A guide to buying property
Buying a property is likely to be the largest purchase you will make in your lifetime. That fact, combined with the complexities involved, can make it a very daunting process for both first time buyers and those who have previously bought property.
Knowing more about buying a house can make it less daunting, so the aim of this guide is to explain the various stages of the property buying process, including property conveyancing, which will also hopefully enable you to make more informed decisions.
Calculating what you can afford
It seems obvious, but working out exactly what you can and cannot afford should be your first action as it will dictate a lot of your future decisions. You should carefully calculate how much money you have available in savings or sellable assets and how much you are able to borrow.
It is highly likely that you will require a loan of some kind to finance the purchase of a property and securing a mortgage is the most common method of borrowing. Mortgages are available from a number of different financial institutions, such as banks or building societies. Certificates are now available in advance of securing a mortgage from some building societies which will confirm that your loan will be granted providing the property meets the building society's satisfactory requirements. Having a certificate of this kind can be beneficial when it comes to making an offer on a property as it can increase the likelihood of an offer being accepted.
In order to get a mortgage, you need to be able to put down a deposit. Saving for a deposit is often one of the biggest issues when buying a property as 10% of the total property purchase price is usually required, although this percentage can vary. Prior to receiving money from a mortgage lender and the completion of the purchase, you will be required to pay the deposit when contracts are exchanged.
As well as having enough money for the deposit, you should also consider and make sure you have enough money to cover all the additional costs which might include:
- any fees from your mortgage lender or the person who arranges your mortgage
- solicitor costs
- survey fees
- valuation fees
- stamp duty land tax
- land registry fee
- local authority searches
- moving expenses such as van hire
- final gas and electricity bills for the property you are leaving
If a sale falls through not only is it disappointing and frustrating but you may need to cover some of the above expenses again during your new search for a property.
Additionally, it is important that you consider the potential running costs of your new property and you can do this by estimating the:
- council tax
- water rates
- insurance costs that cover the building and the contents
- gas & electricity bills; an energy performance certificate will detail how energy efficient your new property is and you can use this to roughly calculate the costs of heating the building.
Choosing a Conveyancing Firm
Prior to submitting an offer you should find a conveyancing firm because an estate agent will want to know their contact details on the submission of an offer. It is recommended that you find a conveyancing firm before you even start viewing properties, as securing their services in advance prevents you for having to choose one in a rush in order to submit an offer.
Choosing the correct conveyancing firm is a vital stage of the house buying process. It is important to remember that not all legal firms have experience in conveyancing. In a worst case scenario, the inexperience and a lack of knowledge of a legal firm without a conveyancing background could lead to the sale of the property falling through and the disappointment, lost money and time will be hard to swallow. Therefore it is important that you spend time searching for an experienced conveyancing firm and it is advisable to meet with them face to face first before making a decision.
Conveyancing is usually completed by a property solicitor or a licensed conveyancer because they have the experience and knowledge required to efficiently provide you with qualified legal advice, write or assess contracts, formalise the land registry, make sure you pay the correct amount of stamp duty tax and can process the finances during the final stages of a property transaction.
An experienced property solicitor can be invaluable during the property buying process because the housing chain and other uncertainties, such as the sale falling through, make the house buying process a very stressful time. Therefore, using a property solicitor to complete the conveyancing process can alleviate some of the stress involved and will help make the process of buying a new home as exciting as it should be.
Searching for your ideal property
Once you have worked out what you can afford and you have found a conveyancing firm you will probably be itching to start looking at what property is on the market.
Deciding on a location to search within is often the first difficult decision to make and you should base this choice on important elements that can have a major effect on your life. These may include:
- how long it would take to commute to work
- the quality and proximity of schools should you already have children or you plan on having children in the future
- is the type of property you are seeking in this area?
- are you able to afford the type of property in this area?
- can you afford to live in the area?
- does the area have a good reputation?
- does the area have enough amenities to fulfil your lifestyle?
After you have chosen a location it is worthwhile speaking to a local estate agent, especially if you are not familiar with the area, because they will have knowledge of not only the location but also how the local property market is behaving at the present time. Before approaching an estate agent, you should have a list of property qualities in mind such as the number of bedrooms and bathrooms, parking options, garden size and anything else that is important to have in your new property. You can take these requirements to an estate agent and they will be able to provide you with a list of suitable properties for you to consider.
Alternatively you can search for property yourself by using the property pages in local newspapers or looking on the internet. The internet can be a great resource for finding property as most property websites allow you to search by location, price, number of bedrooms and other parameters. One of the main benefits of online property searching is being able to view the vast majority of the property market without having to contact numerous estate agents.
Additionally, it may be worthwhile contacting property building companies in your desired location first to see if any new builds are likely to come on the market soon.
When you come across a property that fits your requirements you should arrange a viewing of that property. This allows you to see how busy the area is, find out if there is a high volume of cars/public transport/trains passing close by which may be off putting, see if the property really does suit your needs and find out if you would need to complete any repair or redecoration work to make the property look and function correctly for you. If you are interested in making an offer on a property it is advisable to view it on several different occasions and at different times of day. Doing so will allow you to be sure the property is right for you and by visiting at different times you can get a feel for the type of activities that occur in close proximity to the property that may become a nuisance in the future.
Making an offer
If you find a house that is ideal for you do not assume that you must offer the asking price. However, the property market can be highly competitive so you must consider the bid you place carefully. One common reason for offering less than the asking price is if you would have to cover the cost of any essential repairs in order to make the house liveable.
If you are dealing with an estate agent you should inform them of how much you are prepared to pay for the property. A representative of the estate agent will then inform the owner of your offer. Your first offer may not be accepted but there is no limit to how many offers you can make and you can decide whether to increase your offer or not in your own time. Just be aware that other people may be interested in the property too.
It is important to highlight that an oral offer is never legally binding. Therefore, you should always submit an offer in writing because doing so will ensure that your offer is subject to contract. This allows you to find out more about the condition of the property without being committed to purchasing it.
Once you have had your offer accepted you will need to contact your conveyancer who will process the legal side of your property purchase.
Securing a mortgage
It can take three weeks or more to arrange a mortgage and this process begins with an application to the mortgage lender. Your chosen mortgage lender will then want to get the property you intend to purchase valued to ensure they can get the loan back should you stop paying the mortgage. You will have to cover the costs of this valuation and it is usually done by a property surveyor. However, to save money, it is possible to use the same surveyor to conduct a property valuation and structural survey at the same time.
If you plan on borrowing an amount that is more than a specified percentage of the valuation (usually 75-80%), your mortgage lender may stipulate a condition of the mortgage agreement that states you must take out additional insurance to cover the extra amount. This is known as a higher lending charge or an indemnity guarantee and is where you will pay a single premium to your mortgage lender on top of the agreed mortgage loan.
Getting the property surveyed
When purchasing a property it is advisable that you have a housing survey conducted before completing the property purchase. The purpose of a housing survey is to highlight any structural issues which might make the property a poor investment choice. Issues like subsidence or woodworm can be a nightmare to rectify and therefore it is important that you are aware of issues like these so that you can make an informed decision on whether or not to proceed with the property purchase.
You can choose between two surveys; the most comprehensive survey is a full structural survey which is recommended for property that looks in a poor condition or if the property is over 80 years old. If the property you are interested in is relatively new and looks to be in good condition you might prefer to have an intermediate survey or 'house/flat buyers report' completed instead of a full structural assessment. This survey will assess aspects of the property which are easily visible or easily accessible and if the surveyor finds anything suspicious they will recommend further tests. A survey of this kind is cheaper than getting a full structural survey completed.
Once you and your property solicitor or licensed conveyancer are satisfied that everything is in place, any maintenance required as a result of the survey of the property has been completed, your mortgage has been formally approved, you are ready to pay the deposit and a completion date has been agreed, the final contract can be prepared.
You and the seller will both receive a copy of the final contract. Each party must sign the contract and once they are signed the contracts will be exchanged between both parties. Once the contracts have been exchanged both parties are legally bound to complete the property transaction. If you wanted to pull out of the sale at this stage in the process you would probably lose your deposit.
Completing the purchase
Between the exchange of contracts and completing the property transaction there is typically a four week wait. However, it is not unusual for a buyer and seller to agree to a different date which can be stated in the contract agreement. The completion date in the contract is when the mortgage lender releases the money, your property solicitor or licensed conveyancer receives the deeds to the property you are buying and the seller must give you the keys to the property.
The residential property solicitors at Rollingsons are experienced lawyers who understand how important a property transaction is and will work to achieve your requirements within an agreed timeframe as far as is possible. For more information or to arrange an initial consultation, please contact us on 0207 7611 4848.