What do I need to know about offers, exchange of contracts and completion?

sds sssdsd
Petter
Posts: 62
Joined: Thu Apr 21, 2016 9:44 am

What do I need to know about offers, exchange of contracts and completion?

Postby Petter » Fri Apr 29, 2016 12:53 pm

‘Conveyancing’ is the legal process undertaken when transferring ownership of residential or business property from one person or entity to another.

Conveyancing tends to be carried out using the services of a solicitor or licensed conveyancer.

The conveyancing process consists of three stages:

1. Pre-exchange of contracts

2. Exchange of contracts

3. Completion.

If you require further help on a matter of property law you can use our solicitor directory to the right of this article to look for legal advice near you.



Pre-exchange of contracts

Pre-exchange of contracts involves the exchange of details between the buyer’s solicitor and the seller’s solicitor.

The buyer’s solicitor is provided with a draft contract, which is sent to the buyer, outlining:

the parties’ details

the price

the fittings included

the details of the seller’s title deeds.


The buyer’s solicitor then confirms the terms of the draft and makes an application for Local Authority searches to be conducted, such as whether the building is listed. Further checks are made with the Land Registry and Water Authority.

The buyer’s solicitor makes a number of enquiries with the seller’s solicitor – such as whether there are any ongoing disputes over the property – and sends the buyer a mortgage deed for their signature, which renders the contract a formal one rather than a mortgage agreement ‘in principle’.

The buyer and seller then agree a completion date – when the buyer is at liberty to move into the property.

Exchange of contracts

The buyer is only legally bound to buy the property after contracts have been exchanged. At this point, the buyer pays a non-refundable deposit to the seller – usually up to ten percent of the purchase price.

Until now, the buyer or seller can attempt to renegotiate the purchase price, completion date, other agreed terms or withdraw from the transaction without any obligation to compensate the other party.

The solicitor acting for the buyer prepares a transfer document and sends it to the buyer for signing. This deed transfers legal ownership of the property from the seller to the buyer. Once agreed, the deed must be signed by both parties.

The buyer’s solicitor completes the mortgage arrangements, preparing the money for transfer to the seller upon completion. At this time, Land Registry fees must be paid, so too must Stamp Duty, which is a land tax on buying property worth more than a certain amount – 125,000 in the year 2014/15.

Completion

On completion date, the buyer’s solicitor sends the funds to the seller’s solicitor. The buyer then receives the transfer deeds and title deeds along with the keys to the property.

Gazumping and gazundering

‘Gazumping’ occurs when a buyer makes an offer, which is accepted, but subsequently loses out to another buyer making a higher offer.

This can occur after an offer has been accepted, but the exchange of contracts has not yet taken place.

A less frequent problem is ‘gazundering’, which is when a buyer reduces their offer before exchange of contracts, forcing the seller to accept the lower price if they wish to proceed with the sale.

A buyer can reduce the risk of being gazumped by doing the following:

retain an estate agent with a policy against gazumping

demand that the property is taken off the market

draft a ‘pre-contract deposit agreement’, binding both parties to pay a deposit of 1.5 percent of the property price. If either party exits the process, the injured party retains both deposits. Alternatively, draft a ‘lockout agreement’ preventing the seller from selling the property to another buyer provided contracts are exchanged within a set period of time

take out insurance against gazumping


A seller can reduce the chances of being gazundered by developing a good relationship with the buyer and denying them the opportunity to gazunder by exchanging contracts quickly.



sssdsd

Return to “Buying Property”

Who is online

Users browsing this forum: No registered users and 1 guest