House Buying Procedure
The steps involved in buying a house
It may be a long time since you last moved house or maybe you are at the exciting stage of being a first-time buyer. Perhaps you are entirely new to the Scottish system of conveyancing.
The first step is to make sure that you will have the funding in place.
Your lender can carry out the financial checks and give you agreement in principle before you have seen a property you are interested in.
They will need the Valuation Report on the property before a final decision is made. It is worth checking with your lender whether they will accept the valuation in any Home Buyer’s Report or wish to instruct a Valuation Report. Sometimes, they will only accept reports from particular surveyors. Note that the amount of loan that is offered in connection with a particular property may be less than the “offer in principle”.
If you are relying on funds from the sale of your current property, please remember that, until the contract for a sale is in place, either party could change their minds. Even if the contract is in place, there could be a delay with the sale or it could fall through.
Once you have seen a property that you are interested in it is a good idea to note interest. This lets the selling agents know that you have a serious interest in the property and that if somebody else offers for it, or if a closing date is set, you would wish to be given the opportunity to put in an offer. A closing date is a date that is fixed by the seller’s agents for all offers to be submitted and considered. The selling agents usually let all interested parties know that their best offer should be submitted on a particular date and it is normally, but not always, the highest offer that is chosen.
Noting interest in a property is not a 100% guarantee that you will be given an opportunity to offer, but it is only very rarely that a property is sold without all interested parties having an opportunity to offer. There are certain guidelines laid down by the Law Society of Scotland designed to prevent sellers accepting offers before a closing date if they have already fixed a closing date. The guidelines however only apply to Solicitors.
The next stage is to obtain a Valuation Report if there is not a suitable report as part of the Home Buyer’s Report.
We normally recommend that a Scheme II Valuation is obtained. This is a more in-depth report than a lender needs but the report will be more detailed and can highlight potential problems with the property. The Scheme I Report has a lot less detail but is all that the lender will require. The cost of the reports normally depends on the value of the property but typically a Scheme I Report is about £180 – £250 and a Scheme II costs about £400 upwards.
Offer / Contract
If the Valuation Report is satisfactory, an offer can be submitted.
The offer is prepared by your solicitor and is sent direct to the selling agent. You must be certain that you will be able to fund the purchase at the time the offer is submitted. The offer forms the first part of the contract. The contract is made up of an exchange of letters between the solicitors and does not need to be signed either by the purchaser or the seller. In Scotland the date of settlement (being the date that the purchase price is paid in exchange for the keys) is put in the offer and unless a seller asks for it to be changed this is the date that applies. The settlement date is normally about 6 to 8 weeks after the date of the offer.
The aim is to get the contract in place as soon as possible and neither the seller nor the purchaser should delay in doing this. In theory, the contract could be in place on the same day the offer is submitted. The contract is only binding once all points have been agreed and until that point either the seller or the purchaser can back out, without any penalty. The contract will contain provisions for the protection of both the seller and the purchaser.
During the 6 to 8 week period, as well as dealing with the contract, your solicitor will examine the title deeds to make sure that there is a good title. Other reports are obtained and examined to confirm the property benefits from any services which may be needed.
Normally, a lender will only process your application once they know the offer has been accepted and the Valuation Report is available.
The lender normally sends an offer of loan and the instructions to your solicitor to prepare the Mortgage documentation at the same time.
Ideally, the loan instructions are needed at least two clear weeks before the proposed date of settlement to ensure that the documentation is prepared on time and there is sufficient time to request the loan funds.
If you have not received your offer of loan by this time, you should contact your lender or financial advisor as a matter of urgency as the lack of loan papers is a common reason for a delay in settlement. Most lenders need a few days’ notice before the funds are released. Often the funds we receive are less than the loan as there can be deductions of administrative charges or similar.
ARTL (Automated Registration of Title to Land) is an electronic system of land registration which has been created by the Registers of Scotland and approved by the Law Society of Scotland. The idea is that it removes the need for paper copies of the deeds and the electronic deeds are signed on your behalf by your solicitor.
There are many transactions which are not compatible with the ARTL system. For example, if the title of the person you are buying from is not on the Land register system (in Moray, if they purchased their property before 2002), the transaction cannot be done by the ARTL system.
If you are obtaining a mortgage, it would also be essential that your lender is signed up to the ARTL system.
For this reason, it will be beneficial if you can confirm, as soon as possible, who your lender is to be – even if the loan instructions have not been issued. We will confirm as soon as possible whether the transaction can be carried out via the ARTL system and if there will be benefits for you in the registration dues charged by the Registers of Scotland. We will request that you sign a Mandate authorising Partners at Grigor & Young to digitally sign the mortgage deed on your behalf and we would ask that the Mandate is signed and returned to us as soon as possible.
Land & Building Transaction Tax
Even if no tax is payable, a Land & Building Transaction Tax return form still needs to be sent to Revenue Scotland. We will need a signed form before we can settle the purchase. There are penalties for not completing a return on time.
If the loan instructions have been received in good time there should be no difficulty in obtaining the loan funds in time.
Any balance you are paying and the fees and outlays will be needed a few days before settlement so that we have cleared funds.
If you are relying on a sale to go through, remember that, if there is a delay with the sale, the purchase will not be able to go ahead unless you have made other arrangements regarding funding e.g. a bridging loan.
Payment of the purchase price is made by us direct to the seller’s solicitor. In exchange, we are given the keys, the deed to transfer title to you and any other relevant documents.
We will send the Land & Building Transaction Tax Return to Revenue Scotland and arrange to have your title to the property registered in the Register in Edinburgh.
The Register can take 2-3 years to process the documentation. Once the Land Certificate has been issued this may be sent to your lender, but we can let you have a copy.
Although the vast majority of transactions go through on the planned date, there is a possibility that the purchase could be delayed through no fault of yours and sometimes no-one’s fault.
A last-minute problem can arise.
Please bear this in mind when making arrangements for moving, particularly if the loan papers were not issued in good time or there were problems – such as unauthorised alterations to the property – which required to be addressed.
This is a brief outline only and cannot cover every circumstance which can arise which would affect your purchase. We hope you find it helpful.
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