Understanding The Process of Buying a House

Understanding the process of buying a house, especially when it’s your first time, is far from easy. It can seem long-winded and shrouded in legal jargon. So, if you can get your head around buying a house, you’re less likely to be surprised. It might even become a pleasurable experience. So, what’s first?

1. Mortgage in Principle

Often referred to as a decision in principle (DIP) or agreement in principle (AIP). Usually, this is the first step in the buying process. It means that a mortgage lender has confirmed that they will, in principle, lend you the money to buy a house. It’s a good idea to sort this out early to save time later. Your lender will typically run a credit check. Legally, they don’t need to ask you beforehand, but they are obliged to have a good reason for checking. Information on checking and improving your credit score can be found here.

2. Look for an Experienced Solicitor or Conveyancer

You can use a conveyancer or a solicitor for the legal part of the process. It’s their job to manage the sale for you. They will draw up the contracts, speak to the seller’s solicitor, deal with the Land Registry and collect/distribute the money.

ID Checks

This is often seen as unnecessarily complicated. However, by law, all estate agents, lawyers and mortgage lenders must check your identity to prevent money laundering and fraud. So, be prepared and pull together the required information in advance. Finding a suitable lawyer early on will help to speed the process up. ID checks will be in place, and property questionnaires can be pre-populated.

Conveyancing Costs

Conveyancing fees range from around £500 to £1,500 depending on the property’s cost and the transaction’s complexity (you’ll usually pay more if it’s a leasehold property).

3. Making the Offer

Everything becomes more ‘real’ when you make an offer. Take time to research prices for other similar properties in the area. Using websites such as Zoopla and the Land Registry can help. Once you’ve decided how much to offer, we’d advise you to put the offer in writing (email is acceptable), even if you’ve spoken to the estate agent direct.

Don’t forget to mention things that make your offer attractive, such as being a first-time buyer or not being hindered by a property chain. Also, ensure your offer stipulates that it is ‘subject to survey’ and ask the seller to remove the property from the market. This could help you to avoid being gazumped.

4. Your Offer is Accepted

When your offer is accepted, the estate agent will ask for your lawyer’s details. These will be passed on to the seller’s solicitor, who will, in turn, prepare a draft contract of sale. In the meantime, your lawyer will carry out property searches and investigate all appropriate legal aspects of the property.

Property Searches

Before you formally commit to buying the property (known as an exchange of contracts), your lawyer will discuss the results of the various searches they’ve conducted. Sometimes, they might come across information affecting the property’s value. Occasionally, they may uncover information leading them to recommend pulling out of the sale. So, your lawyer or conveyancer must be thorough at this stage of the buying process because the sale is legally binding after this point.

Searches include:

Local authority search: arguably the most important because these searches will consist of information the local authority holds, such as prospective planning permission, future developments or restrictions. This will also show who is responsible for maintaining roads and paths adjoining the property;
Land Registry search: this will make sure the seller owns the property;
Water authority search: will tell you where the water comes from, whether the property is connected to mains drainage and whether there are any public drains. This could affect you if you are planning to build work in the future;
Environmental search: these are increasingly important and will include information about flood risk, ground stability and contamination from landfill in the local area;
Chancel repair search: this might seem an odd one, but if your property is close to a church, it’s advisable to check whether you’ll be liable to contribute towards church repairs;
Additional location-specific searches: depending on local factors, it may be advisable to carry out other, for example, mining, as these may reveal serious subsidence risks.

Seller Questionnaires

At this point, the person selling the property will be asked by their lawyer to complete a property information form about their house. This information will be sent over to your lawyer, who will, in turn, check it for any potential issues. These documents should be filled out accurately, as everything the seller states is legally binding.

Finalise Your Mortgage Arrangements

Next, assuming you need a mortgage to buy the property, you must finalise the arrangements with your lender or mortgage broker. At this point, the lender will instruct a lawyer. They will check the property complies with the mortgage terms and prepare the mortgage deed/legal charge for signing.

It’s not unusual for the same lawyer to act for the purchaser and the lender (they are often pre-vetted and are members of lenders’ panels). This should save you money.

Property Surveys

It’s also important to consider the benefits of a property survey. If you’re getting a mortgage, your lender may arrange a mortgage valuation. Don’t confuse this with a property survey. A mortgage valuation is intended to establish what the property is worth and that there will be enough security for the amount and terms of the loan you have agreed to.

We’d always advise you to have an independent survey done. Property surveys help to assess the condition of the building and detect structural problems. There are three main types of surveys: a condition report, a HomeBuyer’s report and a building survey. Costs will vary depending on the property type, where, and how big it is. Your mortgage lender, estate agent, lawyer or the RICS should be able to recommend a surveyor near you.

5. Exchange of Contracts

As soon as the searches and property information form have been checked and money is in place, the next step is to exchange contracts. The date for completion is also agreed upon between the parties. As soon as the contracts have been exchanged, everyone is legally committed. The seller must sell the property, and the buyer must buy the property on the completion date agreed upon.

Property Chain

A property chain involves several linked house purchases. When you’re in a ‘chain’, the house you buy or sell depends on the assets on either side of your property.

A chain can often be long and sometimes unpredictable. But, unfortunately, chains are very common unless you’re a first-time buyer or in a position where you don’t need to sell your house to fund the purchase of the new one.

6. Completion

The completion date is when the buyer pays the agreed purchase price, the seller vacates the property, and the purchaser moves in. Arranging a mutually convenient completion date can be tricky when a chain is involved. Everyone will need to talk to each other to ensure searches, property surveys, and funding are all in sync.

Stamp Duty Land Tax (SDLT)

The rate you pay depends on the value of the property you buy. Unless it’s your first home, or you are otherwise exempt from paying SDLT, you will usually pay SDLT if you have purchased a house over £125,000. If it’s your first home, you will only pay SDLT on purchases of over £300,000.

Your lawyer will have already calculated the amount of Stamp Duty Land Tax (SDLT) due before you exchange contracts. They’ll retain the amount from monies received for the purchase so they can pay HMRC on your behalf on completion of the sale. At the same time, they will register the transaction on Land Registry’s central database.

Our Advice

Please contact us if you’d like to talk to one of our conveyancing lawyers. Alternatively, you can click here to obtain a quotation.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.