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The Ultimate First-Time buyers guide – part 3 (of 3)

Mortgages

Here’s the final part of our ultimate first time buyers guide – here we’re dealing with what happens once you’ve found the property and agreed a deal with the seller

Found it! – When you’ve agreed a deal:-

On the face of it you can relax now – you’ve agreed a deal so that’s everything sorted then isn’t it? – – Surely you’ve just got to do a bit of paperwork and everything’s done?

Sorry, but the answer’s no. You may have agreed a deal in principal but it’s a fundamental point in English law that neither party is committed to this deal yet. So both you and the seller could pull out without any reason and there’s no comeback on either of you. Before you have a heart attack please rest assured that most deals will carry on to completion on the terms agreed initially, but I’m afraid you’ve got a while to go before you can relax.

At what stage do I need a solicitor?
NOW! Ideally when you were sorting out the cost of moving house you will have got figures for the conveyancing (Click here for free conveyancing quote). At that stage you would probably have an idea of which solicitor you feel you can work with. Your solicitor’s role in all this is to safeguard your interests when buying the property – they are there to make sure you don’t buy a load of trouble (but if you insist that you’re happy buying a load of trouble then the solicitor will make sure that you do this with your eyes open)

If you’re going to use us then we would recommend instructing us to act at an early stage – even before you’ve decided on the property to buy. As we do no move, no fee, you’ll not lose out by doing this – even if you don’t go ahead. At the point at which the sale is agreed with the seller, the Estate Agent will normally ask for your solicitors details anyway so it’s handy to be able to give them to them.

If you haven’t already instructed your solicitor to act then do it now. They’ll need a fair bit of information about the property – address, price, sellers details, sellers solicitor details, how they can get hold of the HIP on the property, and so on. This will all help them to start the conveyancing

Conveyancing – what’s that all about?
Conveyancing is the legal process of passing ownership of a property from the seller to the buyer. The seller has their own solicitor (it can actually be a solicitor, or a licensed conveyancer, or you can even do it yourself – if you’re mad as a box of frogs that is), and the buyer has theirs.

As an overview, the seller’s solicitor gathers together a load of information about the property – in order to show that the sellers own it, and that the deeds to the property are all in order with no legal problems. They put this information (together with some other documents called searches) in the Home Information Pack for the property (Click here for our Home Information Pack Beginners Guide).

When a buyer is found this information is supplied to the buyers solicitors. They then look through this information and also do some other checking (using things called searches), to make sure that the property is OK for the buyer to buy. If the buyer is having a mortgage then the buyers solicitor will normally act for them as well. Finally the two sets of solicitors sort out the handing over of the money for the property, and registering the buyers solicitors as the new owner of the property.

I’ve written a guide to conveyancing and included that below

Mortgage – getting that sorted out
Although you’ve previously (hopefully) had an indication of the sort of amount you can borrow, you now have to make a formal application for a mortgage offer. A mortgage offer is a formal document from the mortgage company saying that they will lend you X pounds for the purchase of Y property for Z price. If you’ve used an independent Financial Adviser (or IFA) to advise you on the mortgage to go for then they will normally sort out getting the application submitted. At this stage you’ll normally have to pay the mortgage valuation fee, and possibly an arrangement fee for the mortgage (sometimes the arrangement fee is paid later). You may want to have something more than a basic valuation carried out – have a look at the “Survey – do I need one?” section below in relation to this

When you make your application to the mortgage company they will firstly follow up with your employer to confirm that you do actually earn what you said you did. If you’re self-employed they will normally want to see accounts and may require a report from your accountant (your IFA should be able to advise you on what’s required). They will also request a valuer to carry out the valuation on the property. Once all that information has come in they will do some internal processing and eventually send out a mortgage offer to you and a copy of it to your solicitor.

Survey – do I need one?
I mentioned a mortgage valuation fee above – if you’re buying a house with a mortgage then the mortgage company will insist that at the very least you have a valuation prepared (at your expense). Although you are paying for this report, it is being prepared for the mortgage company, not you (although you can see it). As such, they are basically just reporting on what they consider to be the value of the property, and any obvious defects on the property.

For most properties the valuation will be fine for you as well. However if you’re worried about the state of the property itself then you might want to pay more and go for a more in depth survey. Here you’ve got two options – a House buyers report and inspection, and a full structural survey.

House Buyers Report and Inspection:-
This will cost quite a bit more than the valuation but will usually run to 10 sides or more, and will usually make it sound like the house is falling down. They can be useful in giving you a plan of what works you ought to carry out on the property over the coming months and years, including which items are more important/serious. Normally you should be able to direct the surveyor to particular things you might be concerned about to make sure he/she spends enough time looking at them. These reports can be useful but are usually scary to look at – if you’re aware of that before you look at it then it’s not so bad.

Full Structural Survey
If the House Buyers report and inspection makes the house sound like it’s falling down, the full structural survey can make it sound like it’s already happened! It’s basically like the house buyers report on steroids and will go into great detail. For most house purchases this would be overkill.

Guide to conveyancing
This part of the guide is taken from our website – if you want to view it on the website then click here for the conveyancing beginners guide. The version on the website has a jargon-buster built into it which explains in detail all the technical terms used (such as Title Deeds or Searches)

– Step 1 – We will firstly contact the seller’s solicitors and ask for details of how we can get hold of the Home Information Pack (or HIP). This contains the local authority and water searches. If the property is in a mining area we’ll have to request a mining search as well. Searches are simply a list of questions about the property that are sent to the local council, the water authority and the Coal Authority. When we get a copy of the searches from the HIP we’ll have to make sure that the searches are OK for us to use (they have a shelf life of around 6 months and we’ll need to make sure they haven’t ‘expired’. If they have run out then we’ll need to request fresh searches). The HIP will also contain a copy of the title deeds. We’ll also request the Sellers solicitor to let us have a contract, and questionnaires filled out by the seller.

– Step 2 – The only other thing we will need before we can proceed is a copy of your mortgage offer (if applicable). Once we have all of the relevant documents, we will ask you to sign the contract. If you are just buying then we will ask you to for a deposit as well (you will be told how much is needed), but if you are buying and selling then this will generally not be needed.

– Step 3 – We will go through all the above documents with you (either in the office or by preparing a plain english report for you to read at your leisure) and explain any problems there may be with the property. Once you are satisfied that there are no major problems, then you are ready to exchange contracts.

– Step 4 – Once the buyer and the seller are ready, a Completion Date (the “moving date”) is agreed. We then exchange contracts (this means swapping the contract signed by the seller for one signed by the buyers – together with a deposit provided by the buyers). Once contracts are exchanged the contract is binding and neither party can withdraw without incurring massive expense.

– Step 5 – On the Completion Date, we hand over to the seller’s solicitor the remainder of the purchase money and in return receive the transfer document and the title deeds.

– Step 6 – We must then within twenty-eight days arrange for the payment of stamp duty (if appropriate) and, within two months of the completion date, apply to register the buyer’s ownership at the Land Registry.

A word about chains
The above 6 steps set out the procedure for one transaction – one seller(s) selling one property to one buyer(s). What normally happens however is that the sellers are themselves buying on from someone who’s also buying on – and so on until you get someone who’s selling but not buying another property (e.g. they are emigrating, or have already bought their other property or any other reason). This group of transactions is known as a chain.

If there is a chain of transactions, steps 1 to 6 above need to happen for every single person within that chain. The complication comes from the fact that the exchange of contracts bit (which is the first really important step – it’s when everything becomes binding) has to take place for every party in the chain on the same day at the same time – logistically this can be a bit of a nightmare. The other problem is that every party in the chain will have to agree upon the completion (moving) date. Normally this all takes place on the same day – so that in a long chain of 5 or more parties they will all be moving house on the same day.

The hassle of being involved in a chain comes from the fact that each party in the chain will have their own set of priorities and attitudes – one may be in a hurry, one may now be bothered, and one may be unable to move before a certain date (but hasn’t told anyone that yet!). It’s not unusual to see clients to sign contracts and then phone up the chain to see how close we are to exchange, only to find that the person at the top or bottom of the chain has only just started their transaction. Everyone in the chain then has to wait until they’ve caught up before it can go ahead.

As buyers it’s worth your while trying to find out how long your chain is at the outset, and what stage each party in the chain is at. The Estate Agent should be able to do this at the start – it’s in their interest to know this information as well. It’s good to find this information out as early as possible so you don’t get any nasty surprises later on. There’s nothing wrong if you phone up each of the parties in the chain – if you can all stay in touch throughout the transaction it can help to speed up the process of agreeing dates for moving etc – but don’t agree anything without confirming it with your solicitors first.

At some stage near to completion it’s a good idea to meet the sellers and get them to show you how to work the boiler, thermostats, where the main water stopcock is, main gas tap, main electrical supply switch, and so on. It’s not the end of the world if you can’t do this but it’s nice to know it in advance

After it’s yours – moving in
At the end of the conveyancing process you’ll finally get the keys to your new house. This is a very exciting time (and can also be a bit scary!).

If you weren’t able to go through stuff with the sellers before completion then it’s a good idea to find out straight away where the main shut-off is for the water, gas, and electric – should something go wrong it’s no fun looking for this stuff in the dark with a water or gas leak!

You might want to suggest to the sellers that they redirect their post to their new house – they can do this by telling the local post office – it costs a small amount (can’t remember how much – £30 or so) and lasts for a year I think. It’s worth you mentioning it to them so you’re not continually getting their mail and having to forward it on yourself. This service is useful to them and useful to you.

On the day you move in it’s a good idea to take readings from all the meters and let the suppliers know. The sellers should have done this but it’s easy to forget. You then need to contact them and let them know that you’re taking over the supply – they’ll have their own procedure for switching this to you. You might also want to switch utility suppliers at this stage – it can often save you money. www.moneysavingexpert.co.uk has a good section on this.

You now need to let everyone know your new address. Don’t forget to let the council know as well – you’ll be liable for council tax from the date you move in.

Before unpacking your stuff – put the kettle on and have a nice cup of tea and a biscuit – you’ve earned it. You probably won’t have to do all this again for a few years – the average person moves every 7 years.

I hope this guide has been useful to you – if you’ve got any questions about it by all means pop them onto the form at the bottom of the page and I’ll answer them as soon as I can

Cheers

Mark

5 Responses to “The Ultimate First-Time buyers guide – part 3 (of 3)”

  1. Anonymous says:

    We are now mid process – thanks for reminding us we are not likely to be the only couple to be going barking mad in this house market.Great cut out and keep guide to retaining your sanity as a first time buyer.Lots of brilliant advice, we will pass the link on so others can benefit from your wisdom…Lu Blackband and Robin Lewis

  2. Mark Slade says:

    Thanks for the nice comments Lu and Robin – and good luck with your property purchase. Try and stay sane and remember it's all worth it when you finally move in!

  3. Anonymous says:

    Very imformative, thank you.

  4. Dawson Chambers says:

    Absolutely brilliant, great advice in easy to understand language, very refreshing.

  5. Sladey says:

    Thanks for the kind comments – tell your friends about it! Also if there's anything else you'd like to read about relating to property let me know – if I can I'll do a blog on it

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