21 March 2010
This information applies to Scotland only
The issues you need to consider when buying a property are set out here. The processes and how they relate to each other are explained stage by stage.
If you have problems buying a home, see Problems with buying and selling a home.
The first thing you need to do is to decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions that offer loans to people buying property, for example, building societies and banks. You should find out if you are able to borrow money, and if so, how much.
Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property.
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-
For more information about stamp duty land tax, go to the Directgov website at www.directgov.uk.
You should be aware that you may still have some costs even if your bid for a property is not accepted, for example, you may already have paid for a valuation and/or survey. If the solicitor has started any legal work you may also have to pay for the work done.
You should also take into account the running expenses of the property you wish to buy. These may include:-
The Home Report for the property that you are buying will include some information which might help you to assess the running costs. (see under the heading The Home Report)
When someone wishes to buy a house, in almost all situations, it is necessary to use a solicitor for the legal work that needs to be done. You should approach local firms of solicitors and/or ask friends and relatives to recommend a suitable firm. Before making a choice of solicitor, you should ask for estimates of their charges for buying a house. It is important to contact more than one solicitor as there is no set scale of fees for purchasing a house and different solicitors will make different charges. You should:-
You cannot use the same solicitor as the seller as the solicitor cannot act for both buyer and seller. It is an advantage to use a local solicitor who will have a good knowledge of the local housing market.
The main tasks of the solicitor will be to:-
You can arrange some of these things, for example a mortgage, insurance yourself but will still have to use a solicitor for the legal side of the purchase.
It is now also possible to use an independent qualified conveyancer for this work. A list of independent qualified conveyancers can be obtained from:-
The Law Society of Scotland
26 Drumsheugh Gardens
Edinburgh
EH3 7YR
Tel: 0131 476 8179
E-mail: lawscot@lawscot.org.uk
Website: www.lawscot.org.uk
If you wish to buy a home you may be able to borrow money to do this. This is called a mortgage. The loan is for a fixed period called a term and you have to pay interest on the loan. If you do not keep up the agreed repayments, the lender can take possession of the property.
There are several types of mortgage available. The most common are:-
This is a mortgage in which the capital borrowed is repaid gradually over the period of the loan. The capital is paid in monthly instalments together with an amount of interest. The amount of capital which is repaid gradually increases over the years while the amount of interest goes down
With this type of mortgage you pay interest on the loan in monthly instalments to the lender. Instead of repaying the loan each month, you pay into a long-term investment or savings plan which should grow enough to clear the loan at the end of the mortgage term. However, if it doesn't grow as planned you will have a shortfall and you will need to think of ways of making this up.
There are three main types of interest-only mortgages. These are:-
With an Islamic mortgage none of the monthly payments includes interest. Instead, the lender makes a charge for lending you the capital to buy your property which can be recovered in one of a number of different ways, for example, by charging you rent.
A mortgage could be available from a number of different sources. Some of the available options are:-
For some groups of people, for example, first time buyers on a low income, it may also be possible to borrow some of the money you need to buy a home from other, government-backed sources. You will usually need to borrow the rest of the money from a normal mortgage lender such as a bank or a building society.
For more information about government-backed schemes to help you buy your own home, see Finding accommodation.
As well as standard mortgage deals, lenders might also offer deals which are especially designed for people who don’t qualify for a standard mortgage. This type of deal is known as a 'sub prime' or 'adverse credit' mortgage. They are aimed at people who have had financial difficulties or credit problems in the past. For example, you might have had a previous home repossessed or have been declared bankrupt. You might also have difficulty proving that you have a regular or reliable income.
Sub prime and adverse credit mortgages usually charge a higher rate of interest than standard mortgages. Lender may also limit the amount of money they are prepared to lend you.
Before taking out a sub prime or adverse credit mortgage, you should get some independent financial advice.
If you’re thinking about taking out a mortgage you should make sure you look into all the different options available and that you only borrow what you can afford to pay back. If you do not keep up the agreed repayments, the lender can take possession of your property.
The Financial Services Authority (FSA) has produced a helpful guide to mortgages called 'No selling. No jargon. Just the facts about mortgages'. You can view the guide on the FSA’s Moneymadeclear website at: www.moneymadeclear.fsa.gov.uk.
If in doubt, you may want to consult an independent financial adviser. For help with finding a financial adviser, visit the FSA’s website at: www.moneymadeclear.fsa.gov.uk.
Instead of going directly to a lender such as a building society for a mortgage, a broker could be used. A broker may be an estate agent or a mortgage or insurance broker. They will act as an agent to introduce people to a source of mortgage loan to help them buy a house.
You may want to use a broker because it can save you time shopping around. However, some lenders offer products direct to customers that a broker may not be in a position to offer. So, it may be best to shop around, to see what else is available.
A broker may be used when it could be difficult obtaining a mortgage directly from a lender, for example:-
There are rules about how much a broker can charge for their services. Also, brokers must not discriminate against you because of your race, sex, disability, religion or sexuality when they are offering you their services.
For more information about mortgage brokers, go to the Financial Services Authority (FSA) website at: www.moneymadeclear.fsa.gov.uk.
If you want to complain about a mortgage lender or broker, you should first discuss the problem with them, and then consider making a formal complaint. If you think the mortgage lender or broker has discriminated against you, you can complain about this as well. Each lender or broker should have its own internal complaints procedure. If you have followed this procedure and are still not satisfied, you can take your complaint to the Financial Ombudsman Service.
For more information about making a complaint to the Financial Ombudsman Service see How to use an ombudsman or commissioner in Scotland.
If you are a serving member of the Armed Forces you may be able to get some help with the cost of buying a home. If you are eligible, the Armed Forces Home Ownership Scheme may be able to lend you between 15 and 50% of the value of a home that you choose on the open property market.
To be eligible for the scheme you must:
You can find out more about the Armed Forces Home Ownership Scheme by contacting them:
Freephone: 0800 028 1980
Email: enquiries@afhos.co.uk
Website: www.afhos.co.uk.
There is a number of ways in which someone could find a property to buy:-
When you find a property you are interested in you should arrange to look round it to make sure it is what you want and to check as far as possible on the state of repair. You will need to get some idea of whether or not you will have to spend any additional money on the property, for example, on repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
If the property is a newly-built property, check whether it has a Buildmark warranty. Buildmark warranties are organised by the National House-Building Council (NHBC) which is an independent organisation with over 20,000 builders of new houses on its register. Before being accepted onto the NHBC register, builders must be able to show that they are technically and financially competent and they must also agree to keep to NHBC Standards.
The Buildmark scheme covers homes built by NHBC registered builders once the NHBC has certified them as finished. The scheme will, for example, protect your money if the builder goes bankrupt after contracts have been exchanged but before completion. It also covers defects which arise because the builder has not kept to NHBC Standards. For more information, go to the NHBC website at: www.nhbc.co.uk.
If you are buying a house after 1 December 2008 you will get an Energy Performance Certificate (EPC) free of charge. This will give you information about the energy efficiency rating of the house and suggestions of cost effective energy saving improvements. More information about EPCs can be found on the Scottish Government website at www.scotland.gov.uk.
From 1 December 2008 most houses which are marketed for sale will require to have a Home Report and to make it available to potential buyers. There are three parts to the report; a single survey of the property, an energy report and a property questionnaire. More information about the Home Report can be found on the Scottish Government website at www.scotland.gov.uk.
If you are buying a house which has a Home Report you will get the single survey as part of the Report. The surveyor who produces the single survey has a legal responsiblity to provide accurate information to both the seller and the buyer. The single survey is broadly the same as a scheme 2 survey. (see under the heading The Home Report)
You should not buy a house without getting it surveyed first. If you are buying the house with a mortgage, the lender may insist on having a survey for mortgage assessment carried out, to be paid for by the buyer. There are three main types of survey, or inspection which you can get:-
The buyer’s solicitor should ensure that the surveyor is a member of:-
If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase. In some cases it may be necessary to ask a builder or other workman to estimate the cost of carrying out necessary repairs.
It is normal practice for the buyer to arrange a mortgage and find out as much as possible about the house before making an offer. The offer specifies the price to be paid. Although this is called an ‘unconditional’ offer, it contains a number of standard conditions. You should not make an unconditional offer without thinking about having a survey carried out in addition to the single survey provided by the seller. You should also arrange a mortgage before making any kind of offer for the house.
The conditional offer specifies the price to be paid but makes this subject to the buyer receiving a satisfactory survey.
The seller will rarely accept a conditional offer but may indicate that s/he will accept the offer if the ‘subject to survey’ condition is withdrawn. The buyer would then have to get the property surveyed very quickly.
A seller will almost always prefer an unconditional offer. If the house is advertised at a fixed price there is little to be gained by making a conditional offer.
If you make an offer for a house it may be accepted. Once there is a binding contract, the buyer cannot withdraw from the contract without becoming liable for compensation. Even if the buyer or seller dies and sometimes even if the house burns down, the agreed price must be paid.
If the house is advertised at a Fixed Price this means that the seller is willing to accept the first firm offer at the price specified. The price is likely to be on the high side as it is the highest figure the seller thinks the house will fetch. The buyer should not feel obliged to offer the amount specified if the survey of the house shows that a lot of repairs are needed or if the house has been on the market for a long time.
If the house is advertised at an Upset or ‘offers over’ price this means the figure specified is the minimum the seller would be willing to accept. The seller will normally wait until a number of people have expressed an interest in making an offer and then announce a closing date. Sealed offers are submitted on that date and the seller chooses the best one. You will have to decide how much to offer based on the value of the property to you and the top price which you can afford to pay. The surveyor’s valuation will provide some guidance on this but you should also take into account the amount of interest in the property, the amount of repair the house needs and the current trend in house prices.
If you have made an unconditional offer for the house this will normally be accepted or rejected by the seller straight away. An acceptance may be completely unconditional, in which case there will be a binding contract immediately. Usually, however, the acceptance will contain a number of conditions and there will be no binding contract until all of those conditions have been accepted by your solicitor.
After a binding contract has been agreed, called ‘concluding Missives’, your solicitor will complete the conveyancing procedures and prepare a number of documents, particularly a ‘disposition’ which will transfer ownership of the house to you.The contract or Missives will specify the date of entry to the property. This is the date on which you will have to pay the seller the purchase price of the property in return for the Disposition and the keys to the property. Your solicitor will make all the arrangements for settling the transaction on the date of entry and for completing the buyer’s loan at the same time. This is called ‘completion’ of the purchase.
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