The Buying Process ProcessContact Ashcox & Stone today on 01793 269000
Summary of the buying process
Once you have decided on the type of mortgage and have found the house you want, the rest of the house-buying process is fairly straightforward.
Make an offerOnce you have found your new home, your offer to buy it can be made to the existing owner, normally via the estate agent. Basically, this is the sum you are prepared to pay and any conditions which are attached to this offer, such as subject to contract, valuation, survey, mortgage advance, completion by a certain date, and so on. If accepted, this is the starting point of the whole mortgage process. Subject to Survey and Contract means that neither purchaser or vendor is legally bound to go through with the transaction until a survey has been carried out and contracts have been exchanged.
Appoint a Solicitor/Conveyancer
The term used to describe the transfer of property from one person to another is called conveyancing. The term ‘conveyancer’ is usually used to cover both solicitors and licensed conveyancers.It is usual for the purchaser to appoint a conveyancer at this stage to act on their behalf. In England and Wales a conveyancer may not act for both the purchaser and vendor in the same transaction. The conveyancer will check all legal details on behalf of the purchaser. These details include that:
- the purchaser will receive vacant possession
- no local redevelopment will affect the property
- no new roads/boundaries/planning applications will affect the purchaser’s title
- the vendor has good title i.e. is registered as owning the property
Formal application for loan
You apply for a mortgage from your chosen lender. The application form must be filled in and this will include detailed information about you, the purchaser, and the property under consideration. It is now that the lender will normally require proof of earnings, although some schemes allow income to be self-certified. The proof required can take the form of pay-slips, P60, employer’s references or typically three years’ audited accounts for the self-employed.
At this stage the method of repayment and type of mortgage should also be considered and, if relevant, a proposal for life assurance completed and submitted to the insurance company to ensure the purchaser is acceptable for cover before progressing further. If not acceptable, the method of repayment selected may need to be reconsidered.
Valuation and Survey
Where a purchaser is buying with the aid of a mortgage loan, the lender will need to value the property to ensure it is of adequate security for the loan. The valuation will be carried out by a qualified valuer, but will not describe any structural fault; it is basically the value they would place on the house if it had to be sold. Because a valuation has been carried out by the lender it is a mistake to assume that the property is free from defect. The borrower will normally pay for this valuation, although some lenders are refunding this cost on completion of the loan.
The Home Buyers’ Survey and Valuation report (HBSV)
In most cases, the Home Buyers’ Survey and Valuation (HBSV) report will be sufficient on a property built in the 20th and 21st centuries, unless it is in a particularly poor state of repair or is to be altered extensively.
Concise and inexpensive, the HBSV report takes a standard format common to all chartered surveyors and offers ‘a wide-ranging but concise appraisal of the property, reporting on its general condition, any factors likely to affect materially its value, the value on the open-market and an estimate of the reinstatement cost for buildings insurance purposes.’ It also doubles up as a commissioning form and contract between you and your surveyor.
The HBSV report is likely to cost from £300 upwards according to the size and value of the property. It may be possible to arrange for an HBSV report to be undertaken by the lender’s surveyor at the same time as the valuation report, possibly saving part or all of the valuation fee. Most larger lenders offer this service, which can save as much as £100–£200 compared with commissioning both reports separately.
The Building Report
Buying an older property is potentially a riskier business than buying a home built in the last eighty or so years. As well as the simple factor of deterioration due to age, building techniques have widely improved in recent years, with the introduction of damp-proofing, proper foundations, modern plumbing, heating and wiring, and so on. A more detailed assessment of the fabric and structure of the building is therefore recommended, to assess the condition of the building and the need for repairs or modernisation. In this instance, the RICS recommend a Building Report or, as it was traditionally known, ‘a full structural survey’.
A Building Report should also be considered essential if the property is to be altered in any major way, such as extended, remodelled, refurbished extensively or, in some cases, converted to a home from some other use such as a barn, church, school, and so on. It is also recommended for buildings of unusual construction such as timber or cob.
The cost of a Building Report is likely to vary from around £500 for a two/three-bedroom terraced house upwards, according to the size and value of the property. This may seem a substantial amount but, in most cases, the cost of repairing any faults discovered by the survey can be negotiated off the purchase price. In the current buyers’ market this reduction can often more than offset the cost of the survey.
Mortgage OfferUnless the Valuation Report is unfavourable the lender will now make an offer of advance based upon the valuation of the property or the purchase price, whichever is the lower. The vendor’s conveyancer prepares a draft contract, which is submitted to your conveyancer. If the contract is not acceptable, it must be amended until it is acceptable to you, the vendor; the purchaser; and usually the lender. There aren’t usually any problems with this as contracts are mainly standard.
Exchange ContractsAt this point the vendor and the purchaser each sign a copy of the contract is exchanged between their respective conveyancers/solicitors. The purchase of the property usually becomes irrevocable once this has occurred. It will therefore only take place when the purchaser’s conveyancer is satisfied with all details such as searches, legal title (does the vendor actually own the A deposit, usually 5-10 per cent of the purchase price is paid to the vendor’s conveyancer, and this is usually non-returnable. As the transaction is now irrevocable, you are committed to completing the purchase come what may. You must therefore ensure that the property has adequate buildings insurance from the day of exchange – if the property is damaged in any way a claim could be made against you. Similarly as you are now committed to the purchase of the property it is also important that the mortgage loan is now available and/or life assurance protection arranged from that date.
CompletionThe property finally changes ownership on a date which will have been specified in the contract – usually a month after exchange of contracts. Your conveyancer will arrange for the mortgage monies to be paid over to the vendor, and you make arrangements to collect the keys of the property.
How long does the buying process take?
- You select the appropriate lender
- Submit your mortgage application to the lender and instruct a solicitor. Your lender carries out a credit search; instructs the valuation; and requests references – 3 to 4 weeks
- Your lender then issues a letter confirming they will lend you the money, and sends the relevant forms. You must sign this formal offer of advance, plus the forms, and return them to the lender. Instructions are sent to your solicitor. The solicitor carries out legal searches and conveys the property to the new owner – 2 weeks
- Contracts are then exchanged. The solicitor prepares a report on the title and requests funds from lenders. The purchase is then completed – 4 weeks
- So, on average, this process should take around 10 to 12 weeks.