Buying & Selling Guide

Moving home can be a bewildering business. Apart from finding that perfect home, you need to be sure of the costs involved, the legal and financial processes involved and those professionals that will help guide you through that process.

The following guide will help in an understanding of the main stages in that process. Just click on the relevant links below.

• What can we afford?
• Finding your dream home
• Selling your home
• Negotiations
• Valuation and survey
• Conveyancing
• Exchange
• Completion

What can we afford?

Most property purchases are funded from a combination of capital from savings and from the sale of your existing property, and mortgage loans.

It is an important at the outset to understand what price property you can afford. This is determined by what you are able to borrow and what costs you are likely to incur, in both the purchase of your new home and the sale of your old one.

Make notes on your likely expenditures before undertaking a purchase or sale.

Mortgages
What mortgage can I afford? The most commonly used formula is a multiple of earnings.

e.g. For a couple
3 x the higher earners gross income + 1 x the lower
OR
2.75 x joint income

However this calculation is rarely as straightforward as it might at first seem. This is especially so in the case of the self-employed, those with previous credit problems or individuals with fluctuating incomes.

Recently many lenders have taken to assessing "affordability" when determining the amount that they will lend. This inevitably requires a more in-depth assessment of your circumstances than a simplistic multiple of gross income. It is advisable at this stage to get professional advice on what is available to you.

What types of Mortgage are available?
The range of mortgages that are available is considerable. To understand the mortgage that is most suitable for you we would strongly recommend professional advice. The following, however, is a brief overview of some of the options available to you.

Repayment Options
Interest Only Mortgages - As the name suggests the lender will charge interest only leaving you to provide for the repayment of the loan through other financial products, such as:

Endowments
Bonds and ISAs
Pension lump sum payouts
Repayment Mortgages

This method of repayment involves a monthly payment of interest and a sum towards the repayment of the amount borrowed. In the early years most of the monthly payment goes towards interest payments. Repayment of the amount outstanding accelerates through the life of the loan until you are mostly paying off capital in the later years.

Interest Rate options
Variable interest rate - Monthly interest repayments vary dependent on the lenders current mortgage rate, which, in turn, is based on the "base rate" of interest set by the Bank of England. In the past there have been periods of high interest rates, most recently in the late 1980's, which lead to significant increases in the monthly mortgage repayments.

Fixed Interest rate - These arrangements are set for a defined period of time, generally between 1 and 10 years, during which the rate of interest is fixed. This if course will allow you to budget your outgoings with certainty,

On the down side, however, these arrangements usually come with a "tie-in" period during which substantial penalties can be charged if you need to come out of the fixed rate arrangement.

Capped interest rate - This will give an upper ceiling above which your rate will not rise. However, if the variable rate were to fall below this rate your repayments will fall with it.

However, these loans are usually more expensive than standard variable rates.

Discounted interest rate - Many lenders offer a loan where initial repayments are lower than the standard variable rate rising to the variable rate over a period of time (usually 1 to 3 years).

Where can I find a mortgage?
There are many sources of information on mortgages from individual lenders such as banks and building societies through to independent mortgage advisers who will be able to give an overview of the total market.

Additional Costs
Remember that there are a number of costs in addition to the mortgage itself. One-off expenses involved in moving house can tot up to between £2,000 and £5,000. These one off costs include:

Mortgage Indemnity Guarantee (MIG)
All buyers need to put down a deposit on the property - a mortgage lender will rarely pay the whole price of the property. You should try to put down at least 5 per cent of the value of the home as a deposit, and more if possible. The smaller the deposit you put down, the more your lender will charge you for the extra risk. Most mortgage lenders charge a 'mortgage indemnity guarantee fee' (MIG), or a fee for loaning a higher percentage of the value, on bigger loans.
Costs vary from lender to lender but typical MIG premiums are:

• 4 per cent of the amount borrowed above 75 on a loan of up to 90 per cent of the purchase price
• 6 per cent of the amount borrowed above 75 per cent on a loan of up to 90-95 per cent of the purchase price
• 8 per cent of the amount borrowed above 75 per cent on a loan of up to 95-100 per cent of the purchase price

Arrangement fees
A fee charged by lenders to cover the cost of setting up the mortgage. Some lenders waive this fee.

Lenders Valuation Fee
The cost of the valuation depends on the value of the property - for example, allow about £125 for a property worth £50,000, £165 for a £100,000 house and so on. Some lenders do not charge this fee, as an incentive for you to take out a mortgage with them.

Independent Survey Fee
There are two types of survey, the Homebuyer's Report which costs between £250 and £500, and the more comprehensive Buildings Survey (Structural Survey) which can cost anything up to £1,000 plus. VAT, depending on the value of the house. Allow extra if you need more specialist checks, for example on old properties.

Legal / Conveyancing Fees
There is no standard fee so it is a good idea to shop around for the best rate. Some solicitors charge a flat rate while others charge a percentage of the property price, normally up to 1 per cent. As well as the price of your house, the fee will take into account factors such as the amount of paperwork involved, how much skill is required and how complicated the transaction is.

You will also have to pay for the legal work done by your lender's solicitor. Again, prices vary so ask your lender how much they charge. If you use the same solicitor as the lender to do your conveyancing this may save you money, but compare charges with other firms.

Stamp Duty
This is a government tax, charged for properties above £60,000. If your new home is priced between £60,000 and £250,000, you will pay 1% of the property price. >From £250,000 to £500,000, it will be 3% and over £500,000 it will be 4%. So, for example, if you are paying £100,000 for your home you pay £1,000 in stamp duty.

Land Registry Fees
The Land Registry is a government department which looks after the registers of all registered properties in England and Wales. It charges a fee for transferring the register to the new owner. This fee is charged according to property price:

Local Authority Search Fees
Local searches will be carried out by your solicitor/conveyancer to ensure that there are no potential problems such as planning permission on neighbouring properties or plans for new roads nearby.

Other Search Fees and Disbursements
These include index map, commons, the coal authority, land charge, company searches, bank transfer fees. Allow about £70 to cover an average house purchase.

Estate Agents Commissions
If you're selling your property as well as buying one, the sum charged by your estate agent has to be taken into account. Usually this is charged as a percentage of the property price, around 1.5 - 2 % on average. If you are selling it yourself, you will need to pay for advertisements.

Removal Fees
Ask for quotes from at least 3 different removal firms, as prices vary. Remember you will need to give tips. You can do the removal yourself, but this is much more time-consuming and inconvenient. If you are DIY-ing it, costs will include van hire (+VAT and insurance), petrol, and return travel from the van hire company when you return it. You will also need about £25 for insurance

Contingency Fund
Leave a decent-sized contingency fund for emergencies. You do not want to be left completely penniless in case you have unexpected extra costs.

Finding your dream home

House hunting can be a time-consuming business but it is worth taking your time. Remember it is easier to change your mind at this stage of the process.

What do I need in a home?
It is worth taking some time to think of what your needs are and what you are looking for in a new home.

Location, location, location
You can change many things about a property but not where it is. It is important that you will be happy in the area. Be sure to check on:

The general condition of the area

• The local amenities
• Parking space
• Property tax bands
• The local schools and their catchment areas
• Local crime rates (check with the local police station)
• Ease of travel to work
• Viewing the property

So often buying a house is a decision made on emotion. Of course it is important that you feel good about the property, but it is equally important to be objective about its good and bad features. Visiting a property more than once is a good idea. Try to view at different times and on different days.

Try to get a feel for the condition of the property, and remember a personal inspection is no substitute for a professional survey.

Selling your home

Who Sets the Price
Clearly setting the right price for your home is a crucial element in its sale. Even the most attractive house will not sell if it is incorrectly priced. Conversely a house under-priced will probably sell quickly but at what loss to the seller?

An understanding of what prices properties similar to your own are selling at, will give you a good indication of a fair market value. Similarly an understanding of how the market in general in your area is moving, will help in getting the price right.

An estate agent can be very helpful in getting the pricing of your property correct. He will have a wider experience of the market than you and will be able to give an unbiased, unemotional assessment of value. He should be able to show you an insight into recent sales history for similar properties and an understanding of the general state of the market.

Be aware that the price that you set at the outset may not be the price that you ultimately sell at. You will need to be advised by your agent as to the general reaction to your property, and be prepared to adjust your price if necessary.

Even if you receive an offer that you accept, it will, in most cases, be an offer that is subject to a satisfactory survey and contract.

Which Estate Agent
It is true that there is fierce competition between Estate Agents in the property market. Be wary of agents who attempt to flatter you with inflated valuations. Look for an agent who has an appreciation of the basic facts and the expertise and capability to market your property effectively.

When employing an agent you will need to sign an "agency agreement". That agreement will outline basis on which that agent is acting for you (sole or joint agency), the period over which the agreement is effective, the commission rate that is payable and the circumstances under which it is payable. Make sure you are happy with this agreement before signing.

At the end if the day you will probably go with the agent that you trust.

Presenting Your Home
Take a leaf out of "The House Doctor's" book and try and assess the attractiveness of your home dispassionately. How would you react to the property if you were seeing it for the first time?

It is important to remember that people tend to buy property on emotion. The impressions that your house makes in the first few minutes of someone seeing it will influence their decision whether to offer or not. Simple tips include:

• Keep it clean, tidy and free of clutter
• Deal with those small repairs that you have been meaning to get round to
• Ensure that the basic decoration is up together
• Try and keep the pets and children under control when people are viewing.
• Try and ensure that the atmosphere is as calm as possible.
• Eliminate those "doggy" odours and any other lingering smells. Having fresh flowers or brewing fresh coffee always improves the "feel" of a house.
• Do not neglect the gardens. Make sure that they are tidy and well maintained.
• Make sure that the house is warm and welcoming.

Negotiations

Before Making an Offer

• Check whether the property is freehold or leasehold.
• Check what fixtures and fittings are being left.

What offer should I make?
Getting your initial offer right is important. Often the asking price is put at a level that will allow for some negotiation. Factors to consider when deciding on your opening offer are:

Your attractiveness to the vendor

• Do you need to sell a property in order to be able to buy. If you have sold do your purchasers need to sell, and so on. (Your estate agent will be able to determine whether there is a complete chain of agreed purchases below you.)
• Do you need a large mortgage or do you have a substantial cash deposit.

Saleability of the property

• What is the general condition of the property and does the asking price reflect that.
• How much demand is there for that type of property and the home that you are offering on in particular.

Vendors requirements

• Has your vendor found a property to move to?
• How quickly do they need to move?

Making an Offer
Having decided on the offer that you wish to make it is customary to make that offer and negotiate through the estate agent. Remember, however, that the agent is acting on behalf of the vendor.

There is nothing to stop you asking to negotiate with the vendor directly, but just remember that they maybe harder to negotiate with than the Estate Agent. Above all, try to keep calm!

Accepting an Offer
Having received an offer you have three basic choices

Accept it
Make a counter offer and start to negotiate towards an acceptable price.

Reject it
Your Estate Agent will be able to advise you and help you through this stage of the process. Remember your Estate Agent is working on your behalf in this process and will be looking to achieve the best price that he / she can for you property.

Once accepted, your offer should be confirmed in writing. Usually the Estate Agent will do this. The offer confirmation should state that the offer is "subject to contract and survey", and should confirm the fixtures and fittings that are to be included in the agreed price.

When buying it is a good idea to ask for the property to be withdrawn from the market. This of course will depend on your ability to proceed with the sale, and the view of the vendor.

Valuation and survey

Do I need a survey?
Buying a home is probably the most significant financial investment you are likely to make in your lifetime. You should be as well informed as possible before committing to that decision.

A survey will tell you what condition the property is in, will alert you to any problems that are not immediately apparent and any likely repairs that will need to be made in the near future.

What types of survey are available?
Valuation report - This is a report that is designed solely to allow the mortgage lender to calculate their costs should the property have to be repossessed and sold. This report is not designed to give the buyer information about the condition of the property.

Homebuyers Report - This is the standard report devised by the RICS (Royal Institute of Chartered Surveyors) and is suitable for standard construction properties. This style of report will inform you of any major and some minor problems with the property you are considering.

Full Structural Survey - If the house you are looking to purchase is an unusual one it may pay to have a Full Structural Survey. Such a survey will be more detailed than a Homebuyers Report and can be tailored to look at specific aspects pf the property's condition. As such the price of such a survey will be individually negotiated.

Where do I find a surveyor
It is not hard to find a surveyor most will be listed in the yellow pages. As always, however, recommendations either from your lender, solicitor or estate agent or from someone who has first hand experience is probably the easiest way of finding a reliable surveyor. Alternatively you could contact a professional trade association.

It may pay to shop around as prices can vary. It is a good idea to talk to your mortgage lender before instructing a surveyor, as it is usually possible to get the basic valuation done at the same time, which will reduce your costs.

It is wise to also ensure that your surveyor be a member of the Royal Institute of Chartered Surveyors (RICS).

Conveyancing

What is Conveyancing?
Conveyancing is the term referring to all the legal and administrative work associated with transferring the ownership of land or buildings from one owner to another. The conveyancing process starts after an offer has been made and accepted for a property, and solicitors' details have been exchanged by the two parties.

Most people hire a solicitor or licensed conveyancer to undertake the legal side of buying their home. It is possible to do the conveyancing yourself but this is a time-consuming business and also risky if you lack the necessary expertise.

Contracts
After a sale has been agreed in principle your solicitor will go about the preparation of contracts. Both sets of solicitors (seller's and buyer's) will be in contact in order to receive and negotiate a draft contracts. They will then make and prepare answers to pre-contract enquiries. These will confirm details of the sale and various aspects of the seller's occupancy of the property.

Before the point of exchange your solicitor should send you a property information form or a copy of the draft contract for you to check.

Searches
The solicitor acting for the purchaser will apply to local council for local searches to determine whether any future developments in the area are likely to affect the property. Other searches may be also be carried out, for example environmental searches and enquiries to local water authorities.

How do I find a solicitor?
Traditionally, solicitors undertook all conveyancing work but now there are also licensed conveyancers to do the work. It is illegal for conveyancers who are not licensed to charge a fee for conveyancing work. Check with the Council for Licensed Conveyancers that a named conveyancer is licensed.

It is not too important whether you choose a solicitor or licensed conveyancer, other considerations are more important:

• Prices vary, but be wary of the very cheapest services - this might indicate poor quality. It might be worth paying a bit more for a good service. On the other hand, the most expensive is not necessarily the best.
• Look for a solicitor who is not overworked or inexperienced as this could mean important details are missed. Equally, you don't want one who is very slow or too pedantic as this could hold up the process.
• Buying a house is a stressful business, and it is important that you get on with your solicitor. Think about whether you can trust this person.

Exchange

Once you and your solicitor are satisfied that everything is in order, the contracts can be exchanged. The purchaser and seller both sign a copy of the contract, which is passed to the other party. Once contracts have been exchanged (normally by the two solicitors) both parties are legally bound to follow through with the transaction. You can no longer change your mind - if you pull out it is likely that you will lose your deposit, and you could be sued for breach of contract.

At this point you hand over a non-refundable deposit as security to the seller in case the contract is not carried out. This is normally 10% per cent of the purchase price, but it is usually negotiable. If you do not have the money for the deposit at hand immediately, you can arrange for a bridging loan from your bank.

Once contracts have been exchanged your solicitor prepares the draft transfer document (if the land is not registered it will require a special kind of transfer or 'conveyance'). This documents transfers the title of the property from the seller to the buyer. Once both parties have agreed on the draft, the buyer and the seller sign it.

Your solicitor will also deal with the finalisation and signing of documentation relating to your mortgage, and will arrange for the money to be available on completion of the sale.

Final searches and enquiries will be undertaken. Land Registry checks are carried out, to make sure that nothing is registered against the seller (or at the Land Charges Registry if the property is not registered). Problems such as undisclosed mortgages or disputes could be uncovered at this stage.

There will be various matters for you to deal with in the run-up to completion. There will be some documents to be signed and payments to be made: you must pay Land Registry fees and stamp duty. Before completion you need to make sure that all the terms of the contract have been fulfilled, such as any repairs.

You also need to be arranging all the practical matters related to moving house.

NB It is at this point in the process that the purchaser must insure that the property is insured. This is a requirement of the Lender.

Completion

On the day of completion you receive the keys and have to move out of your old home. You also have to pay the balance of the price on the house (the agreed price minus the deposit which you have already paid), usually through your solicitor or conveyancer. The seller's deeds are now handed over to you, and arrangements are made for any outstanding mortgages on the property to be paid off.

After completion the solicitor still has various details to tie up. They will:

• Where relevant, inform your mortgage lender, life insurance company, and the freeholder that the sale has been completed.
• Register the transfer of ownership at the Land Registry. They will then send the deeds to your mortgage lender who will keep them until you either sell the property or pay off your mortgage.
• Pay the stamp duty.
• Send you a statement of completion, including a summary of the financial transactions. If you have not already paid their fees, they will ask for these now.