In today’s “buyers’ market” sellers are having to compete to attract buyers. This means buying should be a lot more enjoyable than selling. But it’s still essential to do your homework first – as there are a lot of pitfalls for the unwary.
As a buyer you can focus squarely on acquiring that fabulous new home that you really want. Cash buyers, first-time buyers and investors are best placed to buy since they don’t have to worry about selling first.
The same is true if you’re currently renting. But for most of us, quite a bit of time will have already been spent getting this far, with our existing house under offer.
Either way, the main task now is to track down the best possible new home within your budget. Then, to ensure success, the purchase process must be carefully managed, so nothing can rain on your parade.
The Buying Game
The stages you go through as a buyer will run something like this, although not always in this precise order. If you’re simultaneously selling your old property some stages will overlap, All of these stages are discussed in detail in the following .
- Deciding what can you afford
- Deciding where you want to live
- Deciding what sort of property you want
- Appointing your conveyancer
- Making an offer
- Finalising your mortgage
- Conveyancing and the legal process
- Getting a survey
- Exchanging contracts
- Completion and moving
The Legal Framework
Once you’ve found the right property and your offer has been accepted, the legal side of things can really start moving. The key legal steps up to exchange of contracts are set out below.
Often two or more of these tasks will be going on at the same time. From now on, progress is measured by how far things have advanced along this legal framework.
Draft Contract Checked & Returned
The draft contract sets out all the terms of the sale, although the date of completion isn’t normally inserted at this stage.
This is the first version of what will eventually become the final contract, confirming the change of ownership of the property. It is prepared by the seller’s solicitor based on a standard form modified to suit the seller and the property being purchased.
It is then sent to your solicitor, who checks it and amends any clauses that are detrimental to your interests, raising any questions with the seller’s solicitor before returning it.
The main thing they look for is any alterations to the standard text.
Although written in a standard format, these can sometimes go through many changes and alterations, before both sides are happy to agree to all the terms and conditions. Then the final versions can be signed and contracts can be exchanged.
There are two main parts to a draft contract:
Particulars Of Sale
Usually printed on the first page of the contract, this states the names of the two parties and provides a brief description of the property and the agreed purchase price etc.
Conditions Of Sale
Here you will find the details of the proposed transaction. This usually comprises standard conditions of sale (typically the Law Society Conditions) plus any extra conditions added by the seller’s solicitors (for example where they specifically require the buyer to insure the house from exchange).
To confirm current ownership of the property, a copy of the title documents (normally the ‘office copy entries’) usually accompanies the draft contract along with an attached fixtures and fittings form.
‘Preliminary Enquiries’ Sent To Vendor’s Solicitor
One of the first jobs is for your solicitor to send out a long list of questions about the property to the other side’s solicitor. These preliminary enquiries (or ‘pre-contract enquiries’) are on a standard form, usually with a few extra queries added at the bottom of the list.
They ask things like whether the property is connected to mains gas, water, electricity and drainage, whether there have been any disputes with neighbours, and what alterations have been made to the house.
Further questions are raised about any known rights of way, who owns the boundaries, and whether any extensions have been built. If you’re buying a flat, information about the lease will also be requested.
A separate fixtures and fittings form asks sellers to state exactly what they’re including in the sale – ie whether carpets, curtains and lights etc are to be left at the property.
In some cases the seller’s solicitor will start the ball rolling and volunteer this preliminary information, but if the sellers are not terribly organised these questions may ricochet to and fro between the parties for a number of weeks until satisfactory answers are forthcoming.
Of course, it doesn’t help that the replies to individual questions are typically vague and unhelpful, such as ‘I don’t know’, ‘Not to my knowledge’ and ‘No, but please rely on your own searches’.
But if a vendor deliberately lies – for example by denying any history of boundary disputes with neighbours, they could be sued for damages.
Local Authority Search
The Local Authority search is one of the most important components of the purchase process. This is because down at City Hall there is a veritable treasure trove of important data waiting to be explored.
Here you will find records of planning consents, infringements of building regulations, and perhaps even warning notices issued for ‘dangerous structures’ at the property you’re buying (such as unstable chimney stacks).
They also keep records of compulsory purchase notices – where buildings are zoned for compulsory acquisition so that they can be demolished to make way for a major project, such as a new ring road.
Clearly, this is crucial stuff that could drastically affect the value of your property.
So a number of searching questions are sent to the Council, and several different departments are required to provide answers. These enquiries will also ascertain whether the property is Listed or located in a Conservation Area, whether the road is publicly maintained (otherwise the adjoining home owners may be liable for the cost of maintaining it), and to check that the Council haven’t zoned the area as a hub for super-casinos or new ring roads.
Any council grants secured on the property should be flagged up, along with any planning restrictions on adding future extensions to the house (eg where permitted development rights have been removed).
An additional set of questions may also need to be sent to the water authority to find out who’s responsible for the drainage system. Sometimes other specialist searches are needed, depending on the property’s location.
If you’re planning to move to an area where mining was a traditional industry, a mining search will be needed.
Or if your new home faces a common or village green, there’s a risk that you might be expected to pay towards its upkeep, so a ‘common search’ will be required to sniff out any such liabilities (though as a bonus you may be entitled as the new owner to partake in the ancient right of grazing your sheep on common land!).
Checking Title With The Land Registry
At the same time as your solicitor is mulling over the draft contract, perhaps the most important check of all must be carried out – that the person from whom you’ve agreed to buy the house isn’t an identity fraudster but is actually the true owner with the legal right to sell the property.
This is normally done by checking the Land Registry ‘office copy entries’. However, in those rare cases where properties are unregistered, your solicitor will need to sift through a bundle of old title deeds known as an ‘Epitome of Title’.
While they’re at it, they will also confirm whether there are any public rights of way across the garden, and conversely whether you benefit from rights of access over anyone else’s property.
They will further check any recorded legal restrictions on the use of the property (such as agricultural occupancy restrictions). Any intriguing issues that come to light will then be raised with the seller’s solicitor.
Checking Your Mortgage Offer
Unless you happen to be that rare species, a cash buyer, you will not be able to exchange contracts until the formal mortgage offer has been received from your lender.
This isn’t just the agreement in principle you got from your lender ages ago. It’s a formal written offer confirming that they will come up with the funds secured on the house you’re buying.
But first, the mortgage valuation must have been carried out, hopefully valuing the property at the agreed sale price. It also depends on the lender satisfactorily processing your income references and credit ratings.
When everything’s tickety-boo, your solicitor will send you the mortgage deed to sign.
You will also need to confirm that you have sufficient money set aside to pay the balance of the purchase price not covered by your new mortgage. Cash buyers will need to provide proof of the existence of funds, such as a bank statement or an impressively bulging suitcase.
Sometimes the bank’s mortgage valuation report will flag up issues about potential legal concerns that have been spotted on site. This normally relates to matters like shared access, apparent rights of way over gardens, nearby electrical sub-stations, and tunnel passageways through terraces (‘flying freeholds’).
They may also point out any extensions or structural alterations that needed planning or Building Regs consent. Such issues will need to be further investigated by your conveyancer. In rare cases lenders may keep a retention to encourage buyers to repair major defects.
Your solicitor will normally receive a copy of the valuation report direct from the mortgage lender so they can raise questions about anything suspicious noted in the report. But occasionally banks forget to send them one, so it’s not a bad idea to pop a copy of yours over to their offices just in case.
Arranging For The Buyer To Sign The Contract
Once your solicitor is happy with all the terms of the contract, you will be invited to sign it (together with your partner or other joint purchasers). This normally involves a visit to their offices.
But before signing it’s worth taking a few moments to browse through the contract papers and title documents. As far as possible (without being fluent in legal-speak) make sure that you are happy before you sign and commit to contract.
The magic words ‘exchange of contracts’ mean that the sale is now binding on both parties.
It’s not entirely unknown for buyers to pull out after this stage, but if you were unwise enough to do so you’d stand to forfeit all the deposit money, as well as leaving yourself open to being sued for damages by the seller. Before exchange can take place, sufficient deposit money will normally need to be transferred safely into your solicitor’s bank account.
Once contracts have been exchanged, your solicitor’s work doesn’t stop. There are still several key legal tasks that need to be carried out prior to completion.
Timing Your Purchase
Somewhere in the small print of mortgage adverts it normally states something like ‘House prices can fall as well as rise’. Rather unhelpfully, they don’t tell you when this is going to happen.
Even the experts consistently fail to accurately predict the timing of market downturns. One thing that everyone is agreed on is that markets are cyclical. As a very rough rule there has been a slump in house prices every 7 to 12 years, and this, of course, is the best time to buy.
The problem is, trying to second-guess the housing market is a very tough call because unexpected world events, such as wars, natural disasters, inflation and oil prices, dramatically affect international markets and interest rates.
This in turn has a major influence on availability of mortgage funding, and hence the demand for housing. Nonetheless, before you start it’s important to have some idea of the state of the market in order to gauge the strength of your negotiating position as a buyer or seller.
Buying During A Boom
When property prices are rapidly rising it may seem as if they will continue moving upwards forever. The fear amongst buyers is that by holding back from the ‘property ladder’ in the boom times, prices will continue to rocket, making it even harder to save for a deposit in future.
But there’s a lot of luck involved in buying property, particularly when it comes to timing. No one wants to have ‘bought at the peak of the market’ and then be in the position where they have to witness their main asset plunging in value over several years.
Buying During A Slump
Amidst all the doom and gloom that the media delight in churning out during a slump, it can be hard to know when exactly to take the plunge and start buying.
It may be tempting to hang on until prices fall even further, but remember that they won’t drop forever. Eventually, as wages and rents increase over time, property becomes more affordable.
Bargain hunters buy cheap, and as demand increases prices rise, fuelling media tales of easy money, and then everyone else in the country follows suit and plunges in, pushing prices higher still.
Low interest rates, easy finance and full employment are other ingredients that pave the way for recovery.
Where prices fall to the extent where the value of a house has shrunk to less than the mortgage secured upon it, it means you’re in ‘negative equity’. Plenty of home owners found themselves in this position during the early 1990s slump, but for most it simply wasn’t an issue.
Problems are only likely to arise should you be forced to sell – for example where you have to move for a new job. If you did sell it for less money than the mortgage secured on it, you would still owe the bank the balance, which could be a seriously hefty sum.
The best advice is to just get on with your life, and sooner or later prices will pick up, often quite dramatically.
What If You Haven’t Yet Sold?
Suppose you were just idly mulling over the notion of moving house when, quite unexpectedly, you come across your dream home with a For Sale board outside. It’s the house you’ve always wanted, but you haven’t even put yours on the market. By the time you’d waited for an offer to materialise on your place, ten other buyers could have snapped it up.
So what should you do?
If you seriously decide to buy before selling, the only way your offer will be taken seriously is if you effectively become a ‘cash buyer’ for example by taking out a bridging loan.
Otherwise, even if your offer is accepted, there’s a fairly high chance you’ll get pushed sharply aside directly a ‘proceedable’ rival buyer pops up. And losing a property that you’ve got your heart dead set on is obviously going to cause immense anguish.
As a rule, the further the purchase process has proceeded, the more painful it becomes to lose a property. Even after just a week you probably already had all the decoration and furnishing planned to perfection in your mind’s eye. By the second week you’d mentally built the extension, brought up the family and joined the local parish council. Then suddenly there’s a competing bid from someone else who barges in with wads of cash, and promptly proceeds to exchange contracts.
The hardest thing to realise when disaster strikes is that houses are like rather bargains on eBay – if you miss one, sooner or later another, possibly even a better one, will come along.