We understand that buying a property – whether for the first time or otherwise – can be a stressful time but if you recruit the right legal team with the right experience and expertise it needn’t be! Using experience and knowledge, our Solicitors have created a Five Step ‘Buying A Property in Scotland’ guide which you can view below. We hope you find this useful.
- 1. Planning your finances
- 2. Found a property you like
- 3. The Conveyancing Process
- 4. Funds and Finances
- 5. The Date of Entry
1. Planning Your Finances
It is imperative that you understand at the outset all the costs that you are likely to encounter in relation to your transaction to budget efficiently.
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If you are lucky enough to be a ‘cash buyer’ then you will not need a loan to cover the cost of the purchase upfront. The majority of purchasers however will require a mortgage to pay off the purchase price over a longer, affordable period of time.
The mortgage secures the property for the purchaser and the purchaser pays off the mortgage over a set time frame (usually between 25 and 35 years). A mortgage will include interest, which is how the lender makes money from the transaction. The benefit to you – the purchaser – is that a mortgage makes purchasing affordable by paying off the loan each month.
The Mortgage landscape has changed beyond recognition and lending criteria varies from lender to lender. That is why it’s never been so important to take advice.
The market can often change daily and that’s why it makes sense to talk to professionals who have their finger on the pulse with detailed knowledge of a wide range of lending criteria. It is matching this criteria to your personal circumstances which will ultimately determine the lender and product for you.
Deposits
You will also need to save for a deposit for the mortgage. In the current market, you will need a deposit of at least 5% of a property’s value to obtain a mortgage. The lender would then lend you the remaining 95% of a property’s value. 5% is the minimum, but you can save as much as you like for a deposit and the mortgage deal offered to you will depend on how much of a deposit you have.
What makes Neilsons different from many of our competitors is that we have an in-house Mortgage Advisor who is ready to guide you through the process, liaising closely with your in-house Neilsons Solicitor as the transaction progresses. Contact Sheila Batten, our Mortgage Advisor by clicking here.
2. Found a property you like?
Noting Interest and Offering
The first thing we do once you have found a property you like is note your interest with the Selling Agents. This tells us whether there is any competition. Noting interest acts as a holding exercise and the Selling Agents will generally notify us of any developments. If the property is on at a fixed price, however, they may sell it to the first party to offer the fixed price and any notes of interest are disregarded. You have to move quickly with a fixed price property.
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The tactics that we adopt in submitting an Offer will be determined by a number of factors – whether there is competition, whether the property is just on the market, whether the property is on at a fixed price and someone else is chasing it and most importantly what you can afford to offer. We will discuss this with you and then submit an Offer.
The Offer is a legal document which forms one leg of a contract for the purchase. It refers to standard clauses, the terms of which have been agreed by Solicitors in Edinburgh and Glasgow so that the wording of individual clauses is not a matter which causes delay.
The most important parts of the Offer that affect you are the price, the date of entry and what items are included in the sale. The price is a very important matter that we will discuss with you. The date of entry is the date you get the keys and the date on which you pay the purchase price. This is determined in your case by the speed at which the mortgage can be processed and usually for a First Time Buyer is around five or six weeks from the date the Offer goes in.
The items included in the sale are usually the items specified in the sales particulars but if you agree any additional items be sure to let us know so that these can be written into the Offer and form part of the contract.
The Home Report
The Home Report is a very useful document containing an Energy Efficiency Report and Seller’s Questionnaire but most importantly, a full survey on the property carried out by the seller’s surveyor. This is an impartial and detailed survey of the property’s condition and each aspect of the property is scored on a scale of 1-3.
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1 = the surveyor is happy with what they have seen
2 = keep an eye on it and proceed with caution
3 = do more research and further investigation before proceeding.
We will discuss the Home Report with you and consider if you are in a position to submit the offer, based on what we have established about your negotiating position when we noted interest.
The Offer is submitted ‘subject to survey’. You may find that it is strange that we offer subject to survey when there is a Survey Report available to you in the Home Report but your mortgage lender may not accept Home Report Surveys as a matter of principle; they may not accept reports from the Surveyor who carried out the Home Report Survey [mortgage lenders have a panel of accepted Surveyors]; or the Home Report may be regarded as out of date.
What happens therefore is that as soon as the Offer is accepted verbally you have to check whether the Home Report will be acceptable to your mortgage lender.
Some lenders will accept Home Report surveys from almost any lender.
Some lenders will accept Home Report surveys only from those surveyors on their approved panel.
Some lenders will not accept Home Report surveys at all and in that case you will have to pay for an independent valuation carried out on the instructions of the lender.
If it is acceptable, but more than three months old, the sellers will normally pay for the Home Report to be refreshed – ie updated – to reflect any change in valuation or deterioration in condition. The refreshed Home Report is sent to us and we forward it on to you for final approval.
We then “lift” the subject to survey clause and your Offer is then unconditional.
When the Offer is unconditional (i.e. the subject to survey clause has been lifted) the sellers’ solicitor will prepare a Qualified Acceptance of the Offer which we forward to you. If we are happy with the amendments made to the Offer we send a letter back formally accepting the qualifications and holding the contract as concluded. The Offer, Qualified Acceptance and letter in conclusion of the contract are called the missives and only when all the points are agreed do you have a binding contract. Note that we sign the missives on your behalf.
This stage is called ‘conclusion of missives’ and is the equivalent of “exchange of contracts” in England. Because we sign missives on your behalf it is important that you are aware you will be tied into the contract for the purchase legally without signing anything and so if there is any reason why you would not want to be tied in to the deal by the time we believe that all of your financial ducks are in a row you must tell us as soon as possible.
3. The Conveyancing Process
Conveyancing is the legal process by which ownership is transferred from one party to another. This is a highly technical process but much of it is carried on quietly and efficiently on your behalf without you being notified of each technical stage in the transaction, unless we think there is something that requires your input or approval such as confirmation of the boundaries of the property.
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Missives
Generally the process starts with the submission of an Offer to the selling Solicitor. The clauses in the Offer which are of most importance to the clients are the price, the date of entry and what items are included in the price.
Most Offers nowadays refer to the “Scottish Standard Clauses” which is a schedule of Offer clauses – the wording of which has been agreed Scotland wide by Solicitors.
These relate to such matters as the titles, the Local Authority records affecting the property, alterations and any documents relating to dry rot, wet rot, woodworm or rising damp.
The Offer puts the ball in the seller’s court and the seller’s Solicitor will go through each clause with the seller to make sure that the position is adequately covered. The seller’s Solicitor then prepares a “qualified acceptance” which puts the ball back in the purchaser’s court and the purchaser’s Solicitor will determine whether the position can safely be accepted by the purchaser. The letters passing between purchaser’s and seller’s Solicitors are called the missives.
Assuming the purchaser’s Solicitor finds the position as presented to be satisfactory a letter will be issued to the seller’s Solicitor accepting all the modifications made to the original offer and “holding the bargain as concluded”. This creates a binding contract and is called conclusion of missives. This equates to exchange of contracts in England.
Because the stage of conclusion of missives commits both parties to the deal contractually, the practice has grown up nowadays for Solicitors to hold off concluding missives until the purchaser has their mortgage Offer through and/or if there is a sale involved until the sale missives are concluded.
Title Deeds
The seller’s Solicitor will then send the title to the purchaser’s Solicitor and these will be checked carefully. The title may be registered in the old Sasine Register in which case a bundle of titles will be passed to the purchaser’s Solicitor or in the more modern Land Register which is an Ordnance Survey Map based system in which case the Land Certificate will be passed to the purchaser’s Solicitor.
The purchaser’s Solicitor will then make observations on the title and in relation to any other points which arise from the Home Report (in particular the Surveyor’s observations) and the replies from the seller’s Solicitors will be discussed with the purchaser to ensure that everything is satisfactory.
The purchaser’s Solicitor will then prepare a Disposition which is the document transferring title to the purchaser. The purchaser’s Solicitor will also revise the draft documentation prepared by the seller’s Solicitors which updates the Search in the Registers of Scotland and also includes a draft Discharge of the seller’s mortgage deed. When the seller’s Solicitor has approved the draft Disposition the seller will be called upon to sign the hard copy of this.
4. Source of Funds and Completing the Finances
Some years ago the Government introduced regulations designed to prevent Solicitors being used to launder drug money or the proceeds of crime. When we receive money from clients we are governed by very strict rules which oblige us to check carefully where any cash we receive has come from. The following section will explain in detail how to ensure your source of funds and finances are all in order prior to settlements.
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As per the Law Society guidelines, the auditors require us to have on file evidence from you to confirm who you are and where you live.
To show who you are:
We require to have on file a verified copy of either:
- your valid (in date) passport
or - your valid (in date) photo driving licence.
If you don’t have either of these call us and we will discuss alternative acceptable documentation.
To show where you live:
- Gas bill, electricity bill, mortgage statement or Council Tax Demand
Please provide us with a recent (within the past 3 months) gas, electricity, telephone bill, mortgage statement or Council Tax Demand which you have received by mail to your current residing address.
How to get your ID and proof of address documentation to us…
Neilsons utilise a Law Society of Scotland endorsed system which enables UK citizens to submit all their documentation online. We will send you a secure link to complete this at the appropriate time. If you prefer, you can also bring in the original documentation to one of our offices for the check although most clients prefer to complete online.
Source of Funding
If we do not have the correct documentation to show where the “source of your funding” has come from this could delay your entry date.
We require this in advance of your completion date.
To show the source of your funding we need:
Evidence of the source of the funds you are using to buy the property. If your funds are spread amongst a number of accounts we recommend that you transfer each element of funds directly into the account you will use to make the payment to Neilsons (we will call this your “nominated account”).
You should now:
- Refer to your budget planner to establish the total amount of funds to be transferred to Neilsons.
- Identify where these funds will come from – you may have a number of bank accounts, ISAs or investments which will be used to fund the total cost.
- Decide which bank account you will use to pay the funds to Neilsons which will be your nominated account.
- Start to transfer all of the funds, where possible, directly to the nominated bank account which will be used to send us the funds. We recommend you start this process as soon as possible.
- If you are receiving money as a “gifted deposit” from a third party – ie a family member who is not on the title deeds or party to the mortgage – you must tell us and ask the person(s) gifting the money to transfer to your nominated account ASAP. We suggest that gifted money is transferred directly to your nominated account that you will use to pay Neilsons.
- It is imperative that you notify your mortgage lender that you will be funding part of the purchase via a gifted deposit. If you don’t do this your mortgage offer could be withdrawn. In most cases the mortgage lender will approve the gifted deposit if it comes from a relative, and is stated to be a gift, not a loan – because repaying a loan may affect your ability to pay your mortgage. Contact us and we will give you the wording of a letter for your relative to sign to declare the funds as a gifted deposit.
We must be able to “follow the money” and trace the funds over a 90 day period.
Documentation you need to give to Neilsons:
We must be able to evidence where all of the funds have been for the previous 90 days from and including the date you transfer funds to Neilsons. If you are moving funds from one account to another we must have a bank statement showing the money leaving one account and corresponding with a statement showing the money going into the other account. In other words we need an “audit trail” showing where the cash has been starting from 90 days ago.
If you are selling investments we must have a statement/contract note showing the sale amount and we should be able to identify and evidence this money arriving in your nominated account.
This is to enable us to comply with the Government regulations designed to prevent money laundering and the use of money from proceeds of crime. If we don’t have the necessary paperwork in place before the date of entry it’s a show stopper so please be aware of this from the outset.
Providing the documentation
- As stated previously we must be able to “follow the money” from the statements you provide us, so when you instigate a transfer of funds to your nominated account please remember to retain a statement or other evidence from the account or investment from where the money is coming from (covering the 90 day period) and showing the funds being transferred/sold. We should then be able to see this arriving in your nominated account when you provide us with your nominated account bank statement.
- As soon as all of the funds are in your nominated account which should be at the very least 5 working days prior to your entry date, you should email, post or hand deliver a copy of your nominated bank account statements. You should also include your copy statements/contract notes for the transfer/sale of any funds in point (1) above covering the 90 day period.
- All statements should show the name and account number. If you use internet banking and prefer to download statements please ensure that the download includes this information. If not, you could instead do a screen capture to include name and account number.
- Finally, if transferring by CHAPS, after you have transferred the money to Neilsons from your nominated account you should then give us a copy of the CHAPS receipt and a further bank statement showing the transaction to Neilsons.
If funds are coming to us from another person:
We will need their passport, address verification and bank statement covering the 90 days prior to the transfer but only if they transfer funds direct to us.
If the other person transfers the funds direct to your account we only need to see their bank statements for the past three months.
If they have transferred funds to their bank account from another source within the 3 month period we must have copies of the statements from that account too – remember we need to follow the money so we need to see an audit trail showing where the cash has been for the last 90 days.
Their bank statement should also show the money being transferred to your account.
Again, like your ID documentation, we will request that you submit all of your source of funds documentation via our secure Law Society of Scotland endorsed system. Alternatively, you can bring in all the paperwork and statements to one of our offices. Ideally, this should be the office that you are dealing with.
Transferring your funds to Neilsons
You can transfer funds in two ways.
- If you send a cheque this should be made payable to Neilsons and be with us on or before five clear working days before your entry date.
- If you prefer to make a CHAPS payment from your bank account this should be with us no later than one clear working day before your entry date. You should also provide us with the CHAPS receipt from your bank showing the transfer to Neilsons account.
Completing the Finances
During this period the purchaser’s mortgage lender will be processing the application and when it is approved will issue an Offer of Loan to the purchaser and Loan Instructions to the purchaser’s Solicitor. The purchaser’s Solicitor will prepare the mortgage deeds and will update the purchaser with the financial position and request the purchaser to pay the balance of price, fees and outlays as previously quoted. The purchaser’s Solicitor will also then request the mortgage funds from the mortgage lender.
You will note that all of the financial aspects of the transactions come through the Solicitor.
The purchaser’s Solicitor then issues a cheque for the purchase price to the seller’s Solicitor and this is normally sent the night before to be “held as undelivered” on the morning of the date of entry.
The night before the date of entry the seller’s Solicitor also send the signed Disposition in favour of the purchaser, the title deeds and in the majority of cases, the keys, to the purchaser’s Solicitor, again to be held as undelivered.
On the date of entry provided the finances are in place, the Searches are updated and clear and all of the conveyancing observations have been satisfactorily addressed, the purchaser’s Solicitor will contact the seller’s Solicitor and state that the cheque can be cashed.
In return the seller’s Solicitor will confirm that the titles and keys can be held as delivered and will confirm the approximate time at which the property will be available for occupation by the purchaser.
5. The Date of Entry
What Happens on the Date of Entry?
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‘WHAT TIME DO WE GET THE KEYS?’
There is no set time. The availability of the keys is determined by the sellers moving out, your mortgage funds coming into our Bank Account and If selling, your purchasers being able to pay the price over to us. We have no direct control over any of these and therefore can’t give you any exact time until it all falls into place on the day.
We normally arrange for your mortgage to come in the day before, to avoid delay in this connection.
You come in to sign the Deeds a few days before the Entry Date and leave us one key to your place, which we send to the Purchaser’s solicitors the night before the entry date to be “held as undelivered”. This means they hold the keys to our order. They send us the purchase price cheque on the same basis.
We send a cheque for the Purchase price of your new place to the Sellers Solicitors and they send us a key, both “to be held as undelivered.”
We then have to wait for everything to fall into place. You load up in the morning and wait for our call. The purchaser’s Solicitors call us to say they are happy for us to cash their cheque.
The purchaser’s Solicitors call us to say they are happy for us to cash their cheque.
We ring the seller’s solicitor to check if their clients are clear and if so we tell them to cash our cheque.
We call you and ask you to call in to collect your keys to the new place. Based on the time of our call you let us know when you will be clear of your own place. (You leave the remaining keys in the property when you leave it for the last time).
We phone the purchaser’s solicitor and confirm that they can hand over the keys to the Purchasers but tell them not to attempt access until after the time you have given us.
When you get the keys
Take a note of the meter readings and phone in the readings for both properties to the Service Providers. If you don’t know the Gas and Electricity suppliers, note the meter serial number and for Gas, contact Transco on 0845 605 0570 opt 2; for Electricity contact Scottish Power on 0845 270 9101
Check everything is in working order. Remember that if something is working but does not comply with technical regulations, if the value of the claim in total is less than £400, if the problem relates to anything other than a system or an appliance, or if the missives state the seller would not be held liable, the seller is not responsible for the repair.
If the property has been damaged since you viewed the seller may be liable for the repair but not if the damage existed before you viewed or if you had accepted any damage would not be repaired, at the missives stage.
Get on the Voters Roll by calling 0131 469 5986. You lose a lot of points on a Credit Search if you are not registered to vote from your new address
We sort out the Council tax for your sale and the Seller’s Solicitor should deal with the Council tax for your purchase. Unfortunately the Council will not acknowledge receipt of our Intimation of the change in ownership and we have no control over the actions of the Seller’s Solicitors actions so if you don’t hear from the Council in around 6 weeks give them a call direct to ensure that they have actioned the appropriate procedures.
