Some advice on buying and selling your home...
Buying a home
This information applies to England, Wales and Northern Ireland
How much can you afford
The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much (for information on mortgages, see under heading Mortgages).
Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller.
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-
- survey fees
- valuation fees
- stamp duty. This is payable on properties costing more than £60,000 and is at least 1% of the purchase price
- land registry fee
- local authority search
- fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a mortgage broker
- the buyer’s solicitor’s costs
- VAT
- removal expenses
- any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.
You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation and/or a survey. If the solicitor has started any legal work you may also have to pay for the work done.
You should also take into account the running expenses of the property you wish to buy. These may include:-
- heating bills
- community charge/council tax
- water rates
- ground rent, if the property is leasehold
- service charges, if the property is a leasehold flat
- insurance costs, including life insurance, buildings and contents insurance.
You will also have to pay a deposit on exchange of contracts, up to 10% of the purchase price, a few weeks before the purchase is completed and the money is received from the mortgage lender.
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How to find a property
There are a number of ways in which you could find a property to buy:-
- using estate agents
- looking at the property pages in local newspapers
- contacting house building companies for details of new properties being built in the area.
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Deciding on a property
When you find a property you should arrange to look round it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example, for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
Is the property leasehold or freehold
Leasehold property
A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land - who is called the freeholder.
The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender. You should consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.
Freehold property
If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.
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Making an offer
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.
If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.
If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.
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When the offer has been accepted
When your offer for the property has been accepted you will have to consider the following:-
- whether a holding deposit is payable
- arranging a mortgage - see below
- whether a survey is necessary - see below
- who will do the necessary legal work - see below
- whether you want to buy with someone else - see below.
Holding deposits
Once the owners have accepted your offer the buyer may be asked to pay a small deposit to the estate agent. This is not usually more than £500. It is meant to show that you are serious about going ahead with the purchase. It is repayable if the sale does not go ahead.
Arranging a mortgage
If you have not already begun to arrange a mortgage, you should start to do this now. It should take about three weeks from the application for the mortgage to the formal offer being made by the lender. However, this time-scale may vary.
Whoever agrees to lend the money will want to have the property valued. This is to make sure that the lender could get the loan back if for any reason you stopped paying your mortgage and the house had to be sold again. The valuation will be done by a surveyor on behalf of the lender but you will have to pay for this valuation. The fee will be payable in advance, usually when the you send a completed mortgage application form to the lender.
If the amount of money to be borrowed is more than a certain percentage of the valuation of the property (usually 75-80%), your lender makes it a condition of the loan that you take out extra insurance to cover the extra amount. You pay a single premium to your lender which is usually added to the loan. This is known as a mortgage indemnity guarantee.
Arranging a survey
The valuation which is done for whoever is lending the money is not a survey. You should consider whether or not to have an independent survey carried out in addition to the valuation. The survey would not only consider the value of the property but would also examine the structure of the property and should identify any existing or potential problems.
There are two levels of survey that you can choose between:-
- a full structural survey. This is suitable for a property which is large, more than 80/90 years old or in doubtful condition
- an intermediate or ‘house/flat buyers report’ that gives a report on the condition of the parts of the house that are easy to see and to get at and may recommend further tests or investigations, for example, a specialist check for woodworm. This is particularly suitable for properties built this century which appear reasonably sound. It is much cheaper than a full structural survey.
It is possible for you to use the same surveyor who does the valuation to carry out the survey and this may be cheaper. However, you can use a different surveyor if you wish.
If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase or want to negotiate further with the seller about the price. The surveyor will usually advise you as to how any problems they have identified should be dealt with and the likely costs of this. You can find more useful information about property surveys at www.rics.org/public/ups.
Choosing who is to do the legal work (conveyancing)
The legal process of transferring the ownership of the property from the present owner to the buyer is known as conveyancing. You should decide who you want to do the conveyancing work. You can choose to:-
- use a solicitor; or
- use a licensed conveyancer.
Using a solicitor
Most firms of solicitors offer a conveyancing service. Although all solicitors can legally do conveyancing, it is advisable to choose a solicitor who has experience of this work.
Using a licensed conveyancer (EW only)
You can use a licensed conveyancer to do your conveyancing. Licensed conveyancers are not solicitors but are licensed by the Council of Licensed Conveyancers.
If you want to find out if a local conveyancer is licensed you can write to:-
The Council of Licensed Conveyancers
16 Glebe Road
Chelmsford
Essex CM1 1QG
Tel: 01245 349599.
Finding out how much it will cost
Before making a choice as to who will do the conveyancing, you should be advised to find out the probable costs of the conveyancing. It is important to contact more than one solicitor or licensed conveyancer as there is no set scale of fees for conveyancing. You should:-
- check whether the figure quoted is a fixed fee or depends on how much work is involved
- check that the figure includes stamp duty, search fees, land registration fees, expenses and VAT and get a breakdown of these costs
- find out what charges, if any, will be made if the sale falls through before contracts are exchanged.
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Buying with someone else
Legal ownership
If two or more people are buying the property jointly they will be joint legal owners. The agreement of all legal owners is needed if the property is to be sold, although if there is a dispute an owner can apply for a court order.
Beneficial ownership
As well as the legal ownership of property, there is the beneficial ownership to be considered. This means the shares in the property to which the owners are entitled.
There are two types of beneficial ownership - joint tenants and tenants in common. The most important difference is what happens when someone dies. If a joint tenant dies, their share passes automatically to the remaining joint tenant(s). Tenants in common each have a share in the property that they can dispose of as they wish, either whilst they are living or through their will (known as the rules of intestacy).
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Steps in the legal work of buying a property
Although it is impossible to give a precise idea of how long the legal work involved in buying a property takes, it is possible to offer guidelines. From having an offer accepted to exchange of contracts can take up to seven weeks and from exchange of contracts to completion can take up to four weeks. However, if there are any problems the time taken may be longer.
Enquiries made by the solicitor or, in England and Wales, licensed conveyancer
Once you have instructed the solicitor or, in England and Wales, a conveyancer, the seller’s solicitor or the licensed conveyancer draws up a contract which will eventually be signed by you and the seller. However, before the contract can be signed, your solicitor or licensed conveyancer must make sure that there are no problems with the ownership of the property, rights of way, access, or future developments in the area that might affect the property. This is called ‘making enquiries and searches’. The solicitor or licensed conveyancer makes the enquiries and searches as follows:-
- local searches. These are enquiries made to the local authority (or in Northern Ireland, the appropriate government department) about any matters which affect the property which involve the local authority, such as whether there is a compulsory purchase order on the property. Local searches also include questions about any proposed changes or development in the area that might affect the property such as roads, housing, shops. During the local search, the local Land Charges Register (Registry of Deeds in Northern Ireland) is also checked. This gives information about any matter which affects the property such as tree preservation orders, if it is a listed building or in a conservation area; and
- enquiries made to the seller by the solicitor or, in England and Wales, a licensed conveyancer. These are a set of standard questions about the property, boundaries, neighbour disputes and fixtures and fittings that will remain in the property. There may also be additional questions that the solicitor or licensed conveyancer thinks are necessary, such as the transferability of guarantees for any work done on the house, for example, a damp proof course; and
- from the Land Registry.
Arranging to pay the 10% deposit
Whilst the solicitor or, in England and Wales, a licensed conveyancer is making the enquiries, you should sort out how you will pay the deposit that has to be made when the contracts are exchanged. This deposit is usually 10% of the price of the home. However, it is sometimes possible to come to an agreement to pay a smaller deposit. If you are also selling a house it is usually possible to put the 10% deposit on the property being sold towards the deposit on the property you are buying.
If you are unable to provide the 10% deposit it is possible to use a ‘deposit guarantee scheme’. Your solicitor or licensed conveyancer can arrange this with an insurance company.
If raising the deposit may be a problem, you should discuss the options with your solicitor or licensed conveyancer.
To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
Alternatively, you could consider borrowing the money for the deposit from elsewhere, for example, from relatives or a bridging loan from a bank. However, the amount of interest you will have to pay for a bridging loan will be high and you should check how much this arrangement will cost.
Insuring the property
You should make sure that buildings insurance is arranged from the date of exchange, because once contracts have been exchanged you are responsible for the property.
You may be able to get information on buildings insurance from your mortgage lender, solicitor or, in England and Wales, a licensed conveyancer.
To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
Exchange of contracts
The final contract between you and the seller is prepared when:-
the solicitor (or licensed conveyancer) and you are satisfied with the final outcome of all the enquiries - any surveyor’s report has been received and any necessary action taken
- the formal mortgage offer has been received
- arrangements about the payment of the 10% deposit have been made
- the date of completion has been agreed.
You and the seller each have a copy of the final contract which you must sign. These signed contracts are then exchanged. At exchange of contracts both you and the seller are legally bound by the contract and the sale of the house has to go ahead.
You should make arrangements for the supply of gas, electricity and telephone service and make sure that the seller is arranging for final meter readings to be made.
Completion
Completion of the purchase usually takes place about four weeks after exchange of contracts. On the day agreed for completion:-
- the mortgage lender releases the money
- the deeds to the property are handed over to your solicitor or licensed conveyancer
- the seller must hand over the keys and leave the property by an agreed time
The solicitor or licensed conveyancer (in England and Wales only) will usually send their account to you on, or soon after, the completion date.
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The right to buy and the Statutory House Sales Scheme
Who has the right to buy (The Statutory House Sales Scheme in Northern Ireland)
As a public sector tenant you will probably have the right to buy if you are a secure tenant of:-
- a district council
- a London borough council
- a non-charitable housing association
- a housing action trust
- in Northern Ireland, the Northern Ireland Housing Executive.
You have the right to buy if you have been a public sector tenant for at least two years. This need not necessarily have been in your present accommodation. A tenancy with another public sector landlord can be included in this time.
As a tenant you will not have the right to buy if you are:-
- a housing association tenant whose tenancy began on or after 15 January 1989
- a tenant of a property owned by a charity, although you may be entitled to a lump sum grant to help you buy on the open market
- a tenant of sheltered housing or housing specifically designated for the elderly.
If you are not sure whether you have the right to buy you should check with your landlord which category you fit into.
Discounts
As a tenant with a right to buy you will get a discount on the price of the property. If you live in a house the discount will be between 32% and 60%, depending on how long you have lived there. If you live in a flat the discount will be between 44% and 70%, depending on how long you have lived there. The discount will not exceed the regional upper limits, which range from £16,000 to £38,000. In Northern Ireland, the upper limit for discount is £34,000.
If you exercise the right to buy and sell the property within three years you will have to repay all or some of the discount.
How to pay
As a tenant who wants to exercise your right to buy you should try to obtain a mortgage from a building society or high street bank. You could also contact a mortgage broker to see if they can arrange a mortgage.
However, if you cannot afford to buy the property outright you can still buy under the rent to mortgage scheme. Under this scheme you can buy a share of the property and make mortgage repayments on the amount you have borrowed for this. The landlord will retain ownership of the remaining share of the property.
How to apply
In England and Wales, if you want to apply for the right to buy you should ask your landlord for the Right to Buy Claim Form (Form RTB1) or a house sales application form in Northern Ireland. The landlord must provide it.
The right to acquire
As a secure or assured tenant of a registered social landlord, for example, a housing association or a local housing company, you may have the right to buy your home under a different scheme called the ‘right to acquire’. The right to acquire only applies to a limited number of properties, for example, homes built with public funds on or after 1 April 1997.
For more information about the right to acquire, you should contact your landlord or the Housing Corporation who can be contacted on telephone number 020 7393 2000 or by visiting www.housingcorp.gov.uk .
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Mortgages
If you wish to buy a home you may be able to borrow money to do this. The borrower offers the home as security against the loan. The lender has a legal charge against the property, that is, if you do not keep up the agreed repayments, the lender can take possession of the property. This is known as a mortgage. The loan will be for a fixed period and the borrower will be charged interest on the loan.
Types of mortgages
There are several types of mortgage available. The most common are:-
- repayment mortgage. This is a mortgage in which the capital borrowed is repaid gradually over the period of the loan. The capital is paid in monthly instalments together with an amount of interest. The amount of capital which is repaid gradually increases over the years while the amount of interest goes down
- endowment mortgage. This mortgage consists of two parts: the loan from the building society and an endowment policy taken out with an insurance company. You pay interest on the loan in monthly instalments to the building society but do not actually pay off any of the loan. The endowment policy is also paid monthly to the insurance company. At the end of the period of the mortgage the policy matures and produces a lump sum which pays off the loan to the building society and may, in some circumstances, produce an additional lump sum
- pension mortgage. This mortgage is primarily for self-employed people. The monthly payments consist of interest payments on the loan and contributions to a pension scheme. When the borrower retires there is a lump sum to pay off the loan and a pension.
Where to get a mortgage from
A mortgage could be available from a number of different sources. Some of the available options are:-
- building societies
- banks
- insurance companies. They only provide endowment mortgages (see above)
- large building companies might arrange mortgages on their own new-build homes
- finance houses
- specialised mortgage companies.
If you intend
getting a mortgage you should make sure you investigate the different options
available. If in doubt, you may wish to consult an independent financial adviser.
For help with finding a financial adviser you could consult a Citizens Advice
Bureau. To search for details of your nearest CAB, including those that can
give advice by email, click on nearest
Citizens Advice Bureau.
Using a broker to get a mortgage
Instead of going directly to a lender such as a building society for a mortgage, a broker could be used. A broker may be an estate agent, or a mortgage or insurance broker. They will act as an agent to introduce people to a source of mortgage loan to help them buy a home.
A broker may be used when it could be difficult obtaining a mortgage directly from a lender, for example:-
- the mortgage required is particularly large
- the property is unusual in some way
- more than two people wish to jointly purchase the home
- the applicant is self-employed and their income fluctuates. There are rules about how much a broker can charge for their services.
If you are thinking of using a mortgage broker you should consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
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Selling a home
This information applies to England, Wales and Northern Ireland
Using an estate agent or selling the property yourself
If you wish to sell your property you can find a buyer yourself or use an estate agent. Before making a decision you should consider how much each method would cost and how much time you have available. If you use an estate agent, it will be more expensive but the estate agent will take responsibility for advertising, showing potential buyers round, and negotiating a price for the house. If you wish to find a buyer yourself, it will be cheaper but you will need the time to make all these arrangements and deal with any problems.
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Finding a buyer yourself
What price to ask
If you wish to find a buyer yourself, you must first decide what price you want to ask for the property. Many estate agents do free valuations so it is always possible to arrange for two or more local estate agents to provide this information. If you want a formal valuation, you could arrange for an estate agent to provide this but you would have to pay a fee.
In addition, you can find out about the cost of houses locally by looking at local papers, estate agents’ windows and similar houses in the area.
Before deciding on a price, you may wish to consider:-
- doing any repairs or decorating if this would make it easier to sell the house
- arranging for a survey if you think there are any major problems that might affect the value of the house, for example, a roof in a bad state of repair.
You should also decide in advance if you are prepared to include any extras in the sale, for example, curtains and carpets. These are known as fittings. A price for these can be included in the asking price or a separate price can be asked in addition.
There are some items that you must sell as part of the house unless you make it clear to the buyer that such items are not included in the sale. These are known as fixtures and include such items as fireplaces and a central heating system. However, in some cases it is not always clear whether something is a fixture or fitting so it would be useful for you to draw up a list of any items you intend to remove or are prepared to sell to avoid problems later.
It is normal practice for a potential buyer to offer a lower price for the house than the seller is asking. You might therefore want to allow for this by setting your price a little higher than the amount you would like to get.
Advertising the house
You should first of all find out how much the local papers charge for house advertisements and then draft the advertisement on the basis of how much you want to spend. You could use existing advertisements as a guide to the format and wording. It is also possible to advertise very cheaply in shop windows. It is advisable for you not to give the address but to provide a telephone number instead.
Finally you could consider drawing up details of the house in a similar way to that of an estate agent, for example, giving details of room sizes, community charge/council tax, local facilities and fixtures and fittings. These details can then be given to potential buyers, either before they call, or at the time they view.
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If you wish to use an estate agent
If you wish to use an estate agent, you should find out about local estate agents and find out the following information:-
- what type of property the estate agent specialises in
- whether the estate agent belongs to a professional association
- how much the estate agent will charge
- the reputation of the local estate agencies, if possible.
Estate agents’ charges
Nearly all estate agents calculate their fees as a percentage of the final selling price of the property, usually between 1½ - 2½%. This is known as the rate of commission. You should also check if the following are included in this percentage fee or have to be paid for in addition:-
- advertising costs
- costs of preparing details of the house including photographs
- a ‘For Sale’ board
- VAT.
If you decide to use an estate agent, the estate agent must confirm the charges and rate of commission that will be made. The estate agent must do this when they agree to act for you.
What type of agreement can you have with the estate agent
If you use one estate agent to handle the sale, this is known as ‘sole agency’. It is usual for the agreement to state that commission is only paid to the estate agent if they sell the property. If you appoint two or more estate agents to act together for you in selling the property, this is known as ‘joint agency’ or ‘joint sole agency’. The estate agents involved share the commission when the property is sold regardless of which estate agent actually finds the buyer. The commission for the joint agency agreement is usually higher than for a sole agency. If you appoint two or more estate agents independently, but the commission is only paid to the estate agent who finds the buyer, this is known as multiple agency.
What does the estate agent do
The estate agent first of all visits the house in order to value it and decide on an asking price with you. You may wish to ask more than one estate agent to call and value the house. It is also advisable for you to check the price that the estate agent suggests by comparing it to similar houses in the local paper.
The estate agent will prepare details of the house to send out to people who are interested in buying it. These details will include the number and size of the rooms and all the fixtures and fittings which will be left in the house. The estate agent also arranges for the property to be advertised.
You usually shows potential buyers around the house yourself but, if this would cause problems, for example, if you are out at work or away a lot of the time, the estate agent usually is prepared to do this themselves.
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Deciding who to sell to
Whether you have arranged to sell the house yourself or you have used an estate agent you may find that you receive more than one offer for the house. You can sell the house to whoever you want and do not have to sell to the buyer who offers the most money. You may wish to take into account whether the buyer:-
- is a first time buyer
- has found a buyer for their own property. If so, is it part of a chain of buying and selling and how long is the chain
- is paying cash or is likely to get a mortgage
- wants to move at the same time as you.
If you are using an estate agent, it is often easier for the estate agent to find out this information from the buyer.
It is unlawful for a seller who uses an estate agent to discriminate against a prospective buyer on grounds of race, sex or disability, either by refusing to sell the property, or by offering it on less favourable terms.
For more information about taking action about race discrimination, see Taking action about race discrimination .
For more information about taking action about sex discrimination, see Taking action about sex discrimination .
For more information about taking action about disability discrimination, see Using the disability discrimination act .
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Deciding on the price at which to sell
If you are using an estate agent, the agent negotiates with the potential buyer(s) about the price. The estate agent should try and obtain the best possible price for you. If you are acting alone, you must negotiate yourself. You do not have to accept the first offer put to you and should not be rushed into making a decision quickly.
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Accepting the offer
Even if you have accepted an offer, there is nothing in law to prevent you from changing your mind and accepting a higher offer from someone else. You should also bear in mind that when an offer is made and accepted the potential buyer can also withdraw, for example, they may not get a mortgage, or the survey may show up some structural problem.
If you are selling yourself it may be a good idea to keep the names and addresses of all potential buyers who make offers, in case the one you accept falls through.
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Choosing who is to do the legal work (conveyancing)
When you have accepted an offer you, or the estate agent, needs to inform whoever is doing the legal work. You can:-
- use a solicitor; or
- In England and Wales only, use a licensed conveyancer.
Using a solicitor
Most firms of solicitors offer a conveyancing service. Although all solicitors can legally do conveyancing, it is advisable to choose a solicitor who has experience of this work.
For details on choosing a solicitor, see Using a solicitor .
Using a licensed conveyancer (England and Wales only)
You can use a licensed conveyancer to do your conveyancing. Licensed conveyancers are not solicitors but are licensed by the Council of Licensed Conveyancers.
If you want to find out if a local conveyancer is licensed you can write to the Council of Licensed Conveyancers.
For the address of the Council, see Buying a home .
Finding out how much it will cost
Before making a choice as to who will do the conveyancing, you should find out the probable cost. It is important to contact more than one solicitor or licensed conveyancer as there is no set scale of fees for conveyancing. You should:-
- check whether the figure quoted is a fixed fee or will vary if more work is required
- check that the figure includes expenses and VAT and get a breakdown of these costs
- find out what charges, if any, will be made if the sale falls through before contracts are exchanged.
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Exchange of contracts
When contracts are exchanged, and before completion, the buyer may wish to visit the house, for example, to measure up for carpets or to get an estimate for building work. However, you should not allow any work to be done by the buyer before completion.
You should inform the fuel boards and phone company that you are leaving and ask for final readings to be made of the meters on completion day. You should also inform the person at the council responsible for council tax, or in Northern Ireland, the Rate Collection Agency responsible for rates collection.
If the buyer is paying a deposit, this will be paid to your solicitor at exchange of contracts. The solicitor will hold this deposit until completion.
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Completion
You must arrange to leave the house empty by completion day and to hand over all the keys.
Your solicitor will receive the rest of the purchase price from the buyer and will pass this, together with the deposit, to you.
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