Thinking about buying a house or a flat in Scotland?
Buying a new home can be a daunting prospect, especially if it's your first home. The Law Society of Scotland has prepared these guidelines to help you through the process.
Finding a property and noting interest
There are many ways to find a property: from the internet, newspapers, solicitors/estate agents and property centres to browsing the streets for ‘For Sale’ signs. Your solicitor can also help by providing general information on current property available in the area and can use local knowledge to assist in finding a property to suit you.
Once you have found a property you like, ask your solicitor to note your interest with the selling agents (selling agents are usually estate agents or solicitors). A note of interest does not oblige you to buy, it simply indicates that you are interested in the property and wish to be kept informed of developments, such as when an offer must be made. Equally, however it does not restrict the seller who remains free to sell the property as he or she sees fit.
Information about the property (home reports)
Sellers must provide a home report for buyers. These include a single survey (which gives the condition and value of the property), an energy report (which contains a house's energy efficiency rating and carbon dioxide emissions) and a property questionnaire (which includes general information such as a property's council tax band, factoring arrangements, the existence of any local authority notices and information about alterations that have been made).
Home Reports contain a lot of detail so if you are unsure, you should discuss the contents with your solicitor.
Arranging a survey
A surveyor instructed by the seller will provide the survey contained in the home report pack. In many cases this will be sufficient for an interested party to submit an offer. However the potential buyer may have to commission another survey at the request of a mortgage provider or if the original survey was carried out some time ago. Your solicitor can provide further details and advice.
This can be a simple mortgage valuation report, a more detailed survey report or a lengthy building survey (although these are rare). Your solicitor will advise you on the best type of report for the property you have chosen. He or she can also instruct a surveyor on your behalf if you wish. In recent years most offers have been made subject to survey and it is expected that this will remain common practice even when a Home Report is available.
Arranging the loan
Once you have an idea of the price range of properties that you are interested in, you will have to arrange your loan. Even before you begin a detailed search for a property, it is recommended that you talk with your mortgage lender and agree how much you can borrow. Some solicitors are also mortgage brokers and can assist in arranging a mortgage.
Making an offer
Once you have found a property that you are interested in, your solicitor will give you advice about how much you might need to offer. If there are other people interested in the property, the sellers may set a closing date when all the interested parties must submit their best offers (usually offers over the asking price). If you are the only person interested in purchasing the property, or if the property is advertised for sale at a fixed price, it may be possible to put in an offer right away. Ask your solicitor for advice on how to proceed.
The next step is to instruct your solicitor to prepare a formal offer, who signs it on your behalf and submit it to the selling agents. When making an offer, ensure this is done via your solicitor to ensure this reflects your best interests. Proceeding without the expert assistance of a solicitor could lead to you being legally bound to buy something at the wrong price or without the necessary protections.
Having the offer accepted
Usually the highest offer is accepted although occasionally the seller accepts an offer on the basis of some other factor such as an earlier or more convenient date of entry. Sometimes no offers are accepted. Normally, however, a few hours after the closing date you would expect to hear whether your offer is to be accepted or not. If accepted verbally, this will be followed by a written acceptance (called a qualified acceptance) from the seller’s solicitor. The written acceptance may contain a number of points about the property.
At this stage your solicitor will discuss with you in depth the written acceptance. Having discussed all the details of the written acceptance with your solicitor, you can now tell your solicitor to get back to the solicitors for the sellers with a formal response. The seller’s solicitors in turn will speak to their client, before sending their own formal reply. This process will continue until there are no outstanding points.
Agreeing the contract (missives)
Further negotiations are likely after an offer has been accepted, for instance, the date of entry, details of additional items included in the sale and issues such as permits for alterations.
Once all points have been agreed in writing, a binding contract will have been formed. This contract is often referred to as concluded missives. It is important to note that, although you will not have been asked to sign anything at this stage, you will still be bound by the terms of the contract. Neither party can pull out of this contract without penalty. Your solicitor will explain to you the penalties that will occur if you fail to pay the price on time without the consent of the seller.
Checking the documents of ownership
Your solicitor will check the documents of ownership (title deeds) and report to you on the description of the property, any rights relating to it and any conditions that will have to be observed by any owner. These conditions are known as title burdens and could include:
- parking restrictions
- restrictions on use
- rules about where rubbish and bins are to be put
- a ban on putting up an aerial or satellite dish
- a ban on any alterations and new buildings
- restrictions on the height of walls, fences and hedges
- rules about upkeep of private roads, pavements and parking areas
- obligations to pay insurance
- obligations to pay common repair costs
- an obligation to pay a management fee for repairs and maintenance
- a right for your neighbour to enter your garden to carry out repairs to their house and vice versa
These are all typical (but not universal) conditions in housing title deeds. You should see your solicitor if you have any issues with the title deeds.
Preparing the transfer documents
A deed, called a disposition, is required to transfer the title of the property into your name. This is prepared by your solicitor, checked by the seller’s solicitors and signed by the seller.
If you have a loan arranged, you will sign a mortgage document (standard security) which gives your mortgage provider certain rights over the property. These include, in the worst case scenario, a right to take possession of the property and sell it. Your solicitor will advise you about the implications of the mortgage agreement.
Transferring the funds
As well as the purchase price, there are other costs involved in buying a property that you must consider, such as Land and Buildings Transaction Tax (LBTT) (a tax payable to Revenue Scotland). There is also a fee charged by the Registers of Scotland who are responsible for maintaining all the property records in Scotland and where your ownership of your new property is formally recorded.
Your solicitor will make sure that there is nothing to prevent the transaction proceeding and then make the arrangements so that all the funds are collected and paid accordingly.
Completing the purchase
The transaction is completed (settled) on the date of entry. The deeds are delivered to your solicitor, the price is paid to the seller’s solicitor and you get the keys to your new home. Your solicitor will then deal with the LBTT and registration requirements. Now that you own your new home, it is important to have the property and its contents insured. It is worth drawing up a will or revising your existing will – especially if you are buying the house with someone else. Your solicitor can help with both these matters.
Your solicitor will be able to give you advice about other important matters, such as insuring the property and its contents and drawing up a will, which is highly recommended. Also, he or she can provide you with a quotation for the cost of the house-buying process, including legal fees.