The Process of Buying a Property Step by Step
Now you have found the property you want to buy, and you’ll be relieved to learn that British home buyers have a high degree of protection under the law, making the UK one of the safest countries in the world in which to buy a home.
However, you will still need to think carefully before committing yourself to any purchase – don’t allow yourself to be rushed into making a hasty decision, just because someone else is interested in the property or you’re worried about possible price rises.
Once your offer is accepted, your mortgage lender will send a surveyor to do a valuation, and you should commission a more detailed surveyors report. At the same time, you’ll need to appoint a solicitor or licensed conveyancer to deal with the conveyancing – the transfer of the property from the present owner to you. Once the conveyancing work is completed, a completion date can be agreed upon.
With such a large sum of money at stake, it would be foolish to try and cut corners to save money on the relatively small cost of legal advice. Check the credentials of all the professionals you employ, and avoid relying solely on advice given by those with a financial interest in selling you a property, such as an estate agent or developer.
The buying process is slightly different if you are buying your house in Scotland or at auction and we examine these procedures in more detail.
We also take a look at buying a property abroad and offer you some general tips before you take the plunge and buy that house in the sun.
- Making an Offer
- Buying at Auction
- Buying Property In Scotland
- Buying Overseas
Making an Offer
Once you’ve chosen your dream house, it’s time to put your offer into the estate agent or direct to the seller, depending who you are buying from.
Your offer should be based on sound judgment, on what the property is worth – not on your desire to secure the property at any cost.
You will need to take into account factors such as; the condition of the property, how long it has been on the market, and whether or not there the price has been dropped. Good research at this point will always pay off.
Always be prepared to walk away from a deal rather than pay over the odds.
Buying property is one of the few times when you’re expected to haggle – vendors rarely expect to receive the asking price. Don’t try to rush into the deal and panic into over-bidding – you can always raise an offer that’s too low, but you won’t be able to lower an offer once it has been accepted. Remember that your bargaining position may be strengthened if you aren’t part of a chain.
Base your offer on sound reasoning and provide a rationalization for your offer, if it is considerably lower than the asking price. You should make it clear that your offer is subject to contract and survey.
Researching and Making Your Initial Offer
Before making any offer, you should find out as much as possible about the property, such as:
- The state of the property market. Buying when the market is flat or during the winter when there are few buyers around may get you a bargain, although you will have to come in much nearer the asking price when the market is buoyant.
- Why the owner is selling
- How urgent a sale is. Some vendors might tell you outright that they must sell by a certain date and that they will accept any reasonable offer. You may be able to find out from neighbours why someone is selling, which might indicate whether an offer would be accepted.
- The neighbours and neighbourhood. If there are many properties for sale in a particular area that have been on the market a long time, you should find out why.
- Whether the asking price is realistic. Compare with similar properties in the area. If it has been on the market for a long time, it may be overpriced, unless it has obvious faults.
- The condition of the property
- When it was built. You may be able to negotiate a substantial reduction if there’s a lot of work to be done.
- How long the property has been on the market. If it has been on the market a while – why it hasn’t sold
- Whether the asking price has been reduced
These points indicate how desperate a vendor might be to sell. Find out how long the property has been on the market. A good clue is when a property has been reduced in price, which may be indicated in an advertisement or an agent’s data sheet.
The longer a property has been for sale, the more likely a lower offer will be accepted.
Making Your First Offer
Calculate the reasonable price of the property based on other properties in the same area (location is the key factor in determining value), the state of the property market and the amount of work that needs to be done. Don’t let anyone know that you are willing to go higher, and try to give the impression that your offer is high as you can stretch to.
If the market is slow, and your offer is rejected, it may be worth waiting a week or two before making a higher offer. Be wary, agents sometimes invent rival buyers and bids. If this is the case, ask them for written evidence.
However, if you’ve found your dream home, make an offer straight away and increase it until it’s accepted. If you want it and there has been a lot of interest, AND it’s reasonably priced, you should probably consider making an offer at the asking price.
Try to give the vendor the impression that you are in no rush to make a purchase – even if you’re desperate to buy straight away.
Negotiating the Best Deal
If your first offer isn’t accepted, don’t be afraid to haggle . Even if a property is priced realistically, you should expect at least a 5-10% reduction. Cash buyers may be able to negotiate a considerable reduction for a quick sale, and your bargaining position will also be strengthened if you aren’t part of a chain.
Developers may offer incentives to buyers of new apartments or houses, such as paying stamp duty and legal fees, free furnishings, such as carpets or kitchen appliances or upgraded fittings, so try to get as much included in the price as possible.
If you make a low offer, it’s worthwhile indicating to the vendor a few negative points that will merit a reduction in price. But try not to be too critical. They may feel insulted and refuse to sell it to you! You may be able to negotiate a considerable reduction if there’s a lot of work to be done. It may also be useful to obtain an independent valuation – if it’s less than a vendor is asking it may encourage them to lower their price.
An offer made in writing (supported with information about funding and legal arrangements), will be taken more seriously than a verbal offer. But before agreeing on a price, make sure the terms of your offer are clear – they should include the following:
- A list of fixtures and fittings that are included in the sale
- Any work that needs to be done on the property by the vendor before completion
- The offer being subject to a survey and contract – if the survey brings to light any work that needs doing you may need to renegotiate the price
An offer should also be conditional on the vendor taking the property off the market while you obtain a mortgage, have a survey and have your conveyancer conduct searches. You may be able to get them to sign a lock-out agreement, where they will take the property off the market for a period during which contracts are exchanged.
Occasionally, a vendor in England or Wales may invite sealed bids. This is standard practice in Scotland.
There are two kinds of bids, a formal or an informal tender:
- Formal Tender. The sale is complete and binding on both parties once the bids are opened, and a bid is accepted.
- Informal Tender. A sealed bid is subject to a survey and contract, and the either party can withdraw until contracts are exchanged.
Gazumping is the term used when a vendor agrees to an offer from one prospective buyer and then sells to another for a higher amount. This is fairly common in UK (not including Scotland), where it is responsible for ruining over 15% of property deals.
The house buying process in Scotland does not allow either side to pull out of a deal without penalty once an offer has been made and accepted, and so gazumping is practically unheard of there.
However, the process for rest of the UK allows either party to amend or withdraw from a sale at any time before the exchange of contracts – when a sale is legally binding – which is usually up to 12 weeks after the acceptance of an offer. Vendors frequently cancel sales before contracts are exchanged and may take a property off the market altogether if they think they can get a better price later.
You can reduce the chances of being gazumped by encouraging a vendor to sign a lock-out agreement, where you have the exclusive right to buy for a number of weeks. Some agents will also insist that vendors sign a binding agreement that any further offers they receive after acceptance of an offer must be refused.
Another way of beating gazumping is to reduce the time taken between the time the offer is made and the exchange of contracts. The government has introduced a scheme (due to start in 2007) to facilitate this, in which vendors must provide a home information pack. This will include commissioning a survey, collecting the title deeds, conducting local council searches and providing details of warranties and planning permission.
However, without a financial penalty (such as the loss of deposit) it’s unlikely that gazumping will be eliminated, particularly when some buyers are willing to pay much more than the asking price and may even pay in cash.
Before making an offer on a property in Scotland or before exchanging contracts in the rest of the UK, it’s important to have a survey.
However, over 50% of buyers fail to do this and rely on a basic valuation alone – a risky proposition when you learn that around 20% of properties are found.
If you are buying a new house, it should have a National House Building Council (NHBC) certificate. This is a warranty that covers the house for ten years against certain types of physical damage caused by a defect resulting from the builder failing to meet NHBC Standards. In this case, you may not need to commission any further surveys – the lender’s valuation report will be sufficient.
For older properties there are three types of survey:
- Homebuyers report and valuation survey
- Building survey
- Specialist report
Which one you choose usually depends on the age and type of property you’re buying. But if you’re in any doubt about the property’s condition you should have a thorough survey carried out.
Any house over 50 years old should have a full structural survey, as it may have a variety of problems such as dry rot, rising damp, infestations, poor electrical or plumbing installations, subsidence, rotten window frames or a leaking roof.
Surveys should be carried out only by a qualified surveyor, who should be a member of the Royal Institute of Chartered Surveyors (RICS), which now incorporates the Institute of Surveyors and Valuers (ISVA), or the Royal Institute of Chartered Surveyors in Scotland (RICSS).
Also, you should take a long and careful look at the house yourself, not just a cursory glance. Look at everything and try to get an idea of the likely cost to you of rectifying defects.
If a survey brings to light any poor condition that isn’t already reflected in the asking price, you should negotiate a reduction to cover the cost of repairs or renovation. If a property needs work doing on it, obtain a quotation in writing from a local builder or specialist.
The Lender’s Valuation Report
Lenders insist on a valuation before approving a loan, although this usually only consists of a brief check to reassure the bank or building society that the property is worth the money that you want to borrow.
The valuation takes into account the property’s age, condition, area and the price of similar properties locally. Although it’s carried out by a qualified surveyor, it’s merely a cautious assessment of the value of a property and not a survey.
It would be a gamble to rely solely on a valuation report, as it’s no guarantee that a property is structurally sound.
The cost of carrying out the valuation (refunded when the mortgage is finalized) varies depending on the lender and the value of the property. But will be approximately £200 for a house worth £100,000, to over £400 for the house worth more than £500,000.
The valuation report will take into account:
- the condition of the property
- resale potential
- the market value of properties in the area
- accommodation and land
- traffic density
- neighbourhood amenities
If in the surveyor’s opinion, the property is overpriced, you have three options:
- You can find the extra money, taking a risk that you might not get your money back when you come to sell.
- You can back out and look for another property.
- You can enter into negotiations with a revised offer.
Equally, bear in mind that if you’re putting in a sizeable proportion of the asking price yourself, you might want to have the valuation confirmed by the second opinion, as it will be your money that is at risk if the valuation is over generous.
Homebuyers Report and Valuation Survey
If you are buying a property built over ten years ago, it’s wise to commission your Homebuyers Report and Valuation Survey.
This is a concise report on the condition of property, together with a valuation. Any major defects in the property will be listed, along with recommendations for further investigations required.
This type of survey is recommended for conventional houses and apartments that appear to be in a reasonable condition, but is considered inadequate for large houses (over 2,000ft sq or 200m sq), old properties (pre-1940), or converted or purpose-built apartments.
Most mortgage lenders encourage you to use the surveyor who carries out their valuation report. Most surveyors offer a discount if you book a more detailed survey that can be done at the same time as the valuation report.
If, however, you use a different surveyor you will have to pay the full price of the survey, but you will have the benefit of a second opinion on the property.
The report is presented in a standard format of about ten pages in length. The surveyor groups observations under four headings:
- Defects that are a threat to the fabric or structure of the building, such as subsidence, rotten roof timbers, or other major problems.
- Defects that could have a significant effect on the purchase price – rotten window frames for instance.
- Health and safety aspects, such as wiring requiring replacing or asbestos lagging around a water tank in a loft.
- Legal matters, for instance, whether access is over another person’s land, requiring the right of way.
The property will only be inspected where it’s reasonably accessible or visible and electricity, gas, plumbing, and central heating systems will be given a visual examination – but not tested.
The cost of a homebuyer report varies depending on the value, age and condition of property – approximately £250 for a house worth £100,000, to over £700 for houses worth more than £500,000.
A full Building Survey is particularly suited to larger, older (over 50 years old) or more unusual properties – including property over three stories in height or of unusual construction (e.g. thatched). You should also commission a Building Survey if you’re planning to carry out major alterations such as extending or converting a property.
The survey is not a standard format report, and you can instruct the surveyor to address areas of special concern or, equally, to disregard, say, the condition of the decoration, if you know this needs attention.
The survey should cover the condition of:
- The structure of the building (noting any unsoundness, such as subsidence)
- Special features, such as beams, thatched roofs, balconies, tanked (waterproofed) cellars
- Extensions to the original building
- RSJs – reinforced supporting joists put in to carry a load where a supporting wall has been knocked down
- The type of land the property is built on (some homes have been built on unsafe sites such as rubbish tips or chemical factories)
It should also be checked for:
- Termites and other pests
- Any trees near to a house which may cause structural problems
You may need to pay extra to include certain checks and tests, such as an environmental survey and an energy efficiency rating. The surveyor will also advise on any repair costs and the suitability of proposed improvements or extensions you plan to make.
They will examine everything that’s reasonably visible, in addition to reporting on the construction and condition of property.
A structural survey includes the structural condition of all buildings, particularly the foundations, roofs, walls and woodwork; and anything else you want to be inspected. Electrical wiring and plumbing will be inspected for health hazards such as lead pipes, but not tested.
If you want a detailed survey, make sure that the vendor will allow your surveyor free access to the property and allow them to pull up carpets to examine floorboards.
The cost of the building survey varies depending on the value, age and condition of the property – approximately £350 for a house worth £100,000, to over £800 for houses worth more than £500,000.
A full structural survey isn’t much more expensive than a homebuyer report, and so you should always consider choosing this more comprehensive option.
Arising from the Building Survey, the surveyor may recommend that you commission a specialist report to examine any serious problem in detail. The specialist concerned can be a structural engineer or an expert in timber preservation or damp treatment.
You may well benefit from the specialist opinion if the property:
- Has been empty for a long time
- Is very run down
- Has had several extensions added
- Is a conversion (say from and oast house or a barn)
- Has suffered subsidence in the past or is in a terrace where subsidence has occurred to neighbouring dwellings
A general surveyor will usually be able to recommend a specialist company that could undertake the survey. Agree on a price beforehand, though timber and damp treatment firms should provide a free full report and quote at the same time for any action they recommend.
Conveyancing is the legal term for the process by which ownership of property is transferred from one person to another.
A conveyance is a deed (legal document) that conveys a house from the vendor to the buyer, thereby transferring ownership.
There are two main stages in a typical conveyancing transaction – the first takes you up to the exchange of contracts and the second leads to the completion of the sale when you become the new owner.
It involves the following tasks:
- Verifying ownership and ensuring that a ‘good’ title is obtained
- Checking whether land has been registered
- Checking the existence of any restrictive covenants or rights of way
- Checking that any structural alterations (extensions, loft conversions) have the necessary planning permission and building licenses and whether they have a warranty
- Carrying out local authority searches
- Ensuring that there are no debts against property or that they’re cleared before completion
- Checking the lease and its clauses (leasehold property only)
- Drawing up a contract of sale
- Arranging registration of the title in the new owner’s name after the sale of the property
In this section, we take at look at the work done by conveyancers in more detail – the searches, the exchange of contracts and the completion of the sale. We also examine the different types of ownership, as this will affect how your conveyancing is carried out.
Finding a Conveyancer
A government survey in 1999 found that the conveyancing system used in England and Wales is the slowest in Europe. However, the good news is that it is also the cheapest, costing somewhere between 0.5 to 1% of the purchase price.
When you’re looking to buy property, it’s worth asking three solicitors or licensed conveyances to give a rough estimate of their likely costs, based on the property price and whether there are issues that may require extra time to resolve.
These might include leasehold queries on the newly built flat, for instance, concerning parking, management company responsibilities, and so on, or queries on a repossessed property, where the other party might wish to complete the sale with minimal expenditure of effort. Both of these cases would increase the burden on the buyer’s legal representative.
Find a solicitor or license conveyancer by:
- Personal recommendation
- Looking in Yellow Pages, or the Internet
- Contacting the Law Society. You can search on their web site, http://solicitors.lawsociety.org.uk/
- Searching for solicitors using the web search box at the top of this page
- Some large estate agents may offer an in-house conveyancing service, but you will probably be better off with an independent solicitor or conveyancer, as an agent’s services could lead to a conflict of interest.
Your conveyancer will need to know the name of the selling agent, a list of any special points such as items included in the sale (carpets, appliances, furniture, etc.), and anything agreed regarding the condition of the property. They will also need the contact name and telephone number of your lender, and when you would like to take possession.
Legal Forms of Ownership
There are two main forms of legal ownership of property in Great Britain – freehold or leasehold.
In general, if you own the freehold of a house or a piece of land, then you will be the outright owner with no fixed period, and you will bear the full responsibility for repairs, maintenance, and general upkeep.
Any person owning freehold property is free to lease their property, subject to any restrictions the deeds may contain.
The deed to your house will be known as the “freehold transfer document” which will contain any rights and obligations. Usually, the transfer document will list any encumbrances (restrictions) on the use of the land, such as rights of way of other parties or sales restrictions.
The deeds to your home are very important, and you will find it very complicated to sell your property without them.
If you live in a property owned by someone else and have an agreement for a period, usually a long period (over 21 years and up to 999 years), then you are a leaseholder. A lease is a contract between landlord and tenant which lays down the rights and obligations of both parties, and it should be read through carefully by both the leaseholder and, in particular, the conveyancer.
Leases tend to be different from each other and nothing can be assumed. Once you sign, you will be bound by all the clauses in the contract.
The conveyancing of leasehold property is, potentially, far more problematic than freehold property, particularly when the flat is in a block with a number of units.
One common theme of all leasehold property is that the leaseholder pays for any general upkeep and repairs out of a service or maintenance charge.
When you buy a property, make sure that the vendor has paid all debts and has contributed to some form of “sinking fund” whereby provision has been built up for major repairs in the future. After a lease has been signed, then there is little or no recourse to recoup any money owed.
The key points of a lease that should be checked when purchasing are:
- What is the term left on the lease?
- Is the lease assignable – can you pass on the lease without the landlord’s permission or does it need surrendering at a sale or a license to assign?
- What is the ground rent and how frequently will you pay it?
- What is the level of service charge, and how is it collected, managed and accounted for?
- What are the general restrictions in the lease, for example, do you have a designated car parking space, or are you allowed pets?
Occasionally, there is no stated responsibility for upkeep, and consequently, the environment deteriorates, reducing the value of the property.
Once you have agreed on a price with the vendor, the vendor’s conveyancer draws up a formal contract laying down the terms on which the seller is prepared to sell the house. As well as dealing with the price, it will prove the seller does own a house and states whether there are any restrictions on the use to which the property can be booked.
The original oral agreement is not legally binding – the law requires that any contract for the sale of property be in writing.
Your conveyancer checks the contract to ensure that the terms are acceptable and that the seller does own the land. They will also make several searches. These are:
Enquiries Before Contract
These are inquiries issued to the vendor in a standard form and are aimed at revealing certain facts about the property. They include:
- What services are supplied to the property
- Whether there are any existing boundary disputes
- Planning considerations
- Adverse rights affecting the property
- Any easements or covenants in the lease (stipulations which give other certain rights, such as rights of way)
- Any guarantees in existence
- Any fixtures and fittings
- Whether there has been any breach of restriction affecting the property
Local Land Charges Search
Local land charges can be divided into two areas:
- Restrictions on the use of land or property, such as tree preservation orders or listed building orders
- Financial charges on the land for work carried out by the local authority
Enquiries of the Local Authority
Many of these inquiries relate specifically to planning matters, while other elements of the search are concerned about roads and whether they are adopted and whether there are likely to be any costs falling onto property owners.
Other inquiries relate to the possible construction of new roads which may affect the property, the location of sewers and pipes.
Index Map Search
This discloses the title of registered land, and whether it is registered leasehold or freehold. Registered rent charges are also disclosed by the search.
Your conveyancer can ask the relevant authorities anything specific you would like to know, such as:
- Are there any development plans that may affect the property, such as a new road, motorway, railway line, radio or mobile phone masts, landfill sites or industrial plants?
- Have any restrictions on the use of the house being complied with? Will they affect your use of the property?
- Who owns the adjacent vacant land and what degree of development would be allowed? Beware if it has been zoned for commercial activities.
- Was planning permission obtained any building work done on the property? Does this work comply with the building regulations?
- What was the land under and surrounding the property originally used for? Watch out for industrial sites, mining, landfill, waste sites, and military use (unexploded ordnance).
- If the house is in a mining area, has it been affected by subsidence?
- Is the property is prone to flooding and has been flooded in recent years?
The object of all these investigations is to discover as much as possible about the house before you legally commit to buying. If you discover something unfavorable, you can withdraw from the transaction without any comeback from the seller.
The law does not require the seller to disclose this information to you – it is up to you to find it out.
Exchange of Contracts
When buying or selling property in England, Wales or Northern Ireland, prospective buyers make an offer subject to survey and contract.
A contract is in two parts:
1. The Particulars of Sale
This gives an accurate physical description of the property. A plan may be attached to emphasize or illustrate what is in the contract. The particulars will also outline whether the property is freehold or leasehold and what kind of lease the vendor is assigning.
Rights, such as easements and restrictive covenants, should be expressly referred to in the particulars of sale. Also, the vendor should refer to any hidden defects affecting the property, if known.
2. The Conditions of Sale
The requirements concerning completion are detailed thoroughly in the general conditions of sale, such as payment, failure to complete and dates required for completion. Additionally, there may be specific conditions to a sale – these must usually be fulfilled before completion.
If a condition of purchase is that certain work must be done or repairs carried out, a ‘specification of works’ must be drawn up by your solicitor detailing the work to be done before completion.
A property can be owned by a number of joint-owners. They do not need to have equal shares – they can be proportionate to the deposit paid and the repayments made.
The percentage owned by each co-buyer must be registered in the title deeds, and all co-buyers registered as ‘tenants in common’ rather than ‘joint tenants.’
They will also need a ‘declaration of trust’ so that if one person wants to sell, the others have the option of buying them out.
Exchange of Contracts
Once you and your legal representative are satisfied with the house, the contract is drawn up in two identical copies – you sign one and the seller the other.
The contract becomes legally binding only when copies are exchanged so that each party has a copy of the contract signed by the other and both can sue on the contract, should the need arise. If the transaction is one of a chain, each dependent on the next, all the contracts in the chain must be exchanged at the same time.
You, as the buyer, will be asked to pay a deposit of up to 10% of the purchase price on the exchange. This is held by the seller’s legal representative until completion and is non-returnable if you decide not to proceed with the purchase.
Once you’ve exchanged contracts, you become the beneficial owner of the property, with the vendor owning the property on trust for you. You will need to take out buildings insurance at this point- this is mandatory if you have a mortgage.
Your conveyancer will now draw up a document known as a transfer. This is the document that concludes the transfer of ownership from the vendor to you, the buyer. Once you have signed it, the transfer is sent to the vendor conveyancer to be signed by the vendor. The vendor’s conveyancer will keep it until completion.
Your conveyancer must ensure that you have the rest of the purchase money ready for the day fixed for completion. Your conveyancer will deal direct with your lender, if you have arranged a mortgage, and will also draw up the mortgage document for you to sign. Some final searches by your conveyancer ensure that there have been no last-minute changes in the legal ownership of the property at this stage.
Completion the Your solicitor will give you a bill for Stamp Duty Land Tax and Land Registry fees before completion, which must be paid by completion day.
Completion (or closing) is the name for the final act of buying a property when the balance of the price is paid, and the title deeds are handed over, transferring ownership to you. You should try to arrange the completion for early in the week in case there are any problems, which can usually be sorted out the next day.
Property is sold subject to the condition that it’s accepted in the state it’s in at the time of completion, so you should make sure that you’re aware of anything that may have happened between the date of the exchange of contracts and completion, for example, storm damage. If you’re buying through an estate agent, they should accompany you to the property at this point to make the final checks.
You should also do a final inventory immediately before completion to make sure that the vendor has left in place everything they were supposed to, such as carpets, curtains or kitchen appliances, and that, if applicable, they’re in good working order.
If you find anything is missing or damaged, you should make a note and insist on immediate compensation such as a suitable reduction in the amount to be paid. You should refuse to go through with the completion until the matter is settled, as it will be difficult to resolve later.
The balance of the price must be paid by banker’s draft on the day of completion or transferred to your solicitor’s bank account before completion day. When the final payment has been made, the deeds to the property will be handed over to your solicitor, including the conveyance or transfer of ownership. Your solicitor will also receive the keys.
Your ownership must be registered at the Land Registry (the government body that records the ownership of land), and you must pay Stamp Duty Land Tax – your conveyancer will arrange both of these.
Stamp Duty is a government tax levied as a percentage of the purchase price on all purchases of property valued at more than £120,000. Currently, this varies between 1% for houses worth over £120,000 – up to 4% for houses valued over £500,000.
Your solicitor will also send the title deeds to your mortgage lender who holds them as security until the loan is paid off or the property is sold. He will then send you a completion statement listing all the transactions that have taken place, along with his final bill.
Buying at Auction
Buying at auction is becoming increasingly popular, and over 30,000 properties (8% of all properties sold in the UK) are sold in this way a year.
If you want an unusual property or one that needs renovation, this route can offer some good bargains, especially in December, when most other people are busy spending their money and time on Christmas.
Try not to get carried away in a bidding war. Decide the maximum you are willing to pay for the property – and stick to it!
Although you may find yourself a bargain, do bear in mind that many properties sold at auction are those that are difficult to sell or need serious renovation. You should make sure that the price you bid reflects this, taking into account the cost of any necessary work. You must know what you’re doing; otherwise, you can end up paying far more than the property is worth.
There are several advantages to buying at auction; in addition to being a quick way to buy a home, with no chains, you can often save money, and there’s no possibility of being gazumped. However, there are disadvantages too.
As you must commission your survey and carry out legal checks on the contract and title before the auction, these costs will be wasted if you’re out-bid.
Remember, the normal rules of commissioning surveys still apply when buying at auction. So if you’re planning to bid on an old (over 50 years), large (over three stories or 200 m sq), or unusual (thatched, timber, etc.) property, or you plan to carry out major alterations such as converting or extending, you should have a full structural survey.
Guide prices are often very conservative so that they attract as many potential buyers as possible. The actual selling price is often much higher than the guide price – often over double.
The reserve price is the lowest price the vendor is willing to accept, and if no-one bids above it, the property will remain unsold. When bids pass the reserve price, the auctioneer will announce that a property is ‘on the market’ and will be sold.
You should try to attend a few auctions before bidding so that you can familiarise yourself with the procedure. Remember that you will need to have the purchase contract and title checked by your solicitor; obtain a valuation or survey, and arrange a mortgage before you go to bid, although vendors will usually provide a legal pack containing the title deeds, leases, planning permission, searches, special conditions of sale and other information.
Buying at Auction Planner
Buying a property at auction is a rapid process- they’re often advertised only three to six weeks in advance, and payment must be made in full within four weeks (20 working days) of a successful bid.
The guide price is usually set low to tempt potential buyers – properties will usually sell at a much higher price – sometimes over double!
You will need to carry out the following:
- Contact property auctioneers in the relevant area and order catalogs for forthcoming auctions.
- Check when you need to register, should you want to bid
- Arrange to visit any property you are interested in
- Make a shortlist and go to the local authority with questions about your chosen properties.
- Find out if they have rights of way, boundary problems, and so on
- Arrange to revisit properties you are still interested in. Organise a survey and ask the surveyor or a builder to advise what, if any, work would need to be done and how much, roughly, it would cost
- Visit a mortgage provider to set up the mortgage offer on any property you will be prepared to buy. This has to be done before you go to auction. You can only bid if you have the money available, or it could be accessed within 20 working days of your bid being accepted
- The day before the auction, phone the auctioneers to check that the properties have not been withdrawn
- Attended the auction having decided the maximum amount of money you can bid, and stick to it
- If your bid is successful, your contract to buy the property is binding as soon as the hammer goes down. You will usually be asked to sign a contract, though there is no actual legal need – you are bound anyway. You’ll be asked to pay a 10% deposit or �1500, whichever is the greater, by banker’s draft or cash
- You must also prove your identity (so take some form of ID with you) and your solicitor’s details
- Insure the property immediately
- Pass details of your property to your mortgage lender to fast-track processing
- Instruct your solicitor or conveyancer
- Completion should take place within four weeks (20 working days)
If you’re one of the last bidders for a property that fails to reach the reserve price, the vendor may accept an offer after the auction. Tell the auctioneer if you’re willing to improve your bid.
Do remember that when bidding at auction, you bid unconditionally, and you cannot back out (as with a private purchase in England, Wales, and N. Ireland).
You will lose your deposit if you cannot complete the purchase for any reason.
Buying Property In Scotland
Scotland has its system of law, and buying and selling a property is quite a different process from the one in the rest of the UK. The system works more quickly, and there is less risk of gazumping.
The general process runs as follows:
- Apply for a mortgage
- Engage a solicitor or conveyancer (mandatory in Scotland)
- Find a property you wish to buy
- Ask your solicitor to ‘note interest.’
- Complete a mortgage application
- Get a valuation or survey
- Have the mortgage application agreed
- Make an offer on the property
- Complete the mortgage application
- Offer is accepted
- Fix a settlement date
- Arrange buildings insurance
- Solicitors complete missives (contracts)
- Settlement (completion)
In the rest of this section, we take a look at these procedures in more detail.
The Buying Process
Before making an offer you must have a valuation or survey done (and have the necessary finance), as once your offer in writing is accepted it’s legally binding. This means, however, that you will end up losing money on the survey costs if your offer is not accepted.
This has prompted a proposed change in the law where the seller is responsible for having a survey carried out before selling a property.
There are no licensed conveyancers in Scotland. Because solicitors do all the conveyancing and are so involved in the process, then they will usually arrange surveys.
Making an Offer
Most property is advertised as ‘offers above a certain price,’ for example, offers above £100,000, which is called the ‘upset’ price. These asking prices may be set low to attract potential buyers, and the actual selling price is usually about 5-30% higher.
As a result, it can be difficult to know where to pitch an offer as you don’t want to lose a property for the sake of a few hundred or thousand pounds, Completion the offer over the odds.
You should discuss any offer with your solicitor and try pitching it slightly above a round figure, e.g., £210,150 rather than £210,000.
Properties may also be offered at a fixed price, where the first reasonable offer is accepted. If there is a closing date for offers, all interested parties must make sealed bids, which are opened on that date -the vendor normally accepting the highest bid. They can, however, reject all offers, although this rarely happens.
When you’ve found a property you wish to buy your solicitor will contact the vendor’s solicitor by word of mouth and register your interest. This does not have any legal standing, and either party may pull out.
Once the vendor’s solicitor has had sufficient interest, he will usually fix a closing date by which time all offers must be submitted in writing. Your formal offer will come by letter, through a solicitor, and will include any items such as fixtures and fittings. The letter forms part of the contract of sale.
It’s virtually impossible to be gazumped in Scotland, as once an offer in writing has been accepted it’s legally binding and you cannot pull out. This is why it’s vital that you have a valuation or survey was done (and have the necessary finance) before making an offer.
Exchange of Missives
If the offer is accepted, a formal letter called ‘qualified acceptance’ is returned by the vendor’s solicitor, confirming or amending the conditions. These formal letters are referred to as missives and may go back and forth for clarification.
A formal moving in date is set which it makes easier to coordinate a sale and purchase, and removes some of the problems of being in a chain.
Once all the conditions are agreed, the purchase is then legally binding for both buyer and seller. There is no deposit paid in the Scottish system except if you are buying a new house from a property developer.
Once an offer has been accepted and the missives (contracts) concluded, you’re responsible for insuring the property, although it is often usual for an agreement to be made in the missives that the vendor remains liable until the date of entry.
Immediately before exchanging missives a search on the property and against the individual is made. This checks that the vendor has a good title to the property and that you can grant security for the loan.
A local authority search is also carried out to ensure that there are no proposed developments that would affect the property. Your solicitor will then initiate proceedings towards settlement (completion), which is usually four to five weeks after acceptance of an offer.
On completion day, settlement takes place whereby the solicitors acting for the two parties meet and exchange a cheque for the keys.
After completion, you pay your solicitor’s fees, stamp duty and registration fees for the disposition (the legal document that transfers ownership), which is registered with the General Register of Sasines or the Land Register of Scotland.
Buying a property abroad is becoming more and more popular as thousands of Britons rush to buy their very own place in the sun. However, the process is not at all straightforward, and you will need to thoroughly research the procedures relating to the particular country where you are buying.
However, here are a few general tips when buying abroad:
Make sure you buy through a qualified and licensed agent. In most countries (including France, Spain, Portugal and the USA), agents legally have to be licensed and using an unlicensed agent means that you will not be protected if things go wrong.
The agents in the countries noted above will tend to do more of the legal work than in Britain and so will charge more commission.
Always hire a solicitor to act for you – make sure they are English speaking if you are not fluent in the local language. In some countries, the locals do not use solicitors, but you should insist.
The solicitor will check that the seller owns the property and that there are no debts attached to it and that planning regulations have been met.
Local searches are not as regulated as they are in the UK, and it’s often a case of making informal inquiries at the local town hall.
Make sure you understand the role played by the state notary (notaire in France, notario in Spain). They are a state official, whose responsibility is to see that the sale is completed – they do not act for you or the vendor.
Do not sign anything until you are sure that you understand it.