Step by step guide to buying
Once you've made the decision to buy a property there's a number of important areas to consider.
Agreeing your budget
It may seem obvious, but once you’ve made the decision to look for a new home knowing your financial position ahead of your search is important. Doing your homework can save you a lot of time, hassle and money later on.
So before you begin your search, its really important to decide:
- What your budget is
- How much you can afford to borrow
- How much equity you want to invest
- How much Land and Buildings Transactions Tax (LBTT) and Additional Dwelling Supplement (ADS) you will have to pay (see our useful tips for more information)
- How much you need to keep aside for home furnishings and decorations
- Any reserve funds you might need for e.g a household emergency.
You should also confirm with your Mortgage Lender that they are willing to lend you the amount required for your purchase.
An “agreement in principle” or a “decision in principle” from a Lender is not a guarantee of a mortgage offer, however it is favourable to get this at an early point to give an indication of what lending may be available to you.
It is also important to be aware that lenders will only lend based on the Home Report value of the property. If you are therefore looking to pay over the valuation price (which is common in the current Edinburgh property market, especially where Closing Dates are involved), you will need to make allowance for this coming out of your budget for the deposit payable for the property.
Our residential team can put you in touch with an independent mortgage broker who can help you get everything you need in order. Contact us for more information.
Should you buy or sell first?
There’s no right or wrong answer here. Every property transaction is different and the speed at which you sell your property may vary. In a strong market it’s not uncommon to move out of your existing home and into your new one on the same day. Sellers, however, will often look more favourably on those who are not subject to the sale of an existing property. Tax is another consideration. ADS will be payable if you buy a new home before selling your current home. You may be able to reclaim the ADS paid if you sell your current home within 18 months but you will still have to have sufficient funds to pay the ADS at the outset.
We can talk you through the pros and cons of buying first and can have one of our professional valuers assess the marketability of your existing property. Contact us to discuss this further.
Finding your ideal home
Once you’ve agreed your budget it's time to start looking for your perfect home. Before you begin your search though, be sure to have some idea on the following:
- Location - consider the distance to your place of work, family, friends and local amenities. Would you prefer a city, semi-rural or rural location?
- Type of property - would you prefer a flat, semi-detached, detached house or a bungalow or even a cottage?
- Other essentials - is the property in a good catchment area, do you need childcare facilities nearby or good, quick access to public transport links?
Creating a short list of essentials will help you in your property search.
Form of offer
For residential property transactions in Scotland, all Offers incorporate the “Scottish Standard Clauses” which are designed to set down a uniform set of conditions for property transactions. These are simply the default position and can be tweaked and amended if necessary to deal with particular properties quirks and circumstances. The rationale behind these Standard Clauses is, however, to strike a balance between the interests of both buyer and seller and to aid the quick conclusion of missives (the “missives” being the contract between the parties).
The Standard Clauses are very comprehensive and a detailed client guide to each clause can be found here.
Purchase by more than one party
Frequently we are asked to submit an offer for a property in two or more names. We can of course take instructions from all parties however this can be cumbersome and cause unwanted delay so we would recommend that you provide written authority to one designated person to issue instructions on behalf of everyone. The instructions given will be binding on all parties.
It’s also important to consider how you wish the property title to be taken; will it be in one or two names or even more? There are various options that can have significant legal and tax consequences but our conveyancing team can provide you with all the help and guidance you need. Contact us for more information.
Another aspect to consider if you are purchasing with a partner is potentially setting up a Cohabitation Agreement. These agreements, while not particularly romantic, are important in cases where one party is contributing more than the other to the purchase price, or where there are children involved. They will formally regulate what is to happen in the event that you come to the decision to live apart in the future.
We appreciate that each client’s background and circumstances are different, therefore if you believe that you would benefit from a formal Agreement being prepared, our Family Law team would be happy to assist.
Preparing to submit your offer
Fixed Price Properties
Any property advertised at a “fixed price” means that the first written offer at that fixed price is likely to be accepted. If you see a “fixed price” property that catches your eye then you should move quickly and speak to your solicitor to avoid missing out.
If two or more offers from different parties are submitted around the same time, then the seller could choose to set a closing date (see closing date below).
Offers Over vs Offers Around
What’s the difference? In practice we have found that there is little or no difference. Most sellers will advertise their property at “offers over” a given price and in today’s market would then expect to receive offers well above that asking price. The asking price is therefore just a guide so it’s important to speak to your solicitor to ensure you submit an appropriate offer.
The level of your offer will depend on a number of things including:
- (a) the size of your budget
- (b) prices achieved for similar properties in the area
- (c) the amount of interest in the property, and of course, how badly you want that particular house.
If you find the right home, contact us quickly with the address of the property and we will note your interest with the selling agents. Noting interest is cost free and we’re simply advising the seller’s solicitor that you’re interested in submitting an offer.
However a seller can still sell their property at anytime regardless of whether you have noted interest so it’s important to remember that noting interest does not always guarantee you the opportunity to submit an offer.
If more than one party has noted interest in a property the selling agents will usually set a “closing date” for offers. They will notify your solicitor by telephone that they’re inviting all interested parties to submit an offer in writing by a certain time on a specified date.
A seller does not have to accept the highest or “best” offer received at a closing date. If your offer is unsuccessful then due to the guidelines issued by the Law Society, we are unable to make a revised offer unless the seller’s solicitor invites us to.
Home reports: the key facts
What are they, who pays for them and how can I get my hands on them?
A Seller is required by law to provide you with a Home Report for their property. The Home Report is paid for by the Seller and is designed to ensure the potential buyer is well informed about a property before they consider submitting an offer. The Home Report comprises three sections:
This is compiled by a Chartered Surveyor and provides detailed information on the condition of the property and issues such as accessibility. It also contains a property valuation - the price which the surveyor believes the property is worth in current market conditions.
ENERGY PERFORMANCE CERTIFICATE
This is generally carried out by the same Surveyor who undertakes the single survey and it will provide you with an assessment on the property's energy efficiency rating and environmental impact. Improvements, if appropriate, are also suggested within the report.
The seller will also complete a property questionnaire which will include information on the council tax band, any property enhancements and alterations made, car parking, responsibility for common areas and other information relating to the property (e.g. key utility providers and servicing records for heating/plumbing systems).
If the Home Report provided to you is more than three months old you are eligible to ask the seller for a more up to date copy. Alternatively, you can still proceed with an offer under the condition that the seller provides an updated version of the report.
Bear in mind that you are still entitled to have your own valuation or survey carried out before you make an offer, and indeed if you are borrowing a high percentage of the purchase price your Lender may insist that you instruct your own survey report. While most Lenders will be content to proceed on the basis of the Home Report, some Lenders may wish to instruct their own valuer to attend the property.
If the Home Report flags up any areas of concern (damp, wet rot, structural issues, timber decay, roof problems etc) that you are not comfortable with, you can make your Offer subject to you obtaining your own separate specialist reports. If you wish to do this, it is important to let us know at the time of making the Offer so that this condition can be added (if it is not included with the initial Offer then the sellers may refuse access for these reports to be carried out).
Conveyancing: what you need to know
Conveyancing involves the legal transfer of home ownership from the seller to the buyer. The process begins once your offer for a property is accepted and is completed when you receive the keys. Our experienced conveyancing team can help with the following:
- Examination of title
- Dealing with instructions from your lender
Missives is the term used for the formal letters passing between solicitors during the sale process. Missives usually comprise:
- A formal offer
- An acceptance or qualified acceptance issued by the sellers solicitors (a qualified acceptance is a letter accepting our offer but subject to certain amendments)
- One or more additional letters until both sides reach agreement
If and when we receive a written letter of acceptance to your offer, we will contact you within 24-48 hours to talk you through the next steps.
If your offer is accepted without qualification then a binding contract will exist. This is often referred to as a “concluded contract” or “concluded missives”. Until you reach that stage both the buyer and the seller have the right to pull out of the deal without penalty.
Examination of title
We will check the legal boundaries of the property to ensure you are buying what you think you are buying and that you have necessary rights of access. Examination of title also involves the search of official records relating to the property to ensure there are no issues before the transfer of title.
If buying a flat we will ensure that you are not burdened with unfair share of any common liabilities. We will also check various reports from outside bodies (e.g Property Enquiry Certificate) as well as reports on the title from the Registers.
Dealing with instructions from your lender
It’s normal for your Lender to instruct us to deal with the preparation of the security documents on their behalf. We will prepare these documents and explain them in detail before asking you to sign. It’s also our responsibility to prepare a report on the title of the property for your Lender.
If you are married or in a civil partnership but the title of the property will be in your name only, then your Lender will need your partner’s consent towards security documentation. Your partner may wish to have some independent legal advice before providing that consent however, consent is not required if you are separated and your partner will not occupy the property with you.
Registering your title
We will take care of the title registration on your behalf. After you’ve paid the price, we’ll submit an LBTT (Land and Building Transaction Tax) form to HMRC, arrange payment of any LBTT and ADS (Additional Dwelling Supplement tax) due, and register your title in the Land Register. Once registered, a Title Sheet will be issued and if you have a mortgage, we will send this to your Lender. If you don’t have a mortgage, we’ll safely store the Title Sheet and send you a copy (unless you advise us to send the original copy to you). The registration process can often take several months (even years) before you receive a copy of the certificate, so don’t panic if you haven’t heard from us for a while.
Date of entry
We will pay the purchase price for the property on your behalf on the date of entry that’s specified in the missives. In exchange for the payment we’ll receive:
- the signed Disposition transferring the title of the property into your name
- the keys to your new home
- any other relevant documentation
This should all take place before 3pm on the date of entry however, there may be occasions where there are delays due to loan funds not arriving in our account or due to the sellers own transaction being delayed.
Once you receive the keys it’s important to the check that:
- the Seller has left all items that were agreed and included in the purchase price
- the central heating system is working properly
If you come across any issues then depending on the terms of the missives, you may be able to claim against the seller but, any claim must be made immediately through your solicitor.
Make a will
You’ve secured your new property but now its time to secure the future for your family and loved ones. Making a Will is arguably one of the most important things you can do for yourself and your family. A Will can legally protect your spouse, children as well as your assets.
A Will ensures that if anything happens to you then your money, property and possessions are left to those you specifically request. If you do not have a Will then the law will decide how your estate is divided or passed on and that may not reflect your own wishes.
At Gillespie Macandrew we have one of the leading Private Client teams in the country. We’re committed to advising our clients on every legal and tax aspect and that includes advice on making a Will or amending an existing one. Contact us for more information.
Useful reminders & tips (including LBTT & ADS)
Land and Building Transaction Tax (LBTT) - This tax is levied on land transactions by the Government and responsibility for paying the LBTT falls on the party acquiring the interest in land. The current rates of tax for residential properties are as follows:-
Purchase price - LBTT rate
- Up to £145,000 - 0%
- £145,001 to £250,000 - 2%
- £250,001 to £325,000 - 5%
- £325,001 to £750,000 - 10%
- Over £750,000 - 12%
First-Time Buyer Relief is available if you are purchasing a residential property as a first-time buyer and you will be occupying this as your main residence. If you are purchasing the property with another person they must also meet these conditions to qualify for the relief. The relief effectively means that no LBTT will be due on purchases up £175,000 while purchases over that price will receive a £600 reduction in LBTT liability.
PURCHASE PRICE – ADS RATE
ADS is charged when you buy an additional dwelling for £40,000 or more. It is charged at a flat rate of 4% on the purchase price of the property, unless you are replacing your main residence.
Common situations where ADS will be payable include purchasing a second home, a holiday home, a buy-to-let property or a house for a relative to live in where the purchaser already owns their own house (or any other dwelling).
In particular, ADS will be charged if you buy a new home before selling your current home, although you may be able to reclaim the ADS paid if you sell your current home within 18 months of buying your new home.
The rules surrounding LBTT and ADS can be complex depending on individual circumstances. Therefore if you are unsure of your tax position or would like some advice please contact us as soon as possible.
The purchaser must submit an LBTT Return to HMRC within 30 days of the Settlement Date. Failure to submit the return correctly and on time could result in penalties being incurred. In most cases a return must be submitted even if no tax is payable. Your solicitor will submit this return and arrange payment of any tax due following settlement.
And finally, don't forget to......
- Take final gas and electricity readings before you leave your present property
- Arrange for re-direction of your mail
- Notify your telephone supply company
- Register with a new Doctor if you are moving district
- Check which school catchment areas your new home lies in
- Notify family and friends of your new address
- Cancel insurance arrangements for the old property
- Switch off the water supply if your present property is be left vacant for a period of time after you have left
- Notify the school, your bank and your employers of your change of address/phone numbers.
New Build Purchase
The procedure is slightly different when purchasing a newly built property from a developer. The first stage is to reserve your plot with the developer directly through their sales office. You will usually be required to pay a reservation fee and then you must instruct a solicitor to act on your behalf if you have not done so already.
Unlike a standard residential purchase where the Scottish Standard Clauses are used, the missives for a New Build purchase will usually take the form of either an Offer to Sell or Offer to Purchase. This will be in a standard pro forma set by the developer and any attempt to alter their terms is generally met with resistance. Once missives are concluded, it is also usual for a deposit to be paid at this stage, with the balance of the purchase price being paid at the Date of Entry.
At the time of reserving you will usually be told an “anticipated” Date of Entry but it is important to note that this is not binding. The Date of Entry can be difficult with New Build purchases, as this will depend on when exactly the property is passed for habitation by the local authority (usually the Date of Entry is then set for, say, 2 weeks after your solicitor receives intimation of this) and also when the New Home Warranty is issued (e.g. NHBC if applicable).
Apart from this, the conveyancing generally proceeds as normal, with your solicitor examining the title deeds and providing you with your Report on Title, dealing with any lending requirements, and settling the transaction on your behalf.
Many thanks to all at Gillespie Macandrew for the efficient service as well as the regular and thoughtful communication during the weeks leading up to the sale of my mother’s house. It certainly made the process a great deal less stressful than I had anticipated. My brother and I are very grateful to the team.
Lesley Stevenson - Southfield Terrace, Edinburgh