Harrow Weald Branch

Tel:	0208 861 4615
Fax:	0208 861 3610

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Burnt Oak Branch

Tel:	0208 200 1600
Fax:	0208 200 6663

The way it works (continued)...

5. Calculate how much it will all cost
6. Make an offer on the property
7. Start the legal formalities

Calculate how much it will all cost
You've found a property you like and you're serious about buying it. The next step is to calculate how much it will cost to make it yours. Many first time buyers make the common mistake of assuming that the price of the property is the total cost of purchase. Aside from the offered price there are additional costs which need to be taken into account when working out the real cost of purchase:

• Stamp Duty.
  Property prices under £60,000 are exempt from this charge.
  1% charged for property prices between £60,000 and £250,000 inclusive.
  3% charged for property prices between £250,000 and £500,000 inclusive.
  4% charged for property prices over £500,000.
  
  
• Lender's fees.
• Legal fees.
• M.I.G. (Mortgage Indemnity Guarantee).
• Surveyor's fees.
• Land Registry fees.

When calculating the total cost of purchasing your property, ignore the above mentioned costs at your peril. You will be in for a nasty shock when the mortgage lender, solicitor or surveyor starts asking for payment for costs you did not even know about. Our Mortgage calculators can help you work out the total purchase cost.

Make an offer on the property
If after working out the total cost of the purchase you feel this is the property for you, then the next step is to make an offer.

The most difficult decision in the buying process is deciding how much to offer? There are a number of factors to consider when deciding the amount.

• How much you want the property?
• How much you can afford?
• The asking price of the property?
• The desirability and level of interest in the property?
• The amount of time the property has been on the market?

As a guide, decide on the maximum you are prepared to pay for the property and assess the level of interest the property is generating. This will be affected by the economic climate of the property market, the price of the property, the length of time it has been on the market, the surrounding area and its desirability.

Initial offers may be dismissed, but don't be disheartened. If you really want the property and are in a position to raise the offer, put in a counter offer. Remember that this is a negotiation and the agent is instructed by the seller to try and get the best deal possible for them. If you can't negotiate a deal at a price you want then walk away.

Don't forget to play your trump card. First time buyers are in a strong position in that you are not in a 'chain' and are therefore not reliant on the sale of an existing property to be able to finance the purchase. This is a good position to be in; especially if there have been multiple offers for the vendor to consider. Stress this to the agent when submitting your offer, it could be the deciding factor between you and the other interested party.

Start the legal formalities
Your offer has been accepted and the property is said to be 'Under Offer' or 'Sold Subject to Contract'. This simply means that the vendor has agreed to sell you the property at the negotiated price.

There is no legal binding contract and you are not committed to the sale. If you decide to withdraw from the sale, you can do so without incurring any penalty. The vendor is in a similar position and should they receive a higher offer for the property they are entitled to pull out of the sale. Although not such as prevalent now, this was a common occurrence in the property boom of the 1990's and was referred to as 'Guzuping'.

You now need to start the legal formalities and processing of the paper work:

• Instruct you solicitor immediately.
• Provide the estate agent with the details of your solicitors.
• Instruct your mortgage broker to proceed with your mortgage application and arrange for the survey.

Mortgage lenders will instruct a survey to be carried out on the property to identify any structural problems and assess the value of the property before they will release any funds to you. If the survey highlights any major problems, which requires re-negotiation of the asking price, then now is the time.

At this stage the vendor's solicitor will draw up a draft contract and send it to your solicitor.

In response, your solicitor may raise some issues for clarification to the vendor's solicitor and make a Land Registry Search and submit a Local Authority Search to the council. The Local Authority Search should reveal details about any previous planning consents and issues that may affect your property or immediate surrounding area.

If the local search does not throw up any unknown issues and your solicitor receives satisfactory answers to any questions raised they will approve the draft contract.

Before you can exchange contracts (which are legally binding) you will need to have signed your Formal Mortgage Offer which your solicitor will receive from your lender. Once signed and returned your mortgage is ready and you can proceed with the exchange.

Exchanging contracts requires the contract to be signed by you and the vendor. Your solicitor transfers the de posit (usually 10 to 15% of the purchase price) to the vendor's solicitor and sets a date for the Completion of the purchase.

It is at this stage that the agreement becomes legally binding and both you and the vendor are obliged to go through with the sale. Failure to do so will result in severe financial penalties.

Completion tends to be a few days/weeks after the exchange of contracts. At this stage the remainder of the money owned to the vendor is transferred from your solicitor to the vendor's solicitor.

Congratulations, all that's left is to pick up the keys to your new property.

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In part 1 of the buying process we explained that is important to establish your budget and know exactly what it is that you are looking for. We then explained where to begin your search and what to look out for when viewing properties.