Purchase - Finalising the Deal

So, you've found the house of your dreams, you've placed your offer and the vendor has accepted it.  What do you do next?

• Arrange your mortgage
• Instruct your legal adviser
• Obtain removal quotes
• Move in

Whilst under English law, the process for purchasing a property follows a set procedure, there are numerous loop-holes in it that tend to be all in favour of the vendor rather than the purchaser. 

Until the legal process called 'exchange of contracts' takes place, neither party is legally bound to the deal; the vendor doesn't have to sell and the purchaser doesn't have to buy.  Whilst this means that you can withdraw from the sale, it also means that the vendor can accept a higher offer and 'gazump' you (sell the house to someone else unless you increase your offer).  However, having said that, most people are honest and will stick by the deal you have agreed.

Apply For a Mortgage

The first thing to do is to arrange your mortgage (our section on Banking & Finance deals with this). There are a huge amount of mortgage products on the market, so it is definitely worthwhile speaking to an Independent Financial Adviser (IFA).  The financial advice industry is heavily regulated to prevent mis-selling, and IFA's have a duty of care to their clients.

Be aware that most estate agents will also offer you a financial advice service. However, most of their financial advisers are not full IFA's, and are usually only allowed to sell the mortgage products from those companies with whom they have an agency agreement. They may not be able to offer you the deal that is best suited to you.

Instruct a Legal Adviser

The next thing you need to do is to instruct a legal adviser.  The legal work involved in house purchase is called "conveyancing", and can be done either by a solicitor (a general lawyer who undertakes all types of legal transactions), or by a licensed conveyancer, a paralegal who only carries out property purchase transactions.

One of the best ways of choosing a legal adviser is by personal recommendation.  Be sure to obtain a quote for their fees in advance - these will differ greatly from practice to practice and can add a substantial amount of money to your budget.  In general a licensed converyancer should be cheaper, although you may prefer to have access to a solicitor who at the same time can assist you with matters such as revision of wills, etc. The QUICK LINKS tab, above, has links to several service partners including firms of solicitors and licensed conveyancers who have assisted our clients in previous transactions.

Some mortgage companies may well offer free legal services, so this is something to consider.  

Ensure that you give your legal adviser details of the estate agent you are selling and buying through and the mortgage company that you are using.  You will need to supply your estate agent with the details of your legal adviser so that they can send a Memorandum of Sale to them.

Memorandum of Sale

The Memorandum of Sale is a document which lists the details of the agreement. It will have legal adviser's details, the address of the property, the price agreed, details of the fixtures and fittings included in the sale and any other important information.  A copy will be sent to you, the vendor and both parties' legal advisers.  This is not a legal document, merely a form that the estate agent uses.

The Legal Process

The vendors' legal adviser will apply to the UK Land Registry for the deeds to the property and once they have been received, will forward office copies to your legal adviser to check through them page by page to ensure that there are no restrictive covenants in the deeds or clauses that have an onerous affect on the ownership of the house.  Ordinarily, legal advisers will only correspond in writing and this process can take some time.

At the same time, your legal adviser will apply to the local authority that controls the property you are purchasing for a 'local search'.  This is where the local council has to disclose any plans that have been agreed for development in the area close to your chosen property i.e. has the pretty winding lane outside your cottage been approved to be turned into a 10 lane motorway, or has the property owner been served with a public health notice, for example?  The searches can take a few weeks to be returned from the local authority, but are only valid for a three month period.

The legal advisers will prepare and approve the contract of sale.  This contains the full details of what you are buying and it is this that you and the vendor will be asked to sign.  You will also be asked to sign a mortgage deed which is the contract between you and your lender.

Survey and Valuation

Your mortgage company will, before finally approving you for the loan, instruct one of their own surveyors (don't be fooled, you will still have to pay for the survey report) to carry out a survey on the house you are purchasing to ensure that it is suitable security for them to lend money against.  Do bear in mind that they do not necessarily have your best interests at heart - the purpose of this valuation survey is for your mortgage company to check that the house is worth what you have offered for it and subsequently that they will not be lending too much money on it and will be able to recover their money should you default on your repayments.  So, whilst the surveyor will be ensuring that the house isn't falling down, they will not be preparing a fully detailed report about the house.  

It is worth considering investing in either a homebuyers report or a building survey.  These reports will give you more information about the property than the mortgage company's valuation report and considering that this is one of the most expensive things you will ever purchase, the cost of an in-depth survey will go a long way to putting your mind at rest that you are making the right choice.

The survey report may well high-light the need for further, specialist, reports to be carried out.  Perhaps the surveyor suspects that there may be damp present in the property.  These conditions would need to be satisfied prior to the mortgage company confirming their offer of a loan to you.  Alternatively, the mortgage company may offer to only release part of the mortgage amount until such times as any work that needs to be done to the property has been completed.  If this is done, it is called a retention and once the mortgage company is satisfied, the money will be released.  This does of course mean that you will be short of funds to complete your purchase.  You're forced to either renegotiate the deal to take the cost of the works into consideration, or to fund the works yourself.

Once the mortgage company is satisfied with the value of the house and it's condition, they will issue a formal mortgage offer.  This is the confirmation to you and your legal adviser that you have the money with which to buy the house you have offered on.

Exchange and Completion

Once your legal adviser is happy with all of the clauses within the deeds, has a clear local search, a formal mortgage offer and an approved contract of sale, the sale can go ahead.  You will be asked to sign the contract, and the legal advisers will agree to 'exchange contracts'.  Once exchange takes place the sale becomes legally binding and neither party can change their mind.  At the point of exchange (and this can be agreed verbally, and followed up by post), your deposit amount is paid to the vendor's solicitor and a date of completion is agreed.  You also become responsible for insuring the building you have agreed to purchase. It is on the completion that you have to pay the remainder of the purchase price (this is usually sent from your mortgage company to your legal adviser, and then on to the vendor's legal adviser).  

Once the vendor's legal adviser has received cleared funds, you will be able to collect the keys to your new home from the estate agent and the house is yours.  It is normal to have a period of time between exchange and completion, traditionally 28 days so as to book removals, etc., although the two legal processes can be done on the same day.  Do bear in mind that even though the mortgage company and solicitors have been aware of your date of completion for some time, there is no guarantee as to what time of day the money will arrive in the right bank account.  Although most completions happen around lunch-time, which gives your removal men plenty of time to start moving you into the house, it is not unknown for the money not to arrive until the late afternoon and for you to be sitting outside your new home just waiting for a phone-call!!

After Completion

Once completion has taken place, your legal adviser will re-register the title deeds of the property with the Land Registry so that it shows your name as the legal owner.  The other thing you need to do once you have completed is pay the Stamp Duty that is due. For more information on Stamp Duty, click here.  You will also need to settle the invoice for your legal adviser's fees.

Whilst this process may seem to be relatively straightforward, it is usual that there will be a 'chain' of sales and purchases taking place that will all have been agreed at different times.  The chain could be never-ending or just a couple of transactions long.  Regardless of how many transactions are taking place, they will all have to conclude on the same date and this is where the delays and pitfalls of buying a house arise.  Typically, you will be advised that the legal process will take 6-8 weeks to get to the point of exchange of contracts.  However, 10% of all transactions take longer than 20 weeks.  Perhaps this is why people say that moving house is one of the most stressful things you will ever do.

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