FAQ for Residential Property Buyers
Q. How much Deposit will I have to pay (and when)?
Most residential conveyancing contracts require 10% of the purchase price to be paid when the contracts are exchanged. If you are also simultaneously selling a property it is usual to use the deposit that is received on your sale as the deposit on your purchase and to request that the Seller accepts this even if even if it is less than 10%. However a Seller will not normally accept less than 5% and the contract will normally require that the balance of a 10% deposit is paid if you do not complete the purchase on the due date.
If you are obtaining a 95% or more mortgage the Seller may be advised to accept a 5% deposit on exchange of contracts.
It is not normally advisable to pay any deposit until exchange of contracts and any money should go through your solicitor. It is sometimes necessary to pay a small reservation deposit e.g. when buying a new property from a developer but you should ensure that this is refundable if you pull out.
Q. What kind of Survey should I have?
If you are obtaining a mortgage your bank or building society will normally insist that you pay for a mortgage valuation, which is the most basic kind of survey, more or less consisting of a cursory inspection of the property and an assessment of its present market value.
Many people consider that this basic inspection of the property is insufficient to protect their investment and chose to additionally pay for their own survey. Depending on the nature of the transaction it is normally best to wait until your solicitor has received a draft contract before instructing the surveyor, which is a sign at least of a basic commitment on the part of the Seller although even then there is no guarantee that the deal will go through.
We will be pleased to recommend an appropriately qualified professional surveyor if you wish.
Q. Is there anything that I can do to reduce stamp duty land tax?
There are some very sophisticated stamp duty land tax saving schemes, which are sometimes used in very high value transactions but these are beyond the remit of this guide. However a simple way to reduce the tax(which applies to transactions of more than £60,000, or in certain special areas, over £150,000), is if part of the price can legitimately be apportioned (allocated) to fittings or contents. This can be particularly useful if the price is just over one of the stamp duty bands i.e. £60,000/ £250,000/£500,000 or if the price is in one of the higher bands. The amount must be agreed with the Seller and be reasonable and realistic. It may be helpful to agree a list of relevant items, and if possible for the Seller to let you have some proof of the value of the items such as receipts. Your lender (if applicable) may need to be notified that the price for the property itself has been reduced but in most cases this will not affect the terms of the mortgage offer.
Q. What difference will it make to my transaction if there is a "chain" involved?
Inevitably if there are a number of people looking to buy and sell simultaneously, any delay in relation to any one of the transactions will prevent everyone else from exchanging contracts. If you do find yourself in a chain it is always sensible to try to find out at the beginning of the transaction the position of the other parties in the chain, and to try to monitor the progress made by each person as the transaction progresses. You should ask your agent to do this for you.
Q. Why do you charge more for leasehold rather than freehold transactions?
Unfortunately there is more work involved in leasehold conveyancing. Leases are complex and usually lengthy documents often many years old, which need to be carefully studied to check that they are satisfactory and that they meet present mortgage company requirements. The Council of Mortgage Lenders in recent years has laid down a stringent set of criteria which all residential leases must meet and if they do not they are considered defective and remedial action will have to be taken by the solicitors involved in order for the sale to proceed, normally putting the seller to some expense.
In addition because service charges and ground rents are usually payable under the terms of the lease, the present level of service charges, future charges and other matter such as buildings insurance need to be carefully checked.
Q. What types of searches will my solicitor undertake?
Before exchange of contracts, it is usual to undertake a local search, drainage search and environmental search against the Property. There are sometimes other less common searches, which are carried out depending on the location of the property.
The local search is a check at the local authority as to any information that may be recorded against the property and would reveal amongst other things its planning history, whether there are any road schemes or compulsory purchase orders affecting the property and matters of a similar nature.
There are considerable difficulties with certain London Boroughs where the turnaround times for processing local searches have stretched in some cases to beyond 6 weeks. Recognising that most of our clients will be unhappy to see their proposed purchase delayed we are now using electronic searches and search insurance wherever possible to minimise this difficulty.
The drainage search is designed to obtain information from the relevant water company about the drainage arrangements for the property. Principally it will confirm whether the property is connected to main drainage but it may also reveal information about the routes of drains pipes and sewers serving the property. To reduce any delay it is now our policy to conduct all water searches on line hereby reducing the waiting period for the result of the search.
The environmental search is a relatively new type of search and is conducted on line (the result is normally obtained within a few minutes), and provides an indication as to the recorded uses of the land shown on official maps of the vicinity. It includes an assessment as to the likelihood of serious quantities of contamination in the land around the property and of the flood risk for properties in the area. It does not however involve any soil testing or other physical inspection.
After exchange of contracts there are searches carried out at the Land Registry and if you are obtaining a mortgage to check that there are no bankruptcy entries recorded against you.
If you have a different question you may wish to email us at email@example.com. Although we cannot promise to respond personally unless you are one of our clients, we regularly update this web site and will try to include replies to any questions we are repeatedly asked.