Please explain how to buy a house in England!

[kayspace]

ie contracts, settlements, exchange (whatever THAT is!), wriggle outs, gazumping etc.

I know nothing- except the horror stories my colleagues tell me about house sales collapsing on the day people were moving etc! I come from the Australian market which I believe operates like the Scottish market? Where a signed contract is a signed contract!

Hope this helps

Thanks, I'll have a read

It doesn't give the costs of the solicitor and the survey - these can vary and are not cheap, a full survey will be over £500 alone and you will not get it back if the sale falls through.

The mortgage comapny get a survey done and you have to pay for that anyway, but it is not disclosed to you and is only for the mortgage comapny to know that the hous is of the value of the mortgage.

You make an offer, negotiate via Estate Agent until it is accepted, arrange finances, survey and "searches" with solicitor or conveyancer, sign a contract formalising the conditions and a date which is exchanged with vendor(which is the poitn at which it is legally binding and you nromally pay a deposit)then complete (ie hand over finances and keys)on that date, normally move in too.

So how can sales fall through after exchange? I've heard stories where the removals truck has arrived outside the new house to find the vendor has 'changed his mind'. DOES this happen? Who's financially liable?

I don't think it does happen, you have been misinformed. The only way that happens is if exchange and completion happen on same day (which is obviously risky and so solicitors try to avoid it). Quite often the money gets lost in the ether somewhere between the two accounts and the buyers have to sit outside "their" new home until the banks confirm it has arrived. For someone to change their mind after exchange means that they would carry the full costs - in the buyer's case, walking away from their deposit; in the case of a seller, paying all the buyer's costs and, I believe, maybe even having to compensate them for the cost between their house and a similar house (obviously more of a risk in a rising market).

Kay I am from Scotland and looking for a house in England so I think I understand what you mean.

In Scotland once an offer has been made and accepted that is it - done deal.

In England you can make an offer, have it accepted and then the seller can still back out.

Gazumping is when the seller backs out if he receives a higher offer before exchange. Houses are not always taken off the market just because the seller has accepted an offer!

Chains regularly fall through when one buyer ddecides he doesn't want to pay what he originally offered and leaves the seller above him in the chain to decide whether they can accept the lower offer (gazundering - can't be done in Scotland) or possibly because their mortgage offer has fallen through.

It is only after contracts have been exchanged that the house is definately yours.

OK, another question! How can the completion date keep moving? I have definitely known people who you ask, in the playground- oh, you must have moved by now, and they look skyward saying things like 'the bloke at the top/bottom of the chain has had his sale/purchase postponed/fallen through etc so completion has been put back 3 weeks' or whatever. Could completion continue being put back ad infinitum? or is it 'exchange' that happens to?

I ask because we're doing a catchment move. We still have til the end of October to sort it all out BUT I've heard of house purchasing taking that long in this country!

Yes completion can be put back indefinately. As I said before, maybe someone in the chain has decided to haggle over the price, a problem has arisen during the survey and buyer wants to look more closely at it.

The chain will only start moving once the person at the top of the chain has moved and it works its way down so obviously its better if you need a quick move to look into chain-free purchases. There are quite a few on the market just now.

Should point out Kay, I'm no expert just learning the pitfalls as I go along.

It was so much easier buying in Scotland, I just made an offer, had it accepted, signed the papers and moved in 6 weeks later (which was how long it took for the area searches to come back).

Completion (and everything else: price, what is included in sale etc) can only move prior to exchange. The exchange of contracts stipulate when completion should take place - usually two to four weeks after exchange - but the build up to exchange is when all the argy-bargy negotiation happens. That is why selling a house is so stressful because nothing is done and dusted until exchange - it took me six months to get there with our last property and that was willing seller/willing buyer. My solicitor claims he has had people who have taken more than 18 months as they haggle over every last door knob and light fitting.

The trouble with the Scottish system is that you cannot change your mind - you see a house, fall in love, have all your surveys done, put in an offer and then that's that. If your circumstances change - you get a job offer to another part of the country or another, better house comes up, then you're stuffed. And, in a rising market, it ends up a sanctioned form of gazumping; sellers invite offers over but bidders have really no idea how much they should offer and, of course, have to pay for surveys etc first so, unless they offer very generously, risk losing all that money. Not sure I think that that is a really preferable system.

One thing that I found very different in England compared with Oz is that in Oz I think you get approval for a mortgage and then go shopping for a house with a set amount more or less in your pocket. In England your mortgage supplier will assess the house you want to buy and then tell you what they are prepared to loan on it. Which is another place an offer can fall down, if the mortgage supplier says the property isn't worth what you have agreed to pay for it....

Actually, tbh, re the 'Scottish system'- IS it like the Australian system (as definitely in Queensland)? Because I see that type of system being overwhelmingly better than the one in the UK! EVERYONE knows EXACTLY where they stand, and when!

OK, 'stuff happens' but the sudden job relocation is far less likely to be an issue because the whole process happens in such a short period of time! As for 'see a better house'- well, that attitude is, in a nutshell, why there's such an incredibly stressful and upsetting system in place here! IF there comes a defined point where there's NO POINT carrying on house hunting as you're legally committed to buy a particular property, you won't! IF you are allowed to collapse chains in this way, then EVERYONE ELSE in that chain is 'stuffed', aren't they? And what goes around, etc!

As for 'bidders not knowing what to offer', THAT'S where 'doing your homework' comes in. You offer what you are able and prepared to pay, bearing in mind no one else can put in ANY offers during the period between you and the seller 'signing the contract' which is the:
'We have agreed to buy this property for this agreed price. This will go 'critical' once the inspections/ searches/ finance/ repainting of the patio/ whatever else we've mutally agreed on are done. We have 10-14 days in which to sort this. If I'm satisfied with the results, I then immediately become contracted to buy your property, and here's a 10% deposit- oh, and you are contracted to sell it to me!'....
Passing over of cash and keys takes typically between 30-60 days from there. Though I once sold a house from 1st advert to cash in 3 weeks!

Be aware that you don't 'offer generously' for fear of losing out- you and the seller enter into binding negotiations. You find out if it's too low cos the seller won't sign. So you offer a bit more etc. Each offer and counteroffer is initialled on a legal document. It's not a 'sealed bids' system at all!

Note 'searches' and inspections can, miraculously only TAKE 10-14 days when there's a time penalty imposed!

What's not to like?

I don't know anything about the Australian system but the Scottish system works in practice by a solicitor or agent advertising the property; they give a closing date by which you have to put your bid in. Everyone who wants to bid then has to have their own survey/searches/legal work done on the property and then put in an offer. Generally, during the boom years in cities such as Edinburgh and Glasgow these could be 25%-plus over asking price - but really bidders didn't know so it was wild guesswork and I have met people who put in 14 bids on different houses and were beaten each time. Factor in a conservative £1000 per bid for all the pre-bid niceties and that was pretty much half their deposit gone as well as the heartbreak each time. In the end, they bought a new-build where you could just roll up and pay a set price.

I suppose the slowdown will make this sort of story less of an issue but I still don't like the idea that you have to pay for everything up front with no guarantee of buying the house you like. And I particularly don't like the fact that in an overheated market you can feel incredible pressure to put in too high a bid not knowing what others are offering or even if anyone else is offering anthing at all.

The Australian system (at least, in Queensland!):

House goes on market with an asking price. There's usually a few 'Open House' inspection dates set up. You like it, so you contact the agent who draws up a contract with your offer and conditions on it ( eg 30 days/60 days settlement, subject to satisfactory inspections, subject to finance/ subject to sale of existing property whatever), which gets submitted to the vendor. He comes back with HIS next best prices but says, for example, he's not having any 'subject to finance' conditions or if so, he wants more money as he's taking the risk. You then review it, tweak it, resubmit it OR accept it. The agent during this time is running his car into the ground getting this signed form to and fro both parties, often over 3 or 4 days.

ONCE both parties have agreed, the deal is more or less done! You pay a deposit (10% ish?), the contract goes to a solicitor. The house may still be advertised but the seller can't enter into any negotiations til your contract has collapsed or gone through. You get a 10 day cooling off period during which time the searches and inspections are done (yes, they needn't take MONTHS!). If you don't like the results, you pull out. If you do, the contract goes critical. Thus 30/60/90 or whenever you've both agreed days hence, you are the proud owner of said property.

End of.

Surely the solution is this system BUT perhaps with the seller having already done the survey and pest inspection (obviously independently!) before the property goes on the market. Sort of like a HIPS, really. They you know exactly what you're 'bidding/offering' on.

Course, the surveyors and solicitors wouldn't like this one little bit! And there'd be issues with mortgage lenders accepting what would be a basic building inspection, I suppose.

I am from Scotland but live now in England and have moving twice using the English system have to say I much much much prefer the Scottish system.

Also in Scotland you put on the date you want to move in the contract (missives in Scotland) and that is the day it happens.

In the past in Scotland you used to be able to share a survey with someone else who was interested in the house you wanted to purchase (you shared half the costs).

Kay - that sounds an excellent system.

I think it is! There are actual dates and conditions to be met, set out on a legal document! The day you say you'll move, you do!

In the process of mentioning this system to other UK mates and MNetters, questions that arise include:

"What if you can't sell your own house?"
"What if you find a better house?"
"What if you change your mind?",

-the point being - what causes you to fail to sell your home in the UK? People collapsing contracts and walking away, months in! Chains going wrong (no such thing as a 'chain' in Oz!)- well, in THIS system, people are COMMITTED to buy/sell, a great focuser of the mind, I find! And you DON'T go on house hunting once you're committed! And you don't put your house on the market in a half-arsed, speculative manner!

"What if you get relocated in the interim?"

-much less likely to happen when the process from contact acceptance to moving can be 2 months!

What's not to like?