Property Buying Process

UK PROPERTY BUYING PROCESS

ENGLAND & WALES

As a buyer, even if you already live in England or Wales, you might not be familiar with the purchasing procedure. You might be acquiring a property for the first time. Equally you might not have moved for 20 years – some things have changed.

Whatever your situation it is critical, in order to avoid costly mistakes in time and money, to think through your entire purchase before starting to look.

Elements of your check list include:

Why do I want to buy a property?

Security? Shelter? Job Move? Investment? Local Education? Lifestyle? Every reason influences which property is the right one for you but if you don't know why you want to buy you'll never find the right place!

Where do you want to buy?

Where do you need to get too regularly- work and schools are most peoples' main influence but others might be their golf club, proximity to friends and relatives, distance to the airport, attractiveness of the countryside.

When do you need to move by?

Start of academic year? When the new job starts. When the lease on your rental runs out? Already promised the buyer of your existing home a completion date. How are you going to achieve these objectives?

Do you need to sell an existing home before buying the next? How should I go about selling it? How long will it take to sell? How much can you afford? What size mortgage can you get?

In short, if you have not considered most or all of the above factors you are not really even qualified to start searching! You will be one of the “time wasters” loathed by Estate Agents across the world!

One element to be especially aware of when buying in England and Wales though:

Unlike most other countries where purchasers usually have a legally contracted sale under their belts (or the straight cash or cash plus a formally agreed mortgage) it is commonplace for a Buyer to be part of a “chain” of related non-contracted home sales i.e. where Mr A has “agreed” too (but is NOT legally committed to) buy Mrs B's house who in turn has “agreed” too purchase Miss C's flat etc etc

MEANING THAT THEY ALL HAVE TO WAIT UNTIL THEY HAVE ALL

1) FOUND A NEW HOME TO MOVE TO WHETHER BUYING OR RENTING

2) ARRANGED NECESSARY FUNDING

3) PREPARED AND CHECKED ALL LEGAL DOCUMENTATION

4) AGREED A DATE WHEN EVERYONE IN THE CHAIN CAN PHYSICALLY MOVE

As you can imagine this can often be a difficult and stressful to achieve!

The positive side is that if you are a “Cash” buyer with flexible moving dates you are a much, much more attractive prospect when competing for a sought after home or negotiating a better price!

LOOKING FOR A PROPERTY

In England and Wales the vast majority of homes are offered for sale by Estate Agents who will market the properties through their shop windows, the local and national press and internet advertising.

They are paid a fee BY THE SELLER for introducing a buyer at completion.

The only circumstance where a Property Buyer pays a fee is when they have VOLUNTERILY commissioned a Search or Relocation Agent to act on their behalf (again remember the adversarial nature of the system).

Most properties are at least initially marketed by Estate Agents on a “Sole Agency” or Exclusive basis i.e. there is only one agent handling the sale.

It is usually the case that properties are marketed on a Non-Exclusive or Multiple Agency basis when they have been on the market for a few months since a Sole Agency is cheaper for the Seller than a Multiple Agency.

The Property Descriptions and Photographs they provide are often World Class and exhaustive with individual room descriptions normal. Floor and site plans as well as location maps are frequently used.

They are all eager to help a buyer find a home, especially if that buyer demonstrates that they know what they want and are in a position to secure it.

If you approach an Estate Agent without having considered the points made above they will soon realise the fact and invest little time in you and your search.

When you have found a house that you are interested in some Estate Agents will personally show you houses you ask to view, some will let the property owner do so.

If you wish to buy the property you make a verbal offer to the Estate Agent who will try and negotiate a deal acceptable to both parties.

Do Remember That Most British Sellers Are Not Used To Haggling And That Too Low An Offer Might Be Seen As An Insult. Most sales are agreed at a price within 5% of the asking price!

So you've found a home to buy but do not know how to secure it.

• If I make a verbal offer- will it be binding?
• I need a mortgage- how do I get one?
• Is there a “cooling off” period as in France?
• Can the owner change their mind?
• What checks should I make?
• Who deals with the legal paperwork?
• What insurance do I need?
• How soon can I move in?

In England and Wales properties are offered for sale, whether through an Estate Agent or by the Owner privately (a rare event) in one of three ways:

i)Private Treaty- where there are no deadlines for offers, negotiations are either directly between buyer and seller or through the Estate Agent and the legal paperwork can be perused and approved without a formal deadline. When the buyer and seller (and anyone else in the aforementioned “Chain”) is ready, there is a simultaneous “Exchange of Contracts” and the Deposit (usually 10% of the purchase price) paid. It is at this point that the sale is Legally Binding although this can be subject to various conditions arranged by negotiation. Completion occurs as agreed, usually between 2 and 8 weeks later.

ii)Auction- where a short but intense marketing period culminates in buyers bidding (in person in an “Auction Room” or increasingly online or by telephone) against other buyers IN REAL TIME AND AGAINST EACH OTHER “HEAD TO HEAD”, the highest bid being the winner and being legally binding on buyer and seller. The buyer has to pay a Deposit (usually 10%) immediately the Auctioneers Gravel has fallen accepting his bid. All legal information is available prior to the Auction. Completion is usually 1 month after the Auction.

iii)Formal Tender- really a combination of the above two. The property is marketed as usual but with a set deadline for when formal written offers must be received. All Legal checks must be conducted before the offer is submitted. A Deposit (usually 10%) must be submitted with the formal written offer. If yours is the offer accepted the owner, their agent or solicitor signs the contract and the sale becomes legally binding.

iv)Informal Tender- is essentially a Private Treaty Sale but one where interested parties are invited to submit NON-BINDING written offers by a certain day. The owner then choices which, if any, offer to accept and initiate the legal paperwork where after the process is entirely as with a Private Treaty sale.

Home Information Packs

Whilst it is no longer a requirement that a Home Information Pack (HIP's) be available from the first day when a property put on the market by an Estate Agent or a Private Seller an Energy Perfomance Certificate is still needed.

Surveys

In the UK a unique class of professionals exist called “Chartered Surveyors”. If you wish to be reassured about the structural Condition of the building you are thinking of buying you would employ such a Surveyor at your expense.

Legal Representatives

Unlike many other countries in 99% of sales in England and Wales both the buyer and the seller employee their own separate Solicitors' or Licensed Conveyancers to represent each party. True to the “adversarial” nature of English Law each Solicitor is only responsible to their own client and where differences of opinion occur over the legal validity or necessity of contractual clauses “deadlock” can be reached whereupon either a comprise is agreed or failing this the sale “falls through”. Common sense usually prevails.

Taxes

As ever with Taxes this is not entirely straightforward but essentially Stamp Duty Land Tax is payable on land and property transactions throughout the UK.

The current rates (March 2010) are:

Residential Property

Purchase price/lease premium or transfer value SDLT rate

Purchase price/lease premium or transfer value

Up to £125,000 0%

Over £125,000 to £250,000 1%

Over £250,000 to £500,000 3%

Over £500,000 4%

If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £130,000 is charged at 1 per cent, so £1,300 must be paid in SDLT. A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.

Non_Residential or Mixed Use Properties

Purchase price/lease premium or transfer value SDLT

(non-residential or mixed use) rate

Up to £150,000- annual rent is under £1,000 0%

Up to £150,000- annual rent is £1,000 or more 1%

Over £150,000 to £250,000 1%

Over £250,000 to £500,00 3%

Over £500,000 4%

SCOTLAND

Scottish Law is entirely separate from English law!

Solicitors play a much more significant role in the sale process in Scotland than England and Wales, many acting as both Estate Agents and Conveyancers!

Generally buildings are marketed on an “offers over” basis which means precisely that. In this scenario buyers who are seriously interested will generally “note interest” with the seller.Where there are two or more “noted interests” the seller will normally fix a closing date and time.

Occasionally properties are offered at a “fixed price” whereby the seller will accept the first bid received at that price.

All Offers In Scotland Have To Be Formally Made In Writing!

The purchase and sale contract in Scotland comprises letters between the solicitor of the purchaser and seller. These letters are often referred to as “missives”.Missives can sometimes be concluded in just a few days in Scotland – but also can take many weeks.Completion, otherwise know as the Date of Settlement or Entry usually occurs 6 to 8 weeks after the conclusion of the missives.

Home Information Packs are not required in Scotland.

NORTHERN IRELAND

The process of buying a property in Northern Ireland is essentially the same as that for England and Wales EXCEPT that Home Information Packs are not required.

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