NO QUESTION IS A STUPID QUESTION, BUT YOU MIGHT WANT TO READ THIS FIRST!
Nadia Kashani provides a simplified summary of the conveyancing process and deals with common questions raised by First Time Buyers.
Buying a home for the first time can be a daunting prospect and is one which many first time buyers approach with little guidance. Read on for a simplified summary of the process and answers to the three most commonly asked questions.
Put simply, once your conveyancer has been formally instructed by you, the first stage of the conveyancing process is reviewing and investigating the deeds and documents relating to the property. Your conveyancer will begin this process once paperwork has been received from your sellers’ conveyancer and you have returned your instruction forms.
Searches are ordered and it can take a few weeks for results to be returned. Your conveyancer will consider the documentation as it is received, send copies of the documents received so far to you and raise specific enquiries about the property with the sellers’ conveyancer. These enquiries are often related to planning permissions, building regulations approvals and certificates, gas and electrical safety, title restrictions, rights or covenants (binding promises) which are relevant to the property and other legal and practical enquiries which may need to be made to ensure there are no surprises when you finally take ownership of the property. Whilst raising enquiries, your conveyancer will also be negotiating the contract for sale and transfer deed in the background, as well as reporting to your lender, preparing your Stamp Duty Land Tax return (yes, you do in most cases need to submit a return despite being eligible for First Time Buyers’ tax relief!) and keeping the selling agent, your mortgage broker and often other parties in the chain informed throughout.
Once satisfactory replies to all enquiries are received from the sellers’ conveyancer, your conveyancer will be able to prepare a full report on your property, setting out all the information your conveyancer has considered in relation to the property. The contract will be sent to you and once you have considered your conveyancer’s report and are happy to proceed with the purchase you should sign and return the contract to your conveyancer. At this point, you will also need to send your conveyancer the 10% deposit required to exchange contracts.
How and when are contracts exchanged – what does this mean for you? When is a completion date set?
Your conveyancer will need to be in possession of your signed contract and deposit funds (10% of the full purchase price) in order to exchange contracts. Exchange is a formal procedure which usually takes place over the telephone between your conveyancer and your sellers’ conveyancer. On exchange of contracts, the date for completion will be set and written into the contract. It is necessary that all parties in the chain come to an informal agreement as to the preferred date for completion prior to exchange of contracts to avoid ongoing negotiations. Your conveyancer will tell you once exchange has taken place, and will confirm the date set for completion. Once exchange has taken place, you will be contractually bound to proceed with your purchase and complete on the date set. Your conveyancer will send you a completion statement showing the amount required from you to complete and will request mortgage funds from your lender.
What is the difference between the 10% deposit required by your conveyancer to exchange contracts and the deposit you have saved in order to obtain a mortgage?
On exchange of contracts, a deposit is payable to the sellers as surety that you intend to proceed with the purchase. The required deposit is usually 10% of the full purchase price. The 10% deposit must be available in the conveyancer’s client account in order to exchange contracts. So if you are purchasing a property for £290,000 you will be required to send a deposit of £29,000 to your conveyancer so they can exchange contracts on your behalf. If you fail to complete the purchase on the agreed completion date, you may forfeit your deposit – this means the seller is entitled to keep it on the basis that you did not complete.
The full deposit you have saved is the amount your lender requires you to put into the property, on the basis that they agree to lend you the balance by way of a mortgage to be secured over the property.
You will need to bear in mind that you will need to also have sufficient funds to pay for costs and legal fees.
When do we need to put buildings insurance in place?
If you are purchasing a freehold property and you are not obtaining insurance through your lender, you must ensure buildings insurance is put in place from the date contracts have been exchanged. It is advisable to obtain a policy in draft in advance of exchange of contracts and then once contracts have been exchanged, you should contact your insurer to put your policy on risk the same day. Your insurance should cover the full reinstatement value of the property (this can be found on your lender’s valuation report) and have your lender’s interest noted on the policy.
Final stages of the conveyancing process
On the day of completion, your conveyancer will send funds to the sellers’ conveyancer as soon as possible. Contractually, completion will normally need to take place by 1 or 2pm – you will be able to collect the keys from the selling agents once we have telephoned you to let you know you are the proud owner of your first home!
For your conveyancer, the work doesn’t stop here. Your conveyancer will apply to register your ownership at the Land Registry and will be in contact with you at later stage to check you have settled into your new home and to confirm you are now registered as the new owners.
The whole process can be smooth and stress-free if you have an experienced and approachable conveyancer acting on your behalf. Nadia Kashani is Senior Licensed Conveyancer in the Newbury Residential Property team and can be contacted by email (firstname.lastname@example.org) or telephone (+44 (0)1635 917482).