accepted. You now have to consider the following questions:

  • Do you have to pay a holding deposit?
  • Getting a mortgage
  • Arranging a survey / inspection
  • Instructing Solicitor / Conveyancer
  • How are you going to own the property?

Holding deposits are sometimes requested by Developers selling new homes, and are paid in order to reserve the property at an agreed price. On rare occasions they can be required by Sellers of other properties where there has been a lot of interest from several prospective purchasers. In all cases, you should ensure that you are really serious about the purchase, and that there are no potential problems with the transaction that could lead to you losing such a deposit.

Nowadays, there is a huge choice of Lenders in the market competing for your business. We would always refer you to an Independent Financial Adviser (IFA) who will make sure that all available avenues are explored. Salisbury Henderson do not offer financial advice.

Most Lenders will then instruct a Valuer to inspect the property on their behalf. At this time you can choose to have a survey of your own carried out, usually by the same Valuer. Once the Lender has carried out its normal credit and other checks on your status, they will make a mortgage offer to you, and send a copy to your Solicitor / Conveyancer. When you receive the report, you may wish to negotiate further if a particular problem arises.

You may have an existing Solicitor or Conveyancer that you wish to instruct, or Salisbury Henderson will be happy to recommend a firm to you. Always ensure that you clearly understand how much you will be paying before going ahead – all Conveyancers and Solicitors are used to providing fixed itemised quotes.

You will usually own the property in your sole name or in joint names with another person, but where buying in more than one name, there may be valid tax reasons for opting for owning the property as Tenants in Common rather than Joint Tenants. Please ask your legal adviser if this would be in your interests, as Inheritance Tax planning should affect more and more of us now.

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THE LEGAL STEPS
First, there are hardly ever two identical legal processes when buying a home. We have tried to outline a “usual” transaction.

Your Solicitor/Conveyancer will first send off for the appropriate searches from Local Authorities, Utilities and Land Registry, and at the same time request a draft contract from the Seller. There is also a standard questionnaire that the Seller will complete that covers the various aspects of owning the property such as boundaries, planning applications, disputes, rights of way, work done on the property (including any guarantees), items to be included in the sale, etc.. Your Solicitor/Conveyancer will discuss these replies with you.

At this stage, you will need to establish the amount of the deposit that you will be required to pay upon exchange of contracts (usually up to 10%), and ensure that this is readily available. If you have a problem with providing a deposit, then ask your Solicitor/Conveyancer if the Seller will accept a lower amount, or arrange a “deposit guarantee” through an insurance company.

Prior to exchange, your insurance will need to be in place for the new property, as you take over the risk immediately on exchange of contracts.

  • Exchange of contracts will take place when:
  • You and your Solicitor/Conveyancer are satisfied with all enquiries and contract terms
  • The Valuation and/or Survey has been received and any action taken where necessary
  • The mortgage offer has been received and any conditions are satisfied
  • The deposit is paid
  • The completion date (your actual moving date) is agreed

You and the Seller will then each sign a contract, and these will be exchanged. As soon as exchange of contracts takes place, you are bound to buy the property and the Seller is bound to sell to you at the contracted price.

You now need to organise your supply of electricity, gas, water etc., and notify people of your new address with effect from Completion Date.

Completion usually happens between two weeks and a month after exchange, but this is not the case in all transactions and is agreed at time of exchange.
On completion:

  • The Lender releases the mortgage funding to your Solicitor/Conveyancer
  • The Deeds are transferred between parties
  • The Seller hands over the keys (usually through their Estate Agents) at an agreed time
  • You move into your new home!
  • Your Solicitor/Conveyancer sends you their completion statement itemising the costs of the transaction

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