The five-step legal process to buying a house
1 Pre-contractual stage
Once an offer is accepted, the seller draws up a contract, including details such as the selling price, what fixtures and fittings will be left in the property and the date for completing the purchase, known as ‘completion’. The buyer's conveyancer then checks everything is correct. This is when surveys and valuations will be completed and buildings insurance arranged.
2 Exchange of contracts
When the buyer and seller are happy with the contract, they sign final copies and send them to each other. The agreement is legally binding and neither party can pull out without paying compensation.
Buyers usually pay the seller a deposit of about 10% of the purchase price at this point, usually held by the solicitors until completion.
3 Between exchange and completion
A few more checks will be done by the conveyancers at this stage, such as making sure they have all the necessary funds, and they will then arrange for the transfer of funds to the seller.
The money for the property is transferred from buyer to seller and the keys and legal documents are handed over. The property now belongs to the buyer.
5 After completion
The buyer's conveyancer registers the change of ownership with Land Registry, the buyer pays stamp duty and has to inform their insurer that completion has taken place.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
This type of insurance covers the structure and fabric of your property – the bricks and mortar, not the contents (for which you need contents or home insurance). If you have a mortgage, the lender will insist you have a suitable buildings insurance policy in place. Many lenders offer their own building insurance policies, but you don’t have to buy it from your own lender but you have the option of shopping around. The insurance covers you for the rebuilding costs, not the market value of the property.