5 Critical Things You MUST know about Conveyancing
For most people buying a home is one of the most stressful things they’ll ever have to do, and you can understand why when you look at all the pitfalls that can cause the process to fail. Undervalued property, long chains, slow or uncommunicative conveyancing solicitors, gazumping and even the other side pulling out for no reason.
What will help ease the stress is knowing these 5 important things about conveyancing – and how to overcome the potential challenges.
No offer is legally binding
The conveyancing process starts with an offer from a buyer to a seller. A study by RightMove states that you’ll have to have 50 viewings before you’ll get an offer from a buyer. Most offers are funnelled through the selling agent and can often start lower than the original asking price (unless you are buying in London where the fiercer market requires higher offers).
With some toing and froing, the seller and the buyer agree on a price; however this is not a legally binding offer and can change right up until you exchange contracts. This is why the estate agent agrees the sale, ‘Subject to Contract (STC)’ and lists the property as under offer – in fact they’ll often even change the sign on the front of the house to SOLD.
Some sellers want to tie the buyer’s offer in with a reservation deposit (sometimes non-refundable), however these pre-contracts can delay the sale and can often put off buyers who want to do their due diligence before they finally pay for the property.
Plan for 8 to 12 week exchange
The actual time to complete all of the legal work during the conveyancing process depends on a number of different factors; often out of the control of the property solicitor. Although they might be able to complete the legal work quicker than this, these are just a few things that can delay your exchange of contracts:
- Getting your mortgage offer – this can take anywhere from 3 to 6 weeks from getting your mortgage in principle as the mortgage lender needs to confirm your affordability, eligibility, value of the property and then give you the final mortgage offer.
- Having a long chain – a chain is the number of buyers and sellers who are selling their properties to each other. A chain normally starts with a first time buyer and ends with either a second home seller or a probate sale. The simple fact is that the more people you have in a chain, the longer the conveyancing process will take because of the logistics of getting everyone ready.
- Leaseholds take longer and shared ownership even longer – a leasehold is most commonly a flat where you share access to the freehold (the land it is built on) with other leaseholders. You can buy a leasehold flat on the open market, or through a shared ownership housing scheme. The complexities in both cause additional delays due to housing associations, managing agents, freeholders and additional contracts that when buying a freehold you wouldn’t need to do.
Estate agent valuations aren’t always right!
Most estate agents value what they feel your property will sell for using their market knowledge, and comparable properties. You’ll often find however that when getting a number of estate agents to value your property, that the valuations come back with a huge variation in price; some potentially looking to secure a higher price to lock you into a 3 month contract, or those pricing at the lower end of the market in the hope of a quick sale.
Lured in by the higher prices the estate agent uses their selling skills to market and secure a buyer – however this is where the challenge begins, especially if they are getting a mortgage.
As we highlighted earlier, every mortgage lender will look to value the property before they will agree to give the buyer a mortgage offer. The mortgage lender sends in their own RICS surveyor to value the property. Sadly this is where properties that have been marketed over their actual value will be undervalued as the property is not worth what you have offered.
Chains can often fall apart because of this as the buyer will have to make up the difference themselves or renegotiate their offer with the seller (which could mean the seller can’t afford to buy their next home).
To stop this happening you should research what properties in the street have sold for (not under offer or for sale as these aren’t the final prices). Use RightMove, Zoopla or the new Government website, UK House Price Index. You need to look for house prices that have sold over the last 6 months and try not to go back further than this as house prices go up each year by around 7% (London the average price is increase is X%).
Choosing a good conveyancing solicitor is key
The mistake many people make is to choose a solicitor based on their low conveyancing costs. Sadly you don’t ever get the service you need with the work either handled by under-qualified assistants or over-capacity solicitors.
With this said though, paying more doesn’t guarantee getting a good solicitor who’ll be able to give you the support you need. Whilst getting your conveyancing quote try calling your solicitor twice to see how easy it is to get through to them and then look for their reviews online – start with looking for the worst one as they normally flag what could happen.
It’s not over until exchange of contracts
Exchange of contracts is the point where the buyer’s solicitor has satisfied their legal enquiries and the mortgage lender, buyer and seller are happy for the purchase or proceed.
Exchange of contracts is when both property solicitors exchange their signed contracts with each other making the buyer contractually bound to buy the seller’s property. Until this happens, either party can pull out for any reason without any liability to each other for any costs incurred.
After exchange of contracts the buyer can pull out, however they will forfeit their 10% deposit and have to cover the legal costs of the seller.
Completion is when the seller hands over full possession of the property to the buyer and can be any timeframe that both the seller and buyer agree to before they exchange contracts. It normally is somewhere between 1 to 2 weeks as you’ll need time to hand in your notice on your rental, organise removals and for your solicitor to draw down the mortgage funds.
The key to success during the conveyancing process is to do your homework on the property price, find out how long your chain is and get a good conveyancing solicitor to guide you through. Now you are armed with this you’ll have much better chance of success when buying or selling your home.
By Marcus Simpson, Editor