Getting your ducks in a row
The sale and purchase of property tend to go hand in hand, and even if you are at the very early stage of marketing your property it is worthwhile considering what to do when you have sold and are ready to move on. No doubt the process of buying a new home will have changed quite significantly since the last time you did so. As in many areas of life, preparation is the key to success and in this article we offer some practical advice - as well as highlight some points you may need to consider during the purchasing process.
Where to next?
Given the current economic climate, some sellers opt to hold off buying until the sale completes and the proceeds are safely deposited in their bank account. For some this may mean moving into rented accommodation until a on the market. While this may seem a daunting step for you and your family there are significant advantages to this approach as well. Most rented accommodation is available on 6 or 12 month lets, and some accommodation is available unfurnished meaning you can take your furniture with you and avoid storage costs. If you are moving to a different town, moving to temporary accommodation gives you time to familiarise yourself with the local amenities and decide whether the area you think you want to move to is really the one for you. If you already know where you want to move to, having funds readily available and no house to sell are factors that can considerably increase your chances of success when bidding for a new property.
When is the deal “done”
But if moving into temporary accommodation is not for you, when is it “safe” to consider offering for a new property? The answer is normally when missives are concluded for the property you are selling. Once missives are concluded there is a legally binding contract between the parties, though there are certain limited circumstances where the purchaser may still be entitled to withdraw from the missives.
Financing the purchase
One of the essential components of your purchase is sorting out how it will be financed. Will you able to meet the cost of the new property from sale proceeds of an existing one, or do you have available capital? If not then you will most likely need to take a mortgage out over the property and it is important that mortgage funding is in place before you make an offer.
It is wise to speak with a mortgage advisor or your existing lender to find out what level of borrowing is available and what, if any, conditions might be attached to that borrowing. In general the assessment criteria is tougher the higher the loan to value. However even in the current economic climate we are seeing some 90% loan to value mortgages available, although most are 85%. Assuming you do meet the initial criteria, you will receive an agreement in principle confirming that the lender will consider lending to you at a stipulated rate, based on the information you have provided. However, this is not confirmation that the mortgage is in place, as the lender will require to carry out a full assessment before a formal offer of loan is issued.
You need to keep an eye on the timescale to make sure everything runs smoothly in getting your new mortgage in place: from researching the market for the best deals, talking to your lender, and arranging the agreement in principle right through to final confirmation that your mortgage is approved. The process can take longer than you might think.
Finding the right property
It may seem obvious but before making an offer consider carefully whether this is the right property for you. If one of the reasons you are moving is to provide a garden for the family to relax in consider what direction the garden is facing and what time of day you are likely to get most sunlight. Visit the property on more than one occasion, preferably at different times of the day.
Find out whether the property is in the catchment area for the school you wish your children to attend. How long is the commute likely to take? Do a dry run at school times to see how long it will take you to drive to and from the school or nursery.
Does the property offer the amount of accommodation and storage you require? As one of the main reasons for your move is likely to be to accommodate the needs of your growing family, it is important to ensure the property offers the right amount of rooms with space to grow.
If the property needs upgrading and modernisation it might be wise to walk round with a builder and get an idea of the amount of work that is needed, whether what you plan to do can be achieved and how much this might cost. You should also consider if you really will want to live in the property whilst renovation work is ongoing or whether it might be more practical (and less stressful) to move into rented accommodation whilst work is carried out.
Don’t be afraid to ask the sellers about the property. For example, ask them why they are moving, and ask about the neighbours – you could even knock on the neighbours’ doors to complete your research. All this information will help you to assess whether this property is suitable for you and your family.
If you are interested in a new build property, consider what stage the development is at. Is the property you are purchasing one of the first to be completed on the development? If so how long is construction work likely to continue? Will the contractors be on site at the weekends? If so will this disturb your long lie on a Saturday morning?
Regardless of the type of property you are buying it is worthwhile taking along a friend or family member to give a second opinion. It is very easy to be too focussed on what you like about the property and on planning where you want your TV to go, rather than seeing the property with a critical pair of eyes.
Negotiating on price
Once you have found the right property your legal adviser will register your interest with the selling agent, obtain a copy of the Home Report, and advise on price. Now that we are very much more in the realm of a buyer’s market, you can hopefully negotiate the best deal for the property you want to buy.
In the current market in Scotland, most residential properties are advertised for sale at a price in line with the Home Report valuation. However it may be possible to negotiate a price lower than the valuation figure, particularly if the property has been on the market for some time.
If a property attracts a high level of interest the selling agent is likely to set a closing date. If that happens, all interested parties will be asked to submit their offer on a specified date and time. Ordinarily (but not always) the highest offer will be accepted assuming the parties can agree on other factors such as date of entry.
If you are taking a mortgage, the offer submitted on your behalf can be made subject to your lender accepting the terms of the Home Report. It is worth checking with your lender if the surveyor who prepared the Home Report is on their lending panel. If not, your lender may commission a further valuation. You may also want to make your offer conditional on obtaining satisfactory specialist reports where appropriate, rather than incur the cost of these before making an offer.
Buying with someone else, how should title be taken?
Couples that live together without formalising their relationship have different rights from married couples and civil partners. If a couple live together as if they were spouses or civil partners certain presumptions will apply to property acquired during the course of their relationship. Items of furniture, for example, will be presumed to be owned in equal shares. Ownership of a family home however will be determined by how title to the property is formally held.
If you are buying a property with a partner, you may automatically think title needs to be taken equally. However, you can alter the percentages of ownership relative to the level of funds you are each contributing. You may also wish to enter into a property agreement, which will record who has to pay what, and what the levels of liability for repairs etc. to the property are, and possibly even what will happen to the property should you separate from your partner. You may not want to consider that possibility when purchasing your new home, but it is better to be prepared.
If you are buying a new property, it is a good idea to review the financial protection you have put in place for your family. If you become ill for a long period of time you may begin to struggle to meet your mortgage payments. How would your family cope financially if you died? Also very importantly, have you done a rough monthly budget with your new mortgage payments and other increased payments such as insurance, Council Tax and utilities? Will this give you any scope to save each month? Don’t buy something which is going to make ends hard to meet.
There is more to buying a new home than just acquiring the bricks and mortar. While not intended as an exhaustive list, we hope that some of the points discussed in this article will alert you to issues you might want to consider during the course of your purchase.