The process of buying a property in England and Wales is…interesting.
After all the hard work of viewing properties and assessing different opportunities, all that stands between you and your next investment is a confusing and convoluted 12 weeks of phone calls, paperwork and frustration.
You'll learn a lot about arcane points of law, how humans work, and your own capacity for dealing with setbacks and delays. I'm being dramatic, but it's worth going in with full knowledge of what's involved – so you're in a position to take charge, and if it's anything less than an epic saga you'll consider it a bonus.
(The process is slightly different in Scotland, and has different terminology. I might write a post about the process in Scotland in the future – but for now, be aware that this only applies to England and Wales.)
1. Make sure you're in a position to buy
A guaranteed way to burn bridges with an estate agent is to pull out of a deal. They hate it, because it wastes their time and means they need to have unpleasant conversations with their client. And it's bad for you too – because you may have incurred costs, like legal fees, that you can't get back.
So the first step is to make sure you can complete the transaction. If you're buying with cash, no problem: just make sure you've got enough in the bank to cover the purchase, Stamp Duty, and costs.
If you're planning to use a mortgage, you can ask your broker to get you a “decision in principle” (or DIP – sometimes called an “agreement in principle” instead) from a lender. This means that the lender has taken a high-level look at your situation, and decided that you're the type of person they'd lend money to. It's not a binding offer – and it's still possible that they'll find something they don't like about the property – but it's better than nothing.
2. Make your offer
You can make your offer either verbally or in writing. Either is fine, but I prefer to at least reiterate the offer in writing (by email) so I can be sure they've seen all the key points.
Your offer will include the price you're willing to pay, of course, but you should also mention any other important factors that case your offer in a positive light:
- If you're an investment buyer you won't have to sell a property first – so there's no chain. That's a big positive.
- If you're buying without a mortgage, that's one less thing that can go wrong so that's a positive too.
- If you are using a mortgage, you can attach your DIP to show that you're able to get finance.
Technically, your offer should include the words “subject to contract” to make sure you don't accidentally create an agreement that's binding when they accept your terms. In reality that's unlikely ever to happen, but you may as well be safe.
3. Have your offer accepted
All being well, after a bit of back-and-forth you get a call saying that your offer has been accepted – hurrah!
At this point, the estate agent will issue a letter called a “memorandum of sale” confirming what's been agreed. They'll also ask you for the details of your solicitor, which means they can copy the letter to both sets of solicitors to get the ball rolling.
4. Instruct a solicitor
Your solicitor will receive the memorandum of sale from the estate agent so will know that something is happening, but you should also get in touch to find out what they need from your side.
If you don't have a solicitor yet, now's the time to find one! Finding a good solicitor could be a whole article/rant in its own right, but there are a few things to watch out for:
- Get a fixed price quote for the transaction (to give a quote, the solicitor will need to know the purchase price, whether you're buying as an individual or a company, whether you're using a mortgage, and whether or not it's leasehold)
- Avoid cheap, large-scale “licensed conveyancers”, because they tend to keep costs down by operating a “call centre” model and you'll never be able to speak to the same person twice
- If you require a very fast completion, make sure they're aware from the start and in a position to act quickly enough
You'll need to sign a client engagement letter, and probably advance them a few hundred pounds to cover the costs of ordering local searches.
5. Arrange your mortgage
Tell your mortgage advisor that you've had an offer accepted, and they'll get things moving with the lender. It could be the same lender you've previously had a DIP from, but they might approach someone else if better deals are now available or if they original lender doesn't like this specific type of property.
The lender will need to know your solicitor's details, because your solicitor will arrange the legal aspects of the mortgage as well as the transaction itself.
As we'll see in a minute, they'll book in a valuation survey – which you'll often have to pay for, via your advisor.
6. Get a survey
If you’re using a mortgage, your lender will undertake a valuation survey of the property before formally approving your mortgage offer and releasing the funds.
This is just a quick assessment for their own purposes to check that the price is reasonable, the rent will be high enough, and the property meets their lending criteria. On top of that, you can choose whether to get a survey of your own done.
The most comprehensive type is a full Building Survey (formerly known as a Structural Survey), which is only really necessary for old properties, listed buildings or those built using non-standard construction methods. The survey will look into concerns around damp, drainage, woodworm, timber condition and more.
A cheaper and more basic option is a HomeBuyer Report, which costs around £300-£500 and inspects all the main aspects of a property. For each item (such as the roof, flooring and windows) it will give an opinion about whether any work is needed, and give comments for future investigation.
It's up to you whether you think this is worth it. If you've inspected the property yourself and you're confident in your ability to spot anything obviously wrong, it's unlikely to reveal anything new. But if you lack experience, it could be either useful peace of mind or a cheap way of discovering that you actually don't want to buy the property after all.
If you do decide to get a survey done, you can either ask an estate agent for a recommendation or search the database of Royal Institute of Chartered Surveyors (RICS) members at ricsfirms.com. Once the report comes back, don’t be afraid to call the surveyor if you have any follow-up questions.
7. Breathe deeply through the legal process
You want to buy, the seller wants to sell. How hard can it be?
Well, frequently, very. Although it'll often feel like nothing is happening at all for weeks on end, there's actually a lot going on during the legal process:
- Your solicitor will order local searches – covering flood risks, contaminated land, historic mining, and more. It can take a few weeks for these to come in.
- If the property is leasehold, your solicitor will order an information pack from the freeholder (which you'll have to pay for) with information about the service charge accounts, ground rent, major works and so on. This can take a while to arrive too.
- The vendor's solicitor will issue a draft contract, which there will then be some back-and-forth about.
- The vendor will provide information about the property, which will invariably have bits that are missing or confusing. Your solicitor will go through this and ask any questions that arise.
If you just sit back and wait for all this to play out, prepare for months to go by and still not be much closer to owning the property. Because there are so many parties involved – and because solicitors are busy, and often not the most proactive people in the world – there are limitless possibilities for everything to grind to a halt while everyone sits around waiting for somebody else to do something.
Your job is to “project manage” this process by detecting where the hold-up is, and bugging the right person to do whatever needs to be done. You should chase your solicitor once per week in the early stages, and probably several times per week as you inch agonisingly closer to the finish line.
8. Prepare to exchange
While all this has been going on, your mortgage lender will have looked at their valuation survey and may as some extra questions about your finances (via your broker or advisor) to get comfortable with lending to you.
Eventually, they'll issue a formal mortgage offer – guaranteeing that the funds will be available to you, and giving a certain period of time (often three or six months) for you to complete the purchase.
(If the lender doesn't issue an offer and pulls out for some reason, everything will be held up while you start all over again with a different lender.)
This offer is one of the two things you'll need in order to “exchange contracts”, and be committed to the purchase.
The other is a “report on title” from your solicitor, which summarises their findings after going through all the paperwork and asking questions to the vendor's solicitor. It will identify any areas of significance, and flag up any concerns you should be aware of.
All being well, the report on title won't reveal anything major. If there are any items that could be a concern, your solicitor will discuss these with you so you can make an informed decision about whether to proceed. Occasionally, there will be a major issue that can't be solved – in which case your solicitor might advise you to pull out of the purchase.
All being well though, you can agree dates to:
- Exchange contracts: when a (usually) 10% deposit is paid and you become committed to proceed
- Complete: when the balance is paid, and you become the legal owner
Before the exchange date, your solicitor will ask you to send across money to cover the deposit.
On the day of exchange, your solicitor will send the deposit across to the vendor's solicitor. They will then speak to each other and formally “exchange contracts” – which, amazingly enough, is the first point in this whole process that the transaction has been binding on either side!
The date for completion will have been set before exchange. It could be the same day as exchange (and there's no reason for it not to be, as long as everything's ready), but it's not uncommon for it to be a few weeks later.
10. Complete and collect the keys
Before the completion date, your solicitor will request the mortgage funds from the lender so they're sitting in their client account ready for completion.
They'll also send you an account statement, and ask you for funds to cover:
- Any amount towards the purchase missing after taking account of the deposit and the mortgage advance
- Any Stamp Duty that will be due upon completion
- (Usually) their full fee
When the day of completion comes the funds will be transferred across to the vendor's solicitor and – with a little legal magic – the property will finally be yours!
While you head off to pick up the keys, your solicitor will deal with post-completion matters like paying across the Stamp Duty to HMRC and updating the Land Registry.
There's no getting around it: the process of buying a property in the UK is long, complicated and frustrating.
It's not impossible to wrap up a transaction in under a month: at auction this is routinely achieved, but then a lot of the legal work has been done in advance.
If a mortgage is involved, you can expect it to take at least a couple of months. Realistically, three months is probably more typical unless one or both sides are really pushing for it to happen sooner.
Having a good team helps, but ultimately it's your responsibility to keep things ticking along. Frequently, not much will be happening and you won't know why: is it because you're waiting for searches, or has your solicitor not got around to looking at them yet, or is she waiting for the vendor's solicitor to reply to her? It's your job to find out, and to keep politely nudging the right person to get things moving again.
Also, as we saw, nobody is legally committed to the transaction until the point of exchange – by which time you'll have incurred legal fees, and possibly mortgage and survey fees. If something nasty comes to light during the process – or the vendor just changes their mind – that's just your hard luck.
You can't guarantee getting the right result: all you can do is maximise your chances by understanding and taking control of the process.
Keep on top of it, consider taking up meditation, and remember that after a few months of stress you'll have an asset that will make you money for years to come.