What can you expect as a first time buyer?
The legal process in ten easy steps
1. Sort your finances.
You’ll see plenty of articles in First Time Buyer Magasine on sorting your finances in advance; get your credit score checked, have you got a deposit together, what about other fees like Stamp Duty or Land Registry? See more info below about some of these, but have you thought about these before you start your search?
2. Find a property and reserve this with the estate agent / sales team.
You’ve got your finances ready – find a property with an estate agent or new build sales team and reserve this. See our further info below on ‘reservation deposits’. At this stage you might want to meet with a financial advisor or mortgage broker to discuss your options.
3. Instruct a solicitor
If you’re buying a new build property the sales team will have preferred solicitors who they have worked with for years who will know the site. However, it’s always worth shopping around to get quotes from a range of solicitors to ensure you’re getting good value for money.
4. Your solicitor reviews the title
The seller owns the property and must prove this. Previously they would have done this by way of old original title deeds, however, now most properties are registered with HM Land Registry and the seller’s solicitor will provide your solicitor with evidence of this. Your solicitor will review this title and check for any issues or problems.
5. Your solicitor commissions searches
Your solicitor will undertake searches to protect you (and your mortgage lender). These will show if the property has had any problems with planning or building regulations, if the roads are maintained by the local council or someone else, if historically the land has had any negative uses (say if it was once the site of a petrol station or a dry cleaners).
6. You will sort your mortgage offer & your solicitor will check this for you.
Your mortgage offer comes in two parts. One part is sent to you and the second part is sent directly to your solicitor. This is because they act for both you and your mortgage lender and have to complete a form confirmation there is nothing wrong with the property and it represents good security for your mortgage lender.
7. Pay your deposit over.
Your solicitor will now ‘report to you’. This means everything you’ve had up until now, title, searches, mortgage, etc will all be sent to you, with everything for signing, along with a report on title. This summarises their investigation for you and should assist in your understanding of the legal background to your dream home. Read this carefully and if you have any questions do ask your solicitor – it’s what they’re there for. There’s no stupid questions and nothing we haven’t been asked before.
8. Exchange (legally binding)
Once your solicitor has your signed contract, your deposit money, and knows the date you and the seller have agreed as your moving date, they can exchange. This is a quick phone call between your solicitor and the seller’s solicitors and makes the completion date legally binding. Your solicitor will need about a week between exchange and completion to set everything up giving you time to pack!
9. Completion (moving day)
Your solicitor gets the rest of the money from you, your mortgage lender, and sends it to your seller’s solicitors. On receipt you have legally completed and can collect the keys to your new home.
10. Land Registry
Your solicitor will need to make sure you are the registered owner, and your mortgage lender is the registered mortgage lender for your new home. This will take them a few weeks and is completely normal so don’t panic. You can still move in and enjoy your new home while this happens in the background. (If you’re buying a new build property HM Land Registry take several months to register your new lease or freehold ownership so allow longer for this bit). We pay any Land Registry fees and pay your Stamp Duty for you.
Why do I even need a solicitor? Your mortgage lender is going to be parting with a lot of money and they want this to be sent to a solicitors firm. This is because the solicitor will be acting for both you and your mortgage lender. They will also want the monies sent to a lawyer who will then register the mortgage against the property.
Do i need a mortgage broker or can I arrange my own? You don’t need a mortgage broker and can go direct to a bank or building society, however, brokers sometimes have access to exclusive products which could save you money in the long run.
I’m being sold extra insurance – do I need it? If you are buying a freehold property you will need to arrange your own buildings insurance before exchange. Once you’ve exchanged you must buy the property – even if it burns down or floods – so you’ll want your own insurance to fall back on. You may be offered additional insurance, such as mortgage payment protection, or contents insurance, and it is entirely a personal decision for you as to whether you take this out – you’re not obliged to.
Leasehold vs Freehold – a freehold property is one where you own the property and the land it is built on. With a leasehold there is a lease in place giving you rights, responsibilities, obligations over the specific property only, and agreements with the other leaseholders. Shared Ownership is always leasehold as you have a relationship with the housing association.
Why am I paying Stamp Duty? What’s my Land Registry fee going to be? Stamp Duty is a land tax payable on all transactions over £125k. If you are buying a new shared ownership lease you may have to pay stamp duty even if your purchase is less than this as the rental amount of your lease may trigger some SDLT be payable. Your Land Registry fee is based on the value of your property – your solicitor should put this their initial quotation but if they haven’t you can ask them for this information at any time – it’s easy for us to work out for you.
Reservation deposits paid to agents – is this legal? This is now the norm with new build properties but do read the small print – on what basis will you get the reservation fee back. What if you can’t proceed for reasons outside of your control (say you’re financially stable but then suddenly are made redundant resulting in your mortgage being withdrawn). Read the small print and understand what the conditions are for a refund thinking the entire time ‘worst case scenario’.
Solicitor / Licensed Conveyancer / Legal Executive – what’s the difference? All three are types of lawyers. All three pass strict exams. All three are regulated and have codes of ethical conduct they must abide by (such as keeping your information confidential, and always acting in your best interests, and not acting where they could be a conflict between your interests and someone else’s). All three must be skilled to undertake the work they are undertaking for you. Be careful if the role is ‘case executive’ or ‘case manager’ as this is not a formally recognised legal qualification.