40 Common Mistakes when buying and selling property
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The team
- Karen James: Conveyancing
- Lynda Shackleton: Conveyancing
- Mark Hepworth: Conveyancing
- Taking time to choose the right estate agent
- 'I do not need to instruct a solicitor until I have found a buyer for my property'
- Not checking the chain of transactions at the outset
- Agreeing a sale for personal reasons
- Not viewing the property on more than one occasion
- Continued Marketing
- Check your financial position
- Making an offer on another property when you have not received an offer on yours
- Not taking the time to choose the right solicitor
- 'I have to offer the asking price on a property'
- 'The purchase price cannot be changed once my offer has been accepted'
- Not checking the likely timescale of the transaction at the outset
- Not taking time to understand the legal terminology. For example, 'exchange' and 'completion'.
- 'I'll have to pay the other side's legal costs if I withdraw from the transaction.'
- 'Everything I see in the house will still be there when I move in.'
- Failing to take independent financial advice regarding the finance of your purchase.
- 'I do not need a survey'
- 'A mortgage valuation is enough'
- Not obtaining specialist advice
- Failing to resolve structural defects before exchange
- 'I do not have to tell them that'
- 'I've parked there for years'
- 'I can move into my new house when contracts have been exchanged'
- 'I do not need to pay a deposit on exchange'
- Thinking that signing the contract is legally binding
- Thinking that verbal agreements made with the other party are binding
- Making arrangements in anticipation of completion
- 'I do not want to move out until after completion'
- Thinking Capital Gains Tax never applies
- 'I have moved out of my property and it is still fully insured'
- 'I don't have to arrange buildings' insurance until completion'
- 'I don't need to arrange life insurance until completion'
- Thinking you are more clever than the Inland Revenue!
- 'As soon as I have completed my purchase I can rent the property out'
- Not advising your solicitor of your intended use of the property or plans to extend.
- Failing to notify the service providers
- Failing to consider whether to hold the property as joint tenants or tenants in common
- Failing to consider what would happen if you lost your job
- Not considering what would happen if your partner/spouse died
- 'I do not need to make a will or update the one I have'
1. Taking time to choose the right estate agent
No sale, no fee, free Home Information Pack, £100 cashback on completion and free cuddly toy might sound attractive, but there are other criteria to choosing estate agents. I would recommend you ask a minimum 3 to attend at your property to give a market valuation. Ask yourself the following questions. Are you comfortable with the suggested sale price? If one agent has valued your property substantially higher than others, ask yourself if it is a realistic price, or does the agent really need the instruction. How and where is the property going to be marketed? On which internet sites will the property be advertised? Will the agent arrange your Home Information Pack? Are advertising fees extra?
2. 'I do not need to instruct a solicitor until I have found a buyer for my property'
When selling a property, most people often only decide to instruct a solicitor once they have found a buyer and agreed a price. In fact instructing a solicitor at an earlier stage means that all the contract papers can be ready to forward to a buyers' solicitors as soon as a buyer is found. A good solicitor will also identify potential issues at the outset for example, requesting copies of planning consents for extensions, which will help to avoid any delays.
3. Not checking the chain of transactions at the outset
It is important that you check that the chain of transactions is complete below and above you and that everyone is in a position to proceed. Normally an appointed estate agent would verify these details for and check that any buyer has the financial means to proceed.
4. Agreeing a sale for personal reasons
You might think that the 'nice couple' who have made an offer would be lovely new neighbours for the people next door, but have they sold their own property, are they in a position to proceed as quickly as you would like them to? Similarly, refusing a reasonable offer because you take an instant disliking to someone could be cutting off your nose to spite your face - you won't have to live next door to them!
5. Not viewing the property on more than one occasion
If buying a property, I would strongly recommend that, before submitting an offer, you view the property on several occasions at different times of the day. For example, you may establish that the road is busy at certain times or there is a lack of street parking in the evening. Check which direction the property is facing as you may specifically want the sun to be on the back of the house in the afternoon. Check what the local amenities are like. It's a good excuse to call on the neighbours to ask about local schooling and healthcare which gives you chance to check out your potential neighbours too.
6. Continued Marketing
Sellers should really not agree to stop marketing the property before establishing that the potential buyers are in a position to purchase. Often re-advertising the property after a time delay leads other buyers to think that there is a problem with the property. Buyers should be aware that sellers are likely to continue marketing the property unless specifically requested not to do so whilst sellers are checking out the completed chain or the financial viability of the buyers.
7. Check your financial position
Buyers should always check the level of mortgage borrowing that can be achieved before viewing properties and making offers. It can be heartbreaking finding the home of your dreams and then discovering you do not have the financial means to buy it.
8. Making an offer on another property when you have not received an offer on yours
There is nothing to stop you making an offer, however you will be treated far more seriously if you have a buyer for your own property who is able to proceed with the purchase of your property immediately.
9. Not taking the time to choose the right solicitor
A sensible way of choosing a solicitor is by personal recommendation. A friend, family member or work colleague may be able to recommend a particular firm they have recently used. Your estate agent may also make recommendations to use solicitors who they have regular contact with and who will probably have valuable local knowledge.
10. 'I have to offer the asking price on a property'
You do not have to offer the asking price when buying a property. It is quite common to initially make an offer below the asking price with a view to negotiating a lower price than the sellers are requesting.
11. 'The purchase price cannot be changed once my offer has been accepted'
No transaction is legally binding up until the point at which contracts are exchanged. Until that time further negotiations on the purchase price can always take place, particularly if a survey reveals defects in the property.
12. Not checking the likely timescale of the transaction at the outset
People often have unrealistic expectations of achievable completion dates. On average, it will take between six and seven weeks from instructing a solicitor to moving in. This period can be reduced or lengthened depending upon the chain and problems encountered with the legal process. A chain will only move as fast as the slowest person in it. It is important that you keep in touch with your solicitor to obtain updates.
13. Not taking time to understand the legal terminology. For example, 'exchange' and 'completion'.
Exchange and completion are the key dates in any transaction. Exchange is the date when contracts for either the sale or purchase are exchanged between the respective parties. It is only at this point that a binding contract comes into existence meaning neither party may withdraw from the transaction without incurring liability for the breach. On exchange both parties will agree a completion date which is the date when you will move house.
14. 'I'll have to pay the other side's legal costs if I withdraw from the transaction.'
Always remember that you can withdraw from a transaction at any time before contracts are exchanged and there is normally NO obligation to pay any fees of the other side whatsoever.
15. 'Everything I see in the house will still be there when I move in.'
When making an offer you should consider whether there are any fixtures fittings and contents that you would like to stay at the property. As part of the negotiation process, you may wish to make an offer based on certain items (eg carpets and curtains) being included in the price. Sellers will be asked to complete a comprehensive form setting out exactly what items are to be included in the sale price. This list of contents forms part of the contract so if you have said you are leaving the oven, you are contractually obliged to do so.
16. Failing to take independent financial advice regarding the finance of your purchase.
It is strongly recommended that you seek the advice of an Independent Financial Advisor (IFA). They will be able to advise you on the most suitable way to finance your purchase. They can also advise you on the most suitable and competitive mortgage to suit your needs. There are more than 30,000 mortgage products out there. A true IFA will survey the whole of the market to find the mortgage or financial product which is right for you.
17. 'I do not need a survey'
The purchase of a property is probably the largest financial transaction of your life and it is important that proper professional advice is obtained from a surveyor regarding the condition of the property. Which leads me on to...
18. 'A mortgage valuation is enough'
If a mortgage is needed to buy a property then most people will opt for the cheapest option available which is the basic valuation survey. This, however, is purely for the lenders' needs and does not normally contain any details whatsoever about the condition of the property. Therefore, it is important that you at least have a 'Homebuyers Report'. This is a survey commissioned directly by you with the surveyor which means there is a contractual relationship between you and the surveyor and the surveyor is under an obligation to provide advice regarding the condition of the property. The advice given is backed by professional indemnity insurance which means that you are covered in case any problems are overlooked.
19. Not obtaining specialist advice
When buying a property, the old adage of 'caveat emptor' applies. This literally means, 'Let the Buyer beware'. The seller is not obliged to advise a buyer of any defects in the property. No warranties are given about the state or condition of any of the fixtures or fittings. For example, it might be prudent for a plumber to check out the central heating system before contracts are exchanged.
20. Failing to resolve structural defects before exchange
It is not uncommon for a Homebuyers Report or structural survey to reveal defects, particularly with older properties. When this happens, you should speak with the surveyor and ask him to obtain quotations to remedy the defects. If the cost of the work is substantial, you may decide not to proceed with the purchase or you may wish to consider re-negotiating the purchase price with the seller.
21. 'I do not have to tell them that'
If a seller is asked any questions by the buyer, or their solicitors, about the property, then these must be answered honestly. The Seller is usually asked to fill in a Property Information Form which asks for details such as which boundaries they maintain, or whether they've had any disputes with the neighbours etc. Failure to answer these enquiries may jeopardise the sale later on and equally the seller could be liable to the buyer for withholding or providing false or misleading information.
22. 'I've parked there for years'
Boundaries to the property are not always clearly defined. I would always recommend comparing the actual boundaries to the title plans provided by your solicitor. This will avoid any potential boundary disputes in the future and means if there is a discrepancy the onus is on the sellers to put it right at their cost before contracts are exchanged.
23. 'I can move into my new house when contracts have been exchanged'
Normally, you can only have access to the property on the completion date.
24. 'I do not need to pay a deposit on exchange'
Normally, if you are selling one property and buying another, the deposit which is received on your sale can be used as the deposit on your new property. This means that you should not need to pay any additional money on exchange of contracts. If you are just buying, then it is a requirement of the contract that a deposit of 10% of the purchase price is paid to the sellers on exchange of contracts. It is common, however, for a lesser deposit to be negotiated, especially if the buyer is borrowing more than 90% of the purchase price from a mortgage lender. It is rare for a seller to agree to exchange with no deposit at all, particularly if there is a chain.
25. Thinking that signing the contract is legally binding
There is a difference between signing the contract in the solicitor’s office, or more usually these days, signing it at home and posting it back to the solicitor and exchanging. Exchanging is literally when the contract which has been signed by the sellers is 'swapped' with the contract which has been signed by the buyers. Mostly this is done on your behalf by solicitors over the telephone.
26. Thinking that verbal agreements made with the other party are binding
The law states that any agreement for the purchase of a property must be in writing. Take heed - do not sign anything without getting independent legal advice first. Similarly, it is hard to rely upon any statements made by the seller, for example as regards the condition of the property, unless they are in writing.
27. Making arrangements in anticipation of completion
A completion date is not legally binding until contracts are exchanged. Therefore it is strongly recommended that you do not give notice on rented accommodation, book removal vans, arrange for contractors, order new furniture or anything else until you have received confirmation that contracts have been exchanged. This is often why a solicitor will recommend that there be a period of two weeks in between exchange of contracts and completion, to allow you time for all these arrangements to be made.
28. 'I do not want to move out until after completion'
The contract states that you must vacate your property on completion and will usually state a time by which vacant possession must be given - normally by 2p.m. but it is not uncommon to agree to an earlier time such as 12 noon. Vacant possession means that all items should be removed from the property unless it has been specifically agreed that they are included within the asking price or the buyer is purchasing them separately. All items includes carpets that the buyers do not want and rubbish.
29. Thinking Capital Gains Tax never applies
You do not normally have to pay Capital Gains Tax on the sale of your home as there is a specific exemption which covers your principal private domestic residence. However, if you are selling a property in which you do not live, such as a second home, then you may have to pay Capital Gains Tax.
30. ' I have moved out of my property and it is still fully insured'
When a property becomes empty, it is often wrongly assumed that as long as the building insurance policy is maintained then it will cover all the usual circumstances. However, it is quite normal with a lot of insurance companies that certain risks will be excluded after the property has been left empty for more than 30 days. For example, risks such as burst pipes and vandalism are commonly excluded. Therefore, it is important that you ensure that such risks are covered on your policy in the event of the property being left empty.
31. 'I don't have to arrange buildings' insurance until completion'
The contract will usually place the onus on the buyer to arrange buildings' insurance cover from the date of exchange and not the date of completion. If you are obtaining a mortgage and the mortgage lender is arranging the buildings insurance, then this is usually done automatically for you on exchange of contracts. If the lender is not arranging the buildings insurance, then you need to make arrangements so that the policy can be put on cover immediately contracts have been exchanged.
32. 'I don't need to arrange life insurance until completion'
Should the unthinkable happen and you were to die in between exchange of contracts and completion then your estate would still be legally bound to complete the contract. It is advisable to ensure that any life insurance/assurance products are placed on risk immediately contracts are exchanged so that your next of kin would have the funds available to honour the terms of the contract should you die.
33. Thinking you are more clever than the Inland Revenue!
Over the years the government have just about closed all loopholes and covered every 'scam' in trying to avoid the payment of stamp duty. It is normal when you make an offer for a property that the purchase price reflects the price of the house together with any fixtures and fittings which are deemed to be part of the bricks and mortar. You can agree a reasonable additional figure for fittings such as carpets and curtains which is not chargeable to Stamp Duty Land Tax. Such a figure must, however, reflect a reasonable valuation of these items otherwise the Inland Revenue will challenge the transaction.
34. 'As soon as I have completed my purchase I can rent the property out'
If you have a mortgage then you cannot normally rent out a property without the permission of your lender. They will normally only consent to this provided that a proper tenancy agreement is entered into which adheres to their requirements. The mortgage lender might, however, regard the buying of property with a view to renting it out as a commercial transaction and accordingly charge commercial rates of interest.
35. Not advising your solicitor of your intended use of the property or plans to extend.
You might be buying a property with a view to running a business from home, building an extension or even selling off the bottom of the garden as a building plot. You need to advise your solicitor of such intentions at the outset. It may not only be planning permission and building regulation approval that is required. For example, if any building work is within a certain distance of the boundary to your property, then you will need to comply with the Party Walls Act and serve the appropriate notices on your neighbour. Furthermore, your solicitor will check to see if there is a restrictive covenant which may prevent such work being undertaken or may require you to obtain the consent of a former landowner or freeholder.
36. Failing to notify the service providers
Before moving into the property, it is important to establish who the service providers are. In addition, you should ensure that all service meters are read on the date the seller moves out of the property. This will help ensure that future bills are accurate and any disputes are avoided.
A common mistake is to assume that the council tax for the property will remain the same. It is possible that if there have been extensions to the property since the last valuation, then your Council Tax could be re-valued following completion.
37. Failing to consider whether to hold the property as joint tenants or tenants in common
This is relevant to buyers who are buying in joint names. A joint tenancy is where the property is owned by all joint owners but with none of them having a separate or distinct share. If one owner dies the property automatically passes in whole to the survivor(s) despite the terms of the deceased's will. A tenancy in common is where each owner has a separate and distinct share eg 50/50 or 75/25. This form of ownership may be appropriate if you have contributed to the purchase price in unequal shares. If one co-owner dies, his or her share in not automatically transferred to the survivor(s) but will pass according to the provisions of the deceased's will or, if there is no will, under the Laws of Intestacy.
38. Failing to consider what would happen if you lost your job
It is always worthwhile to consider what would happen if you were to lose your job, or were to be made redundant either during the conveyancing process or after completion of a purchase. It is possible to obtain insurance from your solicitor to cover abortive costs, survey fees etc should this happen before exchange of contracts (and to cover other contingencies such as being gazumped, or adverse survey or search results). Your Independent Financial Advisor will be able to give you advice regarding the various products which are available to cover you in the event that you are out of work and are unable to pay your mortgage after completion.
39. Not considering what would happen if your partner/spouse died
You should consider taking out a life insurance policy which would pay off your mortgage if one of you were to die. If the worst happened, at least your home would be secure. Advice should be sought from an Independent Financial Advisor on the best policy to suit your needs.
40. 'I do not need to make a will or update the one I have'
Due to property prices increasing in recent years, many people are now caught in the inheritance tax trap. You should certainly have a will to control what should happen to your property in the event of your death, but if your will is properly drafted, it can also be tax efficient.