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Buying

The following information applies to England, Wales and Northern Ireland but not to Scotland.

Finding a suitable property.

When looking to purchase a property in the UK there are a number of ways to go about looking for suitable properties, the most common being through an estate agent - either by visiting their offices or increasingly by making use of their websites. Most estate agents now offer a website which will allow you to search for suitable properties by location, price and many other search criteria. The most common example of this is www.rightmove.co.uk, which is used by many of the larger estate agents in the UK as well as many of the small local companies.

Many estate agents will also advertise in local newspapers, though these will generally be even more out of date than the website due to print deadlines being at least a couple of days in advance of release in most cases. There are specialist agencies dealing with properties for sale by auction - in some cases you may be able to secure a good price, though in a many cases the properties would require a good deal of cosmetic updating and possibly more serious work as well such as rewiring, roofing work or even remedial structural work.

If you would prefer to buy a brand new home then one option is to contact several property developers and try to find out if they are undertaking any new developments in the areas in which you are looking. Buying a house 'off-plan' (before it has actually been completed) can often result in significant savings over the actual market value once finished and developers often run promotions where they will offer to pay some or all of your deposit or provide free carpets or appliances etc.

It should be noted that properties may well appear on an estate agent's books significantly in advance of their appearance on the internet. This being the case it is wise to register with several agents in the desired area as they will often phone around their registered customers as soon as a suitable new property is added or post the details of any suitable properties to you on a regular basis.

Once you have identified a suitable property and have ascertained that its size, layout, general condition and any work required meet your specifications, the best advice is to move as quickly as possible in terms of arranging any additional viewings that you may require and subsequently making any offers - good properties are likely to be in very high demand and will not remain on the market for long in most cases.

It is commonplace for an estate agent to continue to market a property even once a sale has been agreed since property transactions can and do fall through for a variety of reasons.

Estate agents may require you to undergo a simple financial approval before they will progress any offer that you make for a property as they will need to protect the vendors interests first and foremost and ensure that they are satisfied that you can afford the property that you wish to purchase. Remember that an estate agent is not actually working for you - they are working for the property vendor as they are paying the agent's commission. In a lot of cases estate agents will have a mortgage advisor at their branch that will be able to advise you on suitable mortgage products if required. This is usually a free service since the advisor will normally receive a commission payment from the chosen mortgage lender should you eventually take out a given mortgage product.

Further detailed information on the purchase procedure can be found on this page.

Costs

The following core costs are likely to be incurred during a house purchase though it is by no means an exhaustive list.

Survey or valuation fees: This fee is usually remitted to your lender in advance unless they elect to cover the cost for you as part of an offer.
Stamp Duty: This is payable on properties costing in excess of £125,000 and is around 1% of the purchase price. In some 'regeneration areas' it is only payable on properties costing in excess of £150,000. Payable on completion and handled by your solicitor.
Land registry fee - Payable on completion and handled by your solicitor.
Local authority searches - Payable on completion and handled by your solicitor.
Solicitors fees / conveyancing fees - Payable on completion and handled by your solicitor.
Replacement locks - On completion you want to be sure that nobody else still has keys to your property.

Additional costs

Any fees charged by a mortgage broker, if applicable.
Additional valuation / survey costs should any additional specialist surveys be required to clarify any queries on the basic survey (Homebuyer's Report).

Land Ownership

Is the property that you are buying leasehold, freehold or commonhold?

Freehold

This means that the land on which the property is built is included in the sale and as a result no ground rent or service charge is payable.

Leasehold

This is where the land on which the property is built is not part of the sale itself and ownership is retained by a third party. Where this is the case you will have to pay ground rent to the owner of the – the ‘freeholder’. This rent is typically a few pounds per year but will be confirmed by your solicitor who will also check to see that the rent is paid up to completion of the sale.

In many cases the freehold has been resold to holding companies and while the token rent may not be sizeable you may find that disproportionately large penalties are applied if the ground rent is not paid on time. Under current law it is your responsibility to ensure that this is the case – freeholders are not legally required to invoice you or notify you of any outstanding payment.

It is often possible to purchase the freehold rights to your property and this is not a massively expensive undertaking – it may seem more than the annual rent for a number of years but add in potential penalties and it soon becomes a viable proposition in most cases.

The length of a lease varies and your solicitor will check this as part of their handling of a property purchase. It is not uncommon to find leases that are agreed for several hundred years in advance when purchasing a property.

As well as ground rent on leasehold property you may have to pay a monthly or annual service charge if your property is a flat. This is to cover items such as maintenance and repairs to the buildings and grounds and any shared areas such as gardens or hallways.

Further information on leases can be obtained from LEASE, the Leasehold Advisory Service via www.lease-advice.org.uk

Commonhold

With a commonhold property you can for example a flat freehold and co-own parts of the surrounding building and common areas, forming a ‘commonhold association’ together with the owners of other flats in the building. Under an arrangement of this nature a share of the maintenance, insurance and administration expenditure will be payable in respect of the common areas covered.

Again, LEASE (above) can provide more information on commonhold via www.lease-advice.org.uk.

Negotiating a sale price.

Once you have found a suitable property and wish to proceed with the purchase it will be necessary to make an offer for it, which is not necessarily the asking price. The offer should take into account the perceived market value of the property as well as any repairs that are necessary – it is also possible that in certain circumstances you may be in a situation where you may be forced to offer in excess of asking price if there is a great deal of interest or offers from other parties. You can of course make further offers should the buyer decline your initial offer.

An offer would normally be made via the estate agent advertising the property for sale rather than directly to the owner of the property and they will then act as an intermediary in any subsequent negotiations.

Once an offer is accepted you will need to appoint someone to handle the legal work on your behalf and you will also need to decide on how you wish to finance the purchase of the property if you have not already done so.

Mortgages

It is advisable to arrange a mortgage as soon as possible – obtaining pre-approval from a lender may streamline this process as they would already have all of your details and would only require the specifics of the chosen property in order to process your application. All being well, your lender would normally issue a formal mortgage offer a couple of weeks after the property has been surveyed.

If the property has defects that the lender considers to be serious or that affect its value then it may either refuse to lend you the money for that particular property or may at its discretion apply a ‘retention’ to the mortgage offer – essentially holding back a portion of the mortgage amount until they are satisfied that the defects have been remedied. In some cases this could leave you unable to proceed with a purchase as it could require you to utilise or even borrow additional funds to cover the shortfall until such time as the lender is satisfied that the property merits the loan value and releases the retention amount.

It is possible to mortgage a property up to and sometimes beyond the market value – deals exist for first time buyers whereby you can mortgage a property for as much as 105%, or 5% more than it is worth. This can be useful where additional capital is required to furnish your new home but such mortgages often attract significantly higher interest rates and redemption penalties.

Redemption penalties are the lender’s way of insuring themselves against laying out sums of money up front which they may not be able to recoup if you sell the property after a short period of time or repay the mortgage more quickly than agreed.

Where a lender has advanced a cash sum as part of a mortgage agreement such as with 100%+ mortgages, there will typically be a condition attached whereby should you redeem your mortgage within a certain number of years a proportion of the advance (or of the total mortgage amount) will have to be repaid to the lender. This normally decreases over time until it no longer applies after 5 or so years of the account being in good standing. Redemption penalties may preclude you from changing lenders in order to obtain a better mortgage deal, not by making it impossible to change lenders, but by effectively costing you more money to redeem your current deal than you would save under the proposed new mortgage.

If you have elected not to take out buildings insurance from your mortgage lender then you will be responsible for arranging this and it must be in place on the date of completion. Should this not be in place and should something happen to your property you will be fully liable for any losses.

Surveys

The survey undertaken on behalf of your lender is a basic valuation survey and will not consider the condition of the property beyond basic checks for things such as damp and obvious structural issues. It is generally possible to ‘upgrade’ the survey via your lender by paying an additional fee and the resulting survey will give you a much better idea of the true condition of the property. An intermediate level ‘Homebuyer’s Report’ is best suited to properties up to around 75 years old and beyond that a full structural survey may be advisable, and also considerably more expensive. Specialist surveys such as a drainage survey may be required should initial surveys point to potential problems that are outside their remit.

Should the chosen survey highlight any potential issues with the property you may withdraw from the purchase or enter into negotiation with the vendor in an attempt to reduce the price to reflect the information that has come to light.

Further information regarding property surveys can be found at the Royal Institute of Chartered Surveyors (RICS) website at www.rics.org.

Conveyancing (legal aspects of property buying)

Whilst it is in fact possible to undertake the conveyancing work yourself it is not advisable to do so and the sums of money that can be saved are generally not worth the additional workload and stress – two commodities rarely in short supply when moving home.

As mentioned earlier you can use a solicitor or licensed conveyancer to carry out the property purchase for you and whilst all solicitors can legally undertake your conveyancing work you would be advised to find one specialising in this kind of legal work.

Before instructing a solicitor or conveyancer to handle your transaction you should obtain a written quotation and it may be worth shopping around to find the best price. Consulting with friends, relatives or colleagues who have recently bought property is a good way to locate a suitable person or company that you can entrust this work to.

Much of the time taken to conduct the purchase of domestic property is taken up by the legal work and so it is important to instruct someone that you feel that you can trust to carry out the work in an efficient manner so as to streamline the process as much as possible. Local authority searches alone can take several weeks to be fulfilled depending on demand at the time.

Once you have instructed someone to handle the conveyancing, the seller’s solicitor (or conveyancer) draws up a contract between the both parties. Before the contract can be finalised, your solicitor has to ensure that no problems exist with the ownership of the property or other aspects such as right of way, access, or future developments that may impact the property. The contract will also include lists of fixtures and fittings provided by the vendor detailing what will be left at the property in terms of appliances, soft furnishings etc.

Local authority searches will include checks for Compulsory Purchase Orders, developments or transport infrastructure work, which may have an impact on you or the property at a later date. Checks will also be made into any restrictions placed upon the property such as listed building status or preservation orders.

Further enquiries may be made regarding any work carried out on the property recently in terms of guarantees provided by the contractors who undertook the work. The Land Registry will also be consulted during the searches and enquiries stage.

You should be aware that a deposit will need to be paid on the property that you are purchasing and this will be done when contracts are exchanged. If you have problems in raising this amount then there are a number of options available to you and you should discuss this with whoever is handling the conveyancing on your behalf. If you are selling one property to buy the new property then the deposit will normally be secured against your existing property and so you will not need to physically pay the deposit amount.

Exchange

Once the enquiries and searches have been received, the mortgage offer has been resolved, deposit arranged and any additional matters settled then contracts can be exchanged between the two parties and a completion date arranged. From this point you are legally obliged to complete your purchase of the property and will lose your deposit in full should you withdraw from the purchase.

It would be wise at this stage to make provision for the supply of all utilities and in order to do this final gas an electricity meter readings will be required. These should be taken and agreed in the presence of both parties so that there are no disputes afterwards.

Completion

On the agreed completion date the mortgage lender will release your mortgage amount to your solicitor who will send the monies to the buyers solicitor to finalise the purchase. The title deeds will be handed to your legal representative and in the case of a mortgaged property these will then be sent to your lender for the duration of the mortgage. Keys will normally need to be collected from the vendors solicitor or from the vendor themselves, having agreed to leave the property at an agreed time.

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