A Brief Guide to the Buying Process
Buying a property is a big step to undertake and is likely to be one of the most significant decisions you will make. It is an exciting time but can also be daunting and stressful – there are many things to organise and think about. To help prepare yourself and give you some knowledge of the buying process, we have set out below a summary of what happens during a typical purchase transaction. To assist, we have split the purchase transaction into 3 main stages:
- Commencement to exchange of contracts
- Exchange of contracts to completion
- After completion
Commencement to exchange of contracts
This is an investigative process where matters affecting the property are considered to ensure they are acceptable to you as the buyer and that funding will be available when required. It will involve:
- Purchase Details
Obtaining full details of the transaction including the address of the property, purchase price and other special terms you have agreed.
- Title documentation
The legal title to the property needs to be investigated to confirm that the seller has the ability to sell the property, and also to confirm whether there are any matters (such as rights of way, restrictions on the use and enjoyment of the property, etc) which may affect your decision to proceed.
If you are purchasing the property with the assistance of a mortgage, it is important to ensure that mortgage arrangements are in place at an early stage. Your lender will send us a copy of your mortgage offer and associated mortgage paperwork.
- Joint ownership of the property
If you are purchasing a property jointly with another person or persons, you will need to decide how you wish to hold the property (i.e. as joint tenants or as tenants in common).
There are a number of searches which are usually carried out when purchasing a property. These will show whether there are any matters affecting the property which may affect your decision to proceed. These will usually include a Local Authority Search, Drainage and Water Search and Environmental Search. Other searches may be carried out depending on the type of the property, its location and any other relevant factors.
- Enquiries of the seller
It is normal for the seller to be asked to provide replies to various standard enquiries. These will ask the seller to give information about the property which can include such matters as responsibility for boundaries; whether any extensions have been made to the property; or if there have been any disputes with neighbours. Additionally, the seller is asked to provide details of the fittings and contents which are to be included in, or excluded from, the sale. Additional enquiries may be raised as a result of the information and documentation received.
If you are purchasing a property and require a mortgage, your lender will make arrangements to carry out a valuation report in respect of the property. This is to enable the lender to consider whether the property offers sufficient security for the mortgage advance.It is possible for you to instruct your lender/financial adviser to arrange a Homebuyer’s Report prepared by a surveyor on your behalf (who should be approved by the Royal Institution of Chartered Surveyors). A Homebuyer’s Report is a more detailed survey than the basic valuation and is for your own benefit rather than the mortgage lender. It will allow you to evaluate whether you wish to continue with the purchase at the present price and enable you to consider any urgent problems with the property. If you prefer, it is possible for you to make arrangements for a full structural survey to be carried out. This will provide more detailed information as to the condition of the property and will again allow you to evaluate whether you wish to continue with the purchase at the present price and enable you to consider any urgent problems with the property.
You should make arrangements for putting in place household building insurance regarding the property prior to exchange of contracts (to be effective from exchange of contracts and to cover the required reinstatement value which will be referred to in the valuation report for the property). This is because it is usual for the contract to provide that the buyer is responsible for insuring the property from exchange.
- Stamp Duty Land Tax
It is likely that your proposed purchase of the property will give rise to a liability to pay Stamp Duty Land Tax (“SDLT”) or at least a liability to file an SDLT Return with H M Revenue & Customs. You should ensure that you make arrangements for appropriate funds to be available to meet this liability, together with all other costs associated with the matter.
- Contract & Deposit
The seller’s solicitors will prepare a draft contract relating to the sale and purchase of the property. This will set out the terms on which the property is being sold. Amendments may be required but when the terms of the contact are agreed and satisfactory search results and replies to enquiries are obtained, the contract will be signed and matters can proceed to exchange. In order to be able to exchange, you will need to pay the required deposit (usually 10% of the purchase price).
- Estate Agents
It is normal during the transaction for any estate agent involved to contact us and request information, particularly regarding progress, in relation to the matter.
Exchange of Contracts to Completion
The exchange of contracts to completion stage will involve:
Exchange of contracts is when the agreement to purchase the property becomes legally binding and all parties are committed to the transaction. Until this time, either party may withdraw. The deposit will be paid to the seller’s solicitors and it shows your intention to proceed. The deposit will be forfeited if you later withdraw. There are also other serious implications of withdrawing from the transaction after exchange of contacts.
If you are involved in a chain of transactions (for example, where you are selling another property so that you can proceed with the purchase), we will deal with exchanging contracts so that your sale and purchase are linked together.
Please remember that, as stated above, you are likely to be responsible for insuring the property from exchange and accordingly you must ensure appropriate arrangements have been put in place.
- Documents to be signed
If they are not already in place, the requisite documentation including the mortgage deed and the transfer (which is the formal document transferring legal ownership of the property to you) will need to be signed by you in readiness for completion.
- Funds for Completion
Between exchange and completion you must ensure that arrangements have been put in place to provide cleared funds so that completion can take place on the agreed date. If you are purchasing the property with the assistance of a mortgage, the lender will transfer funds to us directly.
- Pre-completion Searches
Shortly before completion, we will carry out up-to-date searches to confirm that there are no issues which have arisen in respect of the property and that the matter can proceed.
When we have all necessary funds and there are no adverse matters which have arisen, we will arrange to complete the purchase by transferring the appropriate completion monies to the seller’s solicitors. We will normally telephone you to confirm that completion has taken place and that you are the new owner of the property. You will then be free to collect the keys and move into the property.
- Land Registry application and Stamp Duty Land Tax
After completion, Stamp Duty Land Tax will need to be paid to HM Revenue & Customs and an application sent to the Land Registry for the registration of the transfer of the property to you (and for the registration of any mortgage).
- Leasehold Property
If the property is leasehold, the transaction will need to be notified to the Landlord which will normally include the requirement to pay a relatively small registration fee. You should ensure that you make a record and note of the important dates referred to in the lease documentation – such as rent reviews and when the lease will come to an end.
- Notifying Authorities and Service Providers
You should arrange to read meters at the property and notify the suppliers of services to the property of the change of ownership.