buying a property in the uk

CELSIUM GLOBAL MOBILITY SOLUTIONS

ContentsFinance

Choosing the right property

Viewings

EPC / Home Report

Making an offer

Offer accepted

The legal process

FinanceFinancial adviceBuying a property will undoubtedly be the biggest purchase you ever make, so you need to make sure you crunch your numbers correctly to find out exactly how much you can afford and borrow from a mortgage lender. List all of your outgoings in detail so you can build up a realistic picture of what mortgage payments you can afford each month.

You can go directly to your bank, or any high street bank, but independent financial advice can save you money. An Independent Financial Adviser (IFA) can help you work out how much you can afford to borrow, what your monthly repayments will be and, more importantly, comb the market to find out the most favourable mortgage for you.

If you do decide to use an IFA ask them whether they have access to every mortgage on the market as some can only access a limited range of products, and if there is a charge for their service. Celsium can arrange for an independent financial advisor to contact you if you would like this service.

Stamp dutyYou must pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price above £125,000 if you buy a property in England, Wales and Northern Ireland, as the following table indicates:

Purchase price SDLT rate

Up to £125,000 0%

From £125,001 to £250,000 2%

From £250,001 to £925,000 5%

From £925,001 to £1.5 million 10%

Over £1.5 million 12%

In Scotland, you must pay Land and Buildings Transaction Tax (LBTT) on increasing portions of the property price above £145,000, as the following table indicates:

Purchase price LBTT rate

Up to £145,000 0%

Above £145,000 to £250,000 2%

Above £250,000 to £325,000 5%

Above £325,000 to £750,000 10%

Over £750,000 12%

Survey feesYour mortgage lender will value the property you intend to purchase before making you a mortgage offer. You will be required to pay the fee before the valuation is carried out and the fee does vary depending upon which lender you are using and which particular mortgage product you are taking. Expect to pay in the region of £250 to £500, depending upon the value of the property. Basically the more expensive the property, the higher the valuation fee.

It is prudent to have a HomeBuyer Report carried out at the property you wish to purchase, or for older properties, a Building Report (except in Scotland). This can be performed at the same time your mortgage lender carries out its valuation or can be arranged as a separate report.

The HomeBuyer Report offers guidance to legal advisors, highlights any urgent defects and includes a market valuation and insurance rebuild costs. It also includes advice on any defects that may affect the value of the property due to repairs and ongoing maintenance.

A Building Report is essential for larger or older properties, or if you’re planning major works. The most comprehensive survey will provide you with an in-depth analysis of the property's condition and includes advice on defects, repairs and maintenance options.

Expect to pay in the region of £450 to £900 for a HomeBuyer Report and in the region of £1,000 for a Building Report.

Arrangement feesYou will usually be required to pay a mortgage arrangement or “booking” fee before your mortgage application commences. The cost of this varies hugely so it is difficult to give a typical cost but if you pay less than £500 you have done well. Also note that the more attractive the interest rate, the higher the arrangement fee you are likely to pay.

Indemnity feesAlso referred to as a mortgage indemnity guarantee (MIG), higher-lending fee or charge (HLC), additional security fee or mortgage advance premium, this is a form of insurance designed to reimburse the lender if you borrow typically 90% or more of the property’s value and can’t keep up the repayments. Expect to pay around £1,500 for every £100,000 you borrow – added onto the total mortgage.

Agreement in principleIf your mortgage lender can provide you with an “Agreement in principle”, a declaration of how much you can borrow, this puts you in a very strong negotiating position with your estate agent and the vendor. An agreement in principle therefore makes you the more attractive buyer and due to this you have the opportunity of negotiating on that purchase price that much harder.

For further information about mortgage finance visit the FINANCIAL CONDUCT AUTHORITY website or the website for the COUNCIL OF MORTGAGE LENDERS .

REMEMBER, YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP WITH REPAYMENTS ON YOUR MORTGAGE.

Choosing the right propertyThe areaBefore you even start looking for property you need to decide where you wish to purchase. Ask yourself the following questions:

Do you prefer a town, urban or rural setting? How important are transport links? How far do you want to be from work? Do you prefer to walk to local amenities? Which local amenities do you need? Are school places available in the area?

O

Once you have shortlisted some areas, it can be a good idea to speak to colleagues to get an idea of reputation and spend some time driving or walking around the areas at different times of day, including evenings. You can find a lot of information about different areas on the web these days, but ZOOPLA provides a reasonable level of information via its “Local Info” tabs, such as star ratings for Community & safety, Entertainment & nightlife, Parks & recreation, Restaurants & shopping, Schools & public services, Transport & travel, giving you a good overview of the area.

Remember, you can extend and upgrade the house but you can’t change the area without moving home again.

The houseFor the estate agent to provide you with details of suitable properties, you will need to let them know in which areas you are looking, what type of property you prefer, what is on your wish list and where you could make compromises.

Consider the following:

House or apartment New-build, modern or traditional Redecoration or upgrading Parking arrangements No. of public rooms / separate diner No. of bedrooms / bathrooms / en-suite Garden size and maintainability Conservatory

Carry out research on the internet (RIGHTMOVE , ZOOPLA , and ONTHEMARKET ) and book as many viewings as you can as this will enable you to get a good idea of what is available in your rice range. It is worth taking photos with your smartphone, as it can be difficult to recall specific details once you have left the property.

Have a second viewing of any houses you like and try to visit at different times of day before you make a final decision. You will definitely spot any defects more readily during a second visit and you will get a better impression of the surrounding area.

ViewingsAppointmentsIf you happen to stumble upon a property you like, never approach the property unannounced. Most sellers will be unhappy about viewers appearing unexpectedly on their doorstep, and you should always consider the security aspect, so always contact the estate agent to make a viewing appointment. The seller will be more welcoming and likely to spend more time with you answering questions if they have advance warning and time to prepare.

Asking prices in ScotlandAsking prices in Scotland were traditionally in the format of “offers over” and trying to figure out how much you should offer was a bit like trying to pin a tail on the donkey. However, since the introduction of the compulsory Home Reports in 2008, which contain a surveyor’s valuation of the property, most properties in Scotland are now advertised at “offers around” or at a fixed price so the need for guesswork has been removed.

Questions to askIt is always a good idea to attend a viewing forearmed with a list of questions you should ask. You may have your own list already prepared but here are some pointers to get you started:

How long has the property been for sale?

If it has been on the market for a long time, does this indicate a problem with the property or neighbourhood?

Why are they moving?

Do they need more space as the family is growing, or is there a dispute with a neighbour?

How quickly do they want to move?

Within a reasonable timescale or are they looking a little further down the line?

Have they found a property yet?

If they have found a property they should be able to move reasonably quickly, if they haven’t started looking yet you may have to wait a while to complete the purchase.

Has the asking price been altered?

Was it overpriced? Does it need work doing to it?

Has it previously been under offer?

Establish why the buyers withdrew – this could indicate a problem.

What extras would be included in the sale?

Get an early indication of any items you will need to purchase when you move in.

EPC / Home ReportEnergy performance certificate (EPC)The EPC is a method of rating the efficiency of a building and was introduced in 2007 as a result of European environmental policy.

The EPC is a compulsory document which a seller must by law provide when putting their property on the market and the energy efficiency rating should appear on particulars provided by the estate agent.

Reputable agents will provide you with a copy of the EPC but if you are refused an EPC when you are entitled to it, you should contact the trading standards department of your local council.

In Scotland, the EPC must be displayed somewhere in the property, e.g. in the meter cupboard or next to the boiler.

RecommendationsThe EPC may include some cost-effective recommendations split into low-cost (up to £500) and high-cost (over £500).

Each recommended improvement will include:

An approximate cost

A typical annual cost saving

The performance rating after making the improvement(s)

Please note: the seller is under no obligation to act on the recommendations.

For more information about EPCs, visit www.direct.gov.uk

Home ReportA home report is a pack of documents provided by the seller of a home that gives potential buyers information about a property for sale. The report consists of three components:

Single survey

Energy report (EPC)

Property questionnaire

The single survey contains an assessment of the condition of the home, a valuation, and an accessibility audit for people with particular needs.

The energy report gives the home an energy efficiency rating and looks at features such as how well insulated the home is, and how it is heated. The energy report also recommends ways to improve the home's energy efficiency and reduce fuel bills.

The property questionnaire contains additional useful information about the property, for example, the property's council tax band, parking arrangements, alterations that have been made to the property, and whether there are any extra costs involved in living there (such as charges for the upkeep of communal areas).

For more information about Home Reports, visit www.scotland.gov.uk

Making an offerSubmitting the offer (England & Wales)Once you have decided you want to make an offer for a property, you need to consider your negotiating tactics. Your first offer should be just below the price you would ideally like to pay for the property. Never start with your “best and final” offer.

If your initial offer is rejected, which it probably will be, try to establish from the agent what price would be acceptable. Once you have made your “best and final” offer, ask for an answer within 24 hours and remind the agent that you have seen other properties in which you are interested – this will ensure they update you quickly.

As an example, if a property is on the market at £220,000, you could make an initial offer of £212,000 and then a best and final offer of £216,000. What you ultimately offer will depend upon market conditions at the time.

Offers in ScotlandIf a property is advertised as fixed price it means it will be sold to the first person to offer the price. If you see a fixed price property that you like, you should put in an offer as soon as possible.

If you have seen an offers over property that you like, you should get your solicitor to note your interest. Once the seller has received a few notes of interest they may set a closing date. If you have noted your interest you will be notified of this and you should make your offer before the closing date.

Your solicitor can advise you on reasonable offer to make on an offers in the region property. Your offer may be accepted, or the seller might set a closing date to get all interested parties to say how much they will pay.

Arranging a survey (Scotland)If you make an offer and it is accepted, you will be legally bound to buy the property, so you should arrange the survey before you make an offer. Some lenders may not accept the valuation provided in the Home Report single survey, so you should check this with them first in case you have to make your own arrangements. You can choose between two types of survey:

Mortgage valuation

HomeBuyer Report

Your solicitor will instruct your survey and should be able to report verbally on the results within twenty four hours.

Offer accepted First stepsOnce your offer has been accepted, you should ask the agent to take the property off the market – they are not obliged to do so but if they receive any further offers they are obliged to pass them to the seller. Then notify your solicitor of the property and agent’s details so that they can start the legal process (conveyancing). The estate agent will send to you and your solicitor a memorandum of sale outlining the necessary details.

Contact your mortgage lender / IFA to complete the mortgage application and arrange for a valuation of the property – in Scotland, you need to arrange this before you make your offer. Remember, you will normally have to pay for a survey up-front before the surveyor visits.

If you are in the position where you don’t need a mortgage, you won’t need a valuation survey. However, you are strongly advised to obtain a HomeBuyer Report that would highlight any defects within the property.

HomeBuyer ReportThe HomeBuyer Report offers guidance to legal advisers, highlights any urgent defects and includes a market valuation and insurance rebuild costs. It also includes advice on any defects that may affect the value of the property due to repairs and ongoing maintenance. Any issues to be discussed with your solicitor will be noted in the report.

If any defects have been revealed, or if the property has been “down-valued”, i.e. given a value less than the asking price, you can ask for a reduction to cover the cost of the works or re-negotiate your offer.

This report can be performed at the same time your mortgage lender carries out its valuation, but if you prefer a separate report, Celsium can arrange this for you.

Conclusion of missives (Scotland)Both solicitors will exchange formal letters (missives) to sort out any conditions of the sale before the offer is finalised. Your solicitor will also examine the title deeds to the property and report to you on anything of significance before missives are concluded.

Once both parties are satisfied with the conditions, the missives are signed and the offer is finalised. This process can take any time from two weeks to a few months, depending on how complicated the sale is.

Once the missives are concluded, the contract is legally binding and neither you nor the seller can withdraw from the contract or vary the terms at all, unless the other party agrees or there is something in the missives that allows you to do so.

The legal processConveyancingYour solicitor will carry out the conveyancing and “clear title” on your purchase before contracts are exchanged. This usually takes between 8 and 12 weeks, but can take longer depending upon the complexity of the case and the number of buyers and sellers in the chain.

What your solicitor does Checks local authority searches and any plans for the local area

Checks draft contract, title deeds and any other relevant paperwork (e.g. planning permissions, building regulation certificates)

Asks the seller questions about the property (e.g. fixtures and fittings, neighbour disputes)

Receives mortgage offer on your behalf

Checks for debts and bankruptcy

Arranges exchange of contracts and sends deposit monies to the seller’s solicitor

Prepares transfer deeds and mortgage deed and arranges for you to sign them for sending to the seller’s solicitor

Sends your money to the seller’s solicitor

Pays stamp duty on your behalf to HMRC

Registers the title to the property with the Land Registry

Sends deeds to mortgage lender

Exchange of contractsWhen the buyer and seller are happy with the contract, both sides sign final copies and send them to each other.

The agreement to sell and buy is legally binding once this happens. Usually neither party can pull out without paying compensation.

Prior to exchange of contracts, you will need to pay a deposit, usually 10% of the purchase price.

CompletionThe completion date is set at exchange of contracts and is usually one or two weeks after exchange of contracts, although exchange and completion can actually take place on the same day in some circumstances.

On completion day, your solicitor will transfer money to the seller’s solicitor and when this has been received you will be able to pick up the keys (usually from the estate agent) and move into your new home. This is usually from 1pm onwards, so make sure you liaise with your solicitor and removal company to ensure everybody knows what to expect.

The date of entry (Scotland)In Scotland, once the missives are concluded, the contract is legally binding

Within the missives, the agreed date of entry will be the day that the money and keys will change hands.

Unless you have made special arrangements, you are unlikely to get into the house before 1pm, so liaise with your solicitor and removal company to make sure you are all working to the same timescale on the date of entry.