Buying a property is typically the biggest purchase that a person makes in their life and doing it for the first time can be especially daunting and confusing. While algebra continues to be taught in schools, knowledge of the process when it comes to buying a property is normally a case of learning on the job. To assist, here is a brief guide for those looking to get on the ‘property ladder’ (please refer to the Glossary at the end of this article for terms that may be unfamiliar).
The Hidden Costs
The first realisation for prospective purchasers is often that there are many more costs involved than the purchase price itself. Buyers ought to plan ahead for mortgage advisor fees, solicitor fees, removal company fees and Land and Building Transaction Tax (Scotland’s equivalent of ‘Stamp Duty’ south of the border). It is also worth noting what furnishings are going to be left in the property at settlement and how much it may cost to make a house a home.
Preparing to Offer
Before searching in depth for your new property, it is advisable to obtain what is known as a ‘Mortgage in Principle’ (MIP) from a lender. A MIP will give you a realistic idea of what you can afford and the easiest way to organise this is by contacting a mortgage advisor, who will be able to walk you through the process.
The majority of properties in Scotland are marketed using the ‘Offers Over’ system rather than having a fixed price. The result is that actual prices are usually greater than the ‘Offers Over’ figure, as multiple prospective buyers submit competing offers. The valuation of the property found in the Home Report is also a significant figure to be aware of as most mortgage lenders will only lend up to this valuation. If you are to submit an offer above the Home Report valuation then you will need to make up the difference in cash.
Making an Offer
Once you find a property to your liking and decide you would like to make an offer, you should contact a solicitor to Note Interest on your behalf. Noting interest gives the estate agents an indication that you have a serious interest in the property and they will subsequently advise of the Closing Date - the deadline by when all formal written offers must be submitted. Your solicitor will confirm the terms of your offer with you, including any conditions you wish to attach, and submit this to the estate agents on your behalf. Some solicitors will charge for the submission of offers, regardless of whether they are successful or not, however Miller Samuel Hill Brown LLP currently do not.
Accepted Offer - The Conveyancing Process
Hopefully the estate agents will confirm that your offer is acceptable in principle to the seller and this is where the conveyancing process truly begins. In reality, for first-time buyers especially, it is common to miss out on several properties before you do succeed.
At this point, you will need to contact your mortgage advisor to confirm acceptance of your offer and they will arrange for your loan papers to be sent to your solicitor. Meantime, the seller’s solicitors will deliver the Title Deeds and other relevant document to your solicitor, as well as a formal written acceptance of the offer. This acceptance will most likely include ‘qualifications’ in response to the conditions included in your offer and thus it is referred to as a ‘qualified acceptance’. Your solicitor will discuss the qualified acceptance with you and negotiate on your behalf with the seller’s solicitor. The offer, acceptance and any subsequent formal letters form a binding legal contract and are known as ‘Missives’. It is becoming increasingly common that Missives are not concluded until close to settlement so don’t worry too much about this, your solicitor should keep you right! Your solicitor will review the Title Deeds, Legal Searches and other relevant documentation and report back to you to ensure there is nothing untoward that may prevent you from proceeding with the purchase.
Once the loan papers have been received, your solicitor will arrange release of the mortgage funds with your lender prior to settlement. In exchange for the mortgage loan you will be required to grant a Standard Security in favour of the lender, giving the lender certain rights over the property in that event that you fail to make your mortgage re-payments. Your solicitor will also draft the Standard Security and arrange for signing with you - yes, we are busy!
Settlement
Settlement takes place on the Date of Entry as agreed in the Missives. Prior to Settlement, your solicitor will calculate the balance required from you to complete the purchase including any Land and Buildings Transaction Tax and their fees. You will be asked to transfer the funds to your solicitor rather than directly to the seller. It is worth being aware that the Law Society has Anti-Money Laundering requirements which solicitors must adhere to and accordingly you may be asked to provide bank statements showing the source of the funds you are using in the purchase.
At settlement, the purchase price is paid to the seller’s solicitor in exchange for receipt of the Disposition. The Disposition is the legal document that will transfer ownership of the property from seller to purchaser. The keys are usually held by the estate agents and will be released once the purchase has completed. This may not always be first thing in the morning as there may be multiple sale/purchases completing on the same day which are all reliant on each other and this must be taken into consideration when arranging removals.
Immediately on taking entry you should check that the property is in good order and that all systems (e.g. central heating) are working properly. If there are any issues then these should be raises with your solicitor as soon as possible as there is a 5 working day period within which the seller will be bound to rectify these.
Finally, your solicitor will arrange payment of any Land and Buildings Transactions Tax due and will send the disposition for registration in the Land Register. Once the disposition and all relevant documents have been registered, copies of the updated titles will be sent to your solicitor and should be made available to you on request.
Glossary Of Key Terms
Closing Date – deadline set by the estate agents by when all offers for a property must be submitted
Date of Entry – date when the purchase completes and the keys become available for collection
Disposition – legal deed transferring ownership of the property from the seller to the buyer
Home Report – document supplied by a seller comprising a surveyor’s assessment of the condition, value and energy efficiency of a property, as well as a questionnaire completed by the seller containing additional information.
Mortgage in Principle - a provisional indication by a lender of what they could lend you based on your income, spending and debts.
Missives – the contract between the buyer and seller (i.e. the Offer, Qualified Acceptance and any subsequent formal letters exchanged by the respective solicitors)
Noting Interest – a verbal indication from a potential buyer’s solicitor to the estate agent that the potential buyer is interested in buying the property
Land and Building Transaction Tax (LBTT) – a tax payable when buying a property with a purchase price over the LBTT threshold
Standard Security – legal deed signed by the buyer which gives the mortgage provider certain rights over the property
Titles/Title Deeds – documentation detailing ownership and boundaries of the property, as well as conditions affecting use of the property.
