‘Sale agreed’. It’s what buyers and sellers alike are hoping to achieve… an offer accepted, a deal done. But in many respects this is, to borrow a phrase, ‘the end of the beginning’. The time it takes between accepting a deal and the ownership of a property legally changing will take weeks, and may take months. Until contracts are exchanged, your agreement to the sale is not binding, and the weeks after the sale is agreed can be the most frustrating and worrying part of the whole process. If you know what to expect, it is easier to prepare for it.
Sale Agreed – the next step
Once a sale is agreed you will immediately be asked which solicitor you are using. This is because confirming the sale is a legal process (called conveyancing), and from now on the matter is in the hands of the lawyers. The estate agent will send out a document called the ‘Memorandum of Sale’, which has the buyers and sellers details, their agreed price, a list of what is included in the sale, and contact details for the solicitors on both sides. Nothing else will happed towards the sale until this document is sent out, so its better to be ready with a solicitor in place before you reach this stage.
What the solicitors do
English law operates under the principle called ‘Caveat emptor’, which means ‘buyer beware’. In other words, it is the buyers’ responsibility to make sure everything is as they expect it to be. This is what the buyers’ solicitor has to do, by raising a series of enquiries and checking the information on record about the property being purchased.
The list of documents and searches that need to be done varies from area to area, but will invariably include many of the following:
- checking with the water authority that the mains water and sewerage systems are provided, and that the owner of the property does not have to pay for their upkeep
- checking with the Local Authority to make sure there are no approved planning consents in the area which would affect the value or rights of the home-owner
- checking with the Land Registry to make sure that the title deeds to the land are in order, and that the seller is the rightful and legal owner of the land or home they are selling
- checking with the Highways authority to make sure the road is an ‘adopted highway’ – in other words that the government, and not the homeowner, is responsible for keeping the road in good order
- checking for local geographical, geological or environmental information – this can include reports on the likelihood of subsidence in former mining areas; flooding in river basins; on radon gas emissions in the area, or on the safety of old land-fill or contaminated sites.
- Checking for ‘covenants’ or ‘easements’ – that is, restrictions on the use of a property written into its title deeds, or rights of access granted over the land, or rights of access over other people’s land to the property itself.
Some of this information is covered in the Home Information Pack. Some can be applied for directly from the relevant authorities. Some has to be requested from the sellers’ solicitor. All of it will take time to collect and confirm, and may cost money for the documents themselves. These extra costs are called ‘disbursements’, and are usually in addition to the legal fees themselves. A conscientious solicitor will make sure that every legal detail is confirmed and cleared before going ahead with a purchase. The seller’s solicitor should provide any information as quickly as possible.
Mortgages and Surveys
Although these two things are separate, the former always demands the latter, so it is easier place them together. If you need a mortgage, you should already have a mortgage approved in principle, but you will need to provide the exact details of the house you are buying and the price you are paying to turn that principled agreement into a firm offer. The mortgage lender will insist on conducting a survey on the home, to make sure that it is really worth the amount agreed. The property is their security on the loan – of you can no longer pay the mortgage, the lender has to know they can get their money back from the sale of the house. You will have to pay for this survey – usually in the region of £400 – but the work is being conducted on behalf of the lender, so you have no redress if the surveyor gets it wrong.
A mortgage survey is the least rigorous kind of survey. The surveyor will be a qualified professional, and will spend a couple of hours checking the interior and exterior of the house, but they will not do a detailed structural analysis. If everything is fine, the survey will give the go-ahead to lend the money. If, however, there are things of concern to the surveyor, it is quite possible for the survey to insist on more detailed, expert reports on issues such as the roofing, the potential presence of asbestos, or the state of any damp or timber problems in evidence in the property. Again, further reports may well involve more expense to the buyer.
In the worst case scenario, a mortgage survey might conclude that the home is not worth the agreed price, or that work must be done to the property before the full amount of the mortgage is paid. If this happens, it may be necessary to renegotiate the price, or to come to an agreement with the seller as to what work is done when, and who pays for it.
Many buyers, with or without a mortgage, want greater assurance of the condition of the home they wish to buy. There are two further survey options available. A Homebuyers’ survey is commissioned and paid for by the buyer, and the surveyor is legally answerable to the buyer if they miss anything fundamental. This survey is more in-depth and thorough than a mortgage valuation survey. Sometimes, a mortgage company will accept a Homebuyers’ survey, but always address this matter directly or through your IFA before it is commissioned.
Be aware, also, that surveyors are cautious about their legal obligations. It is not uncommon to find phrases in a survey which convey little information but which protect the surveyor against the charge of overlooking something that is discovered later. Many surveys contain phrases like ‘the condition of the roof suggests that it may need replacing within the lifetime of the building’. This doesn’t actually say if the roof will last for five years or five hundred years, but it does protect the surveyor against legal action if the slates start to fall once the new owner moves in.
The most expensive but most rigorous form of survey is a full structural survey. A structural engineer will examine in detail all aspects of the construction of the property. While the cost may be double that of a mortgage survey, this kind of report should bring reassurance, or identify problems if they exist. Given the cost of any property, buyers should seriously consider getting a full, detailed report on their purchase.
A survey takes a few hours at most, but booking the surveyor might mean a delay of a week or two, and waiting for the surveyors report is a principle cause of delay for mortgage offers. It is important, then, to address these issues at the first opportunity.
The role of estate agents
In the strict, legal sense, the Estate Agent has no role or responsibility once the sale has been agreed and the Memorandum of Sale issued. In practice, though, this time is when a good agency really earns their keep. Solicitors are notorious for working to their own time. Lenders have hundreds of applications for loans. IFA’s have a limit to what they can do for each client. Buyers have their own sales, and often their own sales agents. Property chains can involve dozens of these professionals. Usually, it is your agent who will chase and harry all of these people into line to look after your sale or purchase. Remember that the other professionals – from lawyers to brokers to lenders to surveyors – are not working for the agent. There is only so much an estate agent can do when you, or another person in the chain, is the actual client of the solicitor. Nonetheless, a good agent will keep you, and everyone else, informed of exactly what is going on, which documents are needed by whom, and why there is a delay should one occur.
Incidentally, cheap estate agents usually keep their fees low by cutting back on this kind of work, or even cutting it out altogether. While a handful of sales progress with no complications, with no gaps in communication between the professionals, and with no hiccups or hold-ups, in practice this is rare indeed. When problems do occur, a good agent will anticipate and solve them without you even knowing, but a bucket-shop agency will most likely lose the sale. Cutting costs can really become expensive when this happens, as any fees you have paid for your own surveys etc. could be lost, and you will have to go through the stresses of finding a buyer all over again.
Ready to exchange
The exchange of contracts is the point at which an agreed sale becomes a legal commitment. The solicitors for both sides will put together the contract of sale which specifies the amount to be paid, and all of the details regarding the land, property and goods included in the sale. Buyer and seller leave a signed copy of the contract with their own solicitor. When, and only when, both sides are happy that everything is agreed, checked and in place, then the signed contracts are exchanged. From this point on, there is no backing out.
The contracts that are exchanged will agree a completion date – that is, the day when the money has to be handed over and the property legally changes hands. This can sometimes happen at the same time, or it can be agreed for several months in the future. On occasion, a contract can specify a deadline but allow for an earlier completion in advance by mutual agreement. Exchange of contracts confirms the sale will go ahead; completion is when it actually happens.
Until completion, the seller still owns the property. For the buyer, and the buyer’s solicitor, it is vital to have the money ready to transfer. Most solicitors won’t exchange contracts until this is confirmed. It can take several days for the mortgage company to release the funds, and it will cost money to send money immediately, so make sure there is enough time for this to happen. Failing to complete on a purchase on the agreed date can carry heavy financial penalties. Fortunately, it doesn’t happen very often.
Many people choose to move house on a Friday, which makes this an extremely busy time for lenders and lawyers. If at all possible, avoid completion dates on Fridays for this reason. The keys to your new home won’t be handed over until completion happens, and it might run late into the afternoon if you pick the busiest day of the week. This can cause problems for removal firms, and might end up with you working late into the night to get boxes and furniture out of one place and into the next. Worse, if anything goes wrong or there are last minute delays, the offices will close until the Monday, and you may just find yourself with nowhere to go. Although this worrying prospect is a rarity, it’s best avoiding the possibility by picking any other day on which to complete your sale or purchase.
When the money is received from the buyer by the seller’s solicitor, the sale has completed. The solicitor should tell the estate agent, buyer and seller. The estate agent can then release the keys to the new owner. Congratulations! You’ve just moved house!