Buying and Selling Property

Published / Last Updated on 17/05/2021

Buying and Selling Property

Here we cover the house buying and selling process and provide an overview of the costs involved with the whole process.

It will also help you decide how much money you can borrow with a mortgage and provide you tips to help decide on a suitable mortgage lender.

Some Estate Agents have a poor reputation when it comes to buying and selling a home so we have also provided tips on choosing one and the costs to be aware of.

1. Costs of Buying and Selling Property.

The process of buying and selling homes is not a cheap one and costs can vary considerably.  Check all of the small print and make sure you are aware of all costs and charges before you proceed.  This eliminates any nasty shocks further down the line.

If you will be arranging a mortgage to fund the purchase of your new home, the lender may make an application charge.  This is to cover the administration of processing your mortgage and could be up to £1,000.  They may also make charges for any survey/valuation they need and this could be around £350.

As an incentive to use them, some lenders may offer 'fee-free' mortgages.  This means that there would be no application or survey/valuation fees.  They may also agree to pay your legal fees upto a fixed limit.

Depending on the amount of money you borrow from a mortgage lender, they may impose a charge known as a Mortgage Indemnity Guarantee (MIG) premium.  This can also be known as a 'Higher Lending Charge'.

The MIG or Higher Lending Charge is generally applied to people that borrow in excess of 75% of the property value. 

This is a single premium insurance policy that is paid for by the borrower.  It is put in place to protect the lender in the event of loss due to the borrower defaulting on payments.

If possession of the property is taken by the mortgage lender and sold to repay the outstanding mortgage, there may still be a loss to the lender.  This is where the MIG policy comes in to play to cover those losses.

It is vital to be aware that even though you pay for the insurance policy as the borrower, if the mortgage lender claims on the policy the MIG insurance company has the right to sue you for the amount they paid out.  This is called their 'right of subrogation'.

If you are buying through an Estate Agent and have no property to sell there is unlikely to be any charge from them.  This is because the person selling the house incurs those fees.

If you have appointed an Estate Agent to sell your property the price generally starts at 1% of the property value or a fixed fee, usually a minimum of £1,000 plus VAT.  You should be aware that some Estate Agents can charge upto 3% of the selling price for acting on your behalf. 

Estate Agents fees vary and you can negotiate with some of them, especially if you know your house will sell within weeks, rather than months.  You should always ask what the fee includes as some will include all costs and some will exclude the costs of advertising, which can be expensive.  You should also ask for a discount on the fees if your house sells quickly.

Once you have made and had your offer accepted you appoint your Solicitor to proceed with the conveyancing process.

Solicitors generally offer their conveyancing services at a fixed cost but they will all be happy to provide a quotation of cost before you appoint them.

As a guide, the general cost for the conveyancing work involved can be between £250 and £500 plus VAT, depending where you live and the value of the property you intend to purchase.

If you also have a property to sell you should budget on two sets of conveyancing costs as you are selling and buying.

On top of this will be fixed charges for searches, such as a Land Registry search, environmental and local authority searches.  The individual costs will be known by your Solicitor and they will be included on any quotation you ask for.  You will only have to pay search fees for the property you are buying, not the one you are selling.

Once the conveyancing process is done you will be able to complete (become the owner) of the new property.  In order for the mortgage money to be released to your Solicitor to enable you to buy the property there may be charges made of around £40.00 for a telegraphic transfer of the money.

If you have an existing mortgage then the lender may charge upto £100 to release your existing property deeds to your Solicitor.  This fee might be waived if you are having another mortgage with the same lender.

Agreements in Principle

Agreement in Principle (AIP) and Decision in Principle (DIP)

Many mortgage lenders offer an agreement or decision in principle service to potential borrowers and some claim to give you a decision in 15 minutes.

The mortgage lender will take certain details from you regarding your income, expenditure and credit history and will decide on an amount they are happy for you to borrow.

It will not be a formal mortgage offer because certain other checks will be needed for that.  A credit check will be done to make sure you do not have an adverse credit history.

They will then provide you with a certificate that you can show to people you might buy from.

This can prove to them that you are serious about house buying and may give you the edge over potential buyers without one.

2.  Tips for when dealing with Estate Agents

For the majority of property sellers, appointing an Estate Agent is just part of the overall process.

There are many types of Estate Agents, varying from single, local offices through to national, multi-office companies.  It is important to check the Estate Agents in your area as they are more likely to know the local market and local prices.  Be aware though, this is not always the case and you should shop around carefully.

As most people know, Estate Agents carry details of the majority of properties for sale.  Solicitors do this in Scotland.  This can be through their offices, web sites and in the local newspapers.  However, there is a fairly substantial charge involved if they sell your house and some people choose not to go through an Estate Agent.

People that are convinced their house will sell quickly may choose to sell privately, without the use of an Estate Agent.  This can save the selling fees but will mean that they have to show the house themselves to potential buyers and undertake virtually the same tasks as the Estate Agent would have.

If you are buying through an Estate Agent and have no property to sell there is unlikely to be any charge from them.  This is because the person selling the house incurs those fees.

If you have appointed an Estate Agent to sell your property the price generally starts at 1% of the property value or a fixed fee, usually a minimum of £1,000 plus VAT.  However, fees can be upto 3% of your sale price which becomes very expensive.

Estate Agents fees vary and you can negotiate with some of them, especially if you know your house will sell within weeks, rather than months.  You should always ask what the fee includes as some will include all costs and some will exclude the costs of advertising, which can be expensive.  You should also ask for a discount on the fees if your house sells quickly.

Estate Agents will give you a valuation based on what they think you should sell your property for.  We would suggest you ask at least three different Estate Agents to do this for you.  Some Estate Agents overvalue and others undervalue for quick sales.  Both of these can be a problem for you because any mortgage lender may formally value your property at a lower level, meaning that you may have to drop your asking price.

Estate Agents are very quick to try and arrange mortgages for you.  Many of them say they are 'independent' Estate Agents but this does not mean they are 'independent' mortgage brokers or independent financial advisers.  They may only be able to offer you mortgages and financial products from one company which does not give you a choice.

If your Estate Agent can only offer mortgages and products from a limited number of mortgage lenders, get some additional quotations. 

Request mortgage advice

When viewing properties to buy some Estate Agents like to offer you the personal touch and show each interested party around individually.  Some owners like to show the property themselves.  Other Estate Agents like to try and create 'scarecity' and take a number of potential purchasers around together.  This way they are likely to get increased offers, and more quickly, as purchasers believe other interested parties may have their offer accepted first.

If you are a buyer you may be asked by the Estate Agent to put in your highest offer for a property.  This can be the case where an Estate Agent is trying to get the highest price for a property.  They will generally tell you that the owner will consider all offers made on a specific date.  If there is more than one offer on the property, the highest one will win.  We believe this is slightly underhand for the buyer but obviously gets the best price for the seller.

Do not be afraid to tell the Estate Agent that your offer is only valid for an hour.  This way your offer will be taken seriously and is more likely to get a faster response.

In other cases you may make your offer and the Estate Agent will put it to the seller immediately.

3. Moving Tips

Once the legal side of buying and selling is out of the way, all that remains is for you to move out of one property and into another.

Moving is a stressful business but a bit of prior planning can make all the difference.  We hope these tips remove at least some of the stress for you!

Before You Move - Checklist

  • Tell your neighbours the date of your move at both properties.  It should keep you friendly with both sets!
  • Go through your bank statements and personal files to see the people and companies you have had dealings with over the last 12 months.  Write to them all with your change of address.
  • Make sure your telephone company knows the date you are moving and where you are moving to, especially if you are taking on the telephone at your new property.
  • Make sure your bank knows the date you are moving and notify everyone you have regular correspondence from.  Set up a post re-direction service with the post office to catch any post from people you may not have notified.
  • Contact your local council regarding current and new council tax arrangements.  You may be able to get a refund from your old property.
  • Contact your buildings and contents insurance company to tell them you are moving.  Give them a chance to quote for your new property insurance but do get other quotes.  If you paid for your current insurance up front, you may be entitled to a refund.
  • You must change your address on your driving licence as it is an offence for it to show an incorrect address.  Contact the DVLA for details.

The Day You Move - Checklist

  • Readings - Take your own gas and electricity readings - don't let someone else do it for you.  You should read the meters in both your old and new property.
  • Cleaning Materials - Remember to keep cleaning materials to hand.  Your new property will probably be virtually empty making a first clean easier.  If you don't fancy doing the cleaning yourself, local domestic cleaners generally charge £7.50 per hour and can be found in local papers.
  • Eat and Drink - Make sure you have food and drinks (and something to eat and drink from) available for throughout the day.  Moving is hard work, especially if you are not employing a removals company.
  • Removal Firm - If you like the idea of a removals company, they advertise in most publications and on the internet.  Make sure you get a few quotes as the prices can vary.  Also, check out their insurance and terms and conditions.
  • Handbags and Wallets - Make sure to keep handbags and wallets with you and know where they are at all times.  You might need some money during the day but they also need to be kept safe and not thrown out with rubbish etc.
  • Slow Down - Don't rush to move everything.  You will usually have plenty of time and you could injure yourself by lifting items that are too heavy.  Let someone else help you.
  • Visualise - Try to visualise where items will go and put them in boxes that can be put into different rooms.  For example, anything for the bathroom can be packaged into a box marked 'bathroom' and be unpacked later.  At least you will have your toothbrush before collapsing into bed on your first night!
  • Step Back - Take regular breaks and try to enjoy yourself!

If You Use A Removal Company

  • If anything goes wrong with the removal company you will only be able to seek compensation from a member of the British Association of Removers.  Check this before you decide to go ahead with a company.  It may cost you slightly more but the peace of mind should be worth it.
  • Always know what you are moving.  Sounds silly but many things can go missing.  Make a full list of everything to be moved and whether the removal men will take it or not.  Make sure everything the removal company takes is insured.  They may cover you themselves or you may have to arrange insurance yourself.
  • Book your removal company well in advance.  Most completions take place on Friday's so that the full weekend is available to move and sort things out.  Obviously there are only so many Friday's in a month and removal companies do get booked up.
  • Make sure the removal company knows exactly what you want them to do and when.  Agree timescales if you can it will save frustration later on.

5.  Exchanging of Contracts

When a property is sold by one party and purchased by another, the ownership of it has to be legally transferred.

The Solicitors acting in the process confirm exactly what is and is not included in the transfer and a date for the transaction to 'complete' (date of entry in Scotland) is set.

All of the agreements are drawn up in contracts and are signed by both the seller and new purchaser.

Once the agreements have been made, contracts drafted and signed, they are exchanged between solicitors.

As soon as the exchange takes place the vendor is legally obliged to sell the property and the purchaser is legally obliged to buy it.  You should make sure that you are covered by your insurances (life insurance, buildings and contents, accident, sickness and unemployment cover) from this date on any new property you may be purchasing.

 4. Home Information Pack.  

These were abolished on 20 May 2010, this section is for information only (The Conservative Manifesto 2017 suggests they may bring Home Information Packs back).

From the 1 June 2007, it became law that if you wanted to sell a property you were required to prepare a Home Information Pack and make it available to potential buyers of the property.  Then Hips were abolished on 20 May 2010.

Introduction to Home Information Packs - HIPs

The Home Information Pack contains information that is considered essential to both buyer and seller about the provider.

This should avoid and help reduce delays, nasty surprises and make the whole buying and selling process much smoother.

Who pays for the Home Information Pack - HIP?

It is paid for by the seller and must be offered to the potential buyer free of charge.

What does a Home Information Pack contain?

Compulsory: Minimum Information known as 'Required' information:

  • Energy Performance Certificate - Your home will have an A-G grade energy efficiency certificate
  • Sale statement - basic details of the names, addresses and details of the property
  • Searches - details of the land registry searches already done
  • Evidence of title - proof that the owner actually owns the property and can sell it
  • Leasehold and commonhold documents - any land ownership issues and obligations
  • Home Information Pack Index - an index listing all the documents in the pack

Voluntary: Other information (that can be included) but not required, known as 'Authorised' information

  • Home Condition Reports - an independent report about the condition of the property that both buyers and sellers can rely on as an unbiased opinion
  • Legal summary - A plain English explanation of the legal documents in the HIP
  • Home use/contents forms - this may contain useful information such as boundaries, notices, services, sharing with neighbours, planning permissions and other matters of interest to potential buyers

You should contact your solicitor and estate agent about arranging the production of the Home Information Pack before putting your property up for sale.

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