Property in the United Kingdom – A Buyers’ Guide
Every international location has rules and regulations regarding the purchase of land or property by foreigners and it is important to be aware of what will be expected. Below is a general guide to the property buying procedure in the UK.
Buying property in the United Kingdom is a relatively straightforward process and there are no separate procedures for foreign nationals.
We will gladly guide you through each step of the process to ensure you are fully informed and that you avoid any potential pitfalls. Click here to speak to a specialist.
Using an Agent
Unlike in some countries, UK estate agents are licensed bodies of fully trained specialists, and all estate agents must pass strict exams to become legitimate professionals. A real estate agent can act on behalf of the vendor, the buyer or indeed for both parties but their commissions are charged to the vendor.
A good agent is essential when you buy a property and propertyshowrooms.com, in association with the International Investment Property Network (IPIN), always carefully examines your particular requirements and provides a selection of appropriate options from the database. In addition, we can recommend all related professional services you will need to make a safe, reliable purchase. Most of our properties for sale in the United Kingdom are within off-plan developments as they offer the best value for money and represent current general demand.
Making an Offer
The UK buying system allows for a good deal of bartering before the selling price is agreed and this is all the more true in the light of current market conditions. It is common practice to offer a good deal lower and then leave it to the estate agent to negotiate with the vendor on your behalf.
Some buyers are making the most of a general “Buyers’ Market” throughout the UK, achieving bargain prices on prime properties for the purposes of buy-to-let investment and/or long term capital growth when the market finally picks up.
Deposits are not always necessary if a 100% mortgage is agreed on the property, which is often the case; however, lenders charge slightly higher interest rates for the privilege. A minimum deposit of 10% of the property value ensures you will not have to pay a Mortgage Indemnity Fee.
For off-plan purchases, typical reservation fees are around 1,000 GBP with 3.0 – 3.5% deposit payable within 28 days (minus the reservation fee), Another 3.0 – 3.5% installment will be due a year later and another the following year, with the final balance payable upon completion a year later.
Appointing a Solicitor
It is wise to appoint a conveyancing solicitor to ensure all legal paperwork is dealt with professionally. Once the price is agreed, the vendor’s and buyer’s solicitors liaise to finalise the deal. Our advisors can recommend a good lawyer who will carry out all necessary checks on the property or land in the UK and fulfill all the legal requirements of the sale.
It is customary to carry out a structural survey prior to purchase. The depth of survey you contract of course depends on the age and type of property you are purchasing. It’s your responsibility as the buyer to be certain that the building is structurally sound as the seller has no legal obligation to declare or ensure that this is so. Sometimes you will need to alter your initially agreed price, which was made subject to a satisfactory survey.
Once the survey is complete, purchase can go ahead once you have received a written mortgage confirmation.
A wide range of mortgage products is available in the UK and it is usual to obtain an “Agreement in Principle” in writing to assess and agree your ability to pay the loan.
Today, due to rocketing prices, many investors, particularly young couples, are struggling to take their first step onto the property ladder. Some mortgage lenders have been offering special packages, such as the “Share to Buy” mortgage, allowing up to four parties (normally a group of friends or family) to enter into a joint mortgage with reduced costs.
If you possess property in your own country and would like to borrow against this in an equity release plan, we can introduce you to an independent financial advisor who will help you raise the necessary finance. Alternatively you can request a quotation for a mortgage from our experts.
How difficult is the property purchase process in the UK?
There are no restrictions on foreign ownership.
Buying property in UK can be summarized in 3 stages: the search and offer, conveyancing and the final touches.
1. Find a suitable property and make an offer, usually through your real estate agent. The offer does not legally bind you to buy, except in Scotland where offers ARE binding (neither is the seller legally bound at this stage – ‘gazumping’ or withthdrawing from an agreement to buy or sell before the final contract has been signed is very common, except in Scotland).
2. After your offer has been accepted you may wish to arrange for a survey. A survey is strongly advised for early detection of potential problems. Generally there are two kinds of survey:
- a building survey, which will cost you roughly £500 to £1000
- a homebuyer’s report, which will be cheaper at about £300 to £500
There are no set fees for surveys. Negotiate.
3. The legal transfer of the property (conveyancing) is the next stage. You will need a solicitor or a licensed conveyor for this. Again, there is no set fee scale so negotiate, and clarify whether VAT and/or disbursements is/are included in the upfront quotation. Conveyancing proceeds through an exchange of notes between the seller’s solicitor and your solicitor. A “draft contract” will be drawn up by the seller’s solicitor containing the price, information about the seller’s deeds of title, etc.
Your solicitor will check this and negotiate with the seller’s solicitor. Searches, enquiries and surveys undertaken on your behalf will include a Local Authority Search, to check that the property is not in the way of any project; a search at the Land Registry to check security of title. Other enquiries will check on things like mineral rights, flooding, pollution, etc. This part of the conveyancing process will take a minimum of two weeks, but it not unusually takes two or three months.
4. Once you and your solicitor are satisfied, you sign final contracts. This binds both parties legally – the sale must go through. At this point you hand over a non-refundable 10% deposit.
5. A transfer contract documenting the transfer of title will next be prepared and signed by both parties. A completion date will also be agreed upon. Between the contract signing and completion date, proper arrangements with the Land Registry office are made: stamp duty and other fees connected with registering are paid. Payments are now completed and the deeds are handed to you. The process is over, you are now a proud owner.
Selling a property
A Home Information Pack (HIP) must now be provided before properties in England and Wales can be put on the open market for sale with vacant possession (Housing Act 2004). The idea is to reduce the (large) number of abortive sales in England and Wales (28% of all ‘agreed’ sales fail to take place) and is based on Danish practice.
The pack must be no more than three months old when the property is first marketed, and must contain:
- An energy Performance Certificate
- A sale statement
- A copy of the title documents for the property
- Local Authority and drainage searches
- An index
If the property is leasehold or commonhold, then the pack must also include the following:
- A copy of the lease
- Building insurance policy
- Contact details for the landlord or management and any legal details
- Regulations that apply
- Recent service charge receipts and accounts
The initial idea was to include a Home Condition Report, to reduce the cost burdens on buyers, but this was not implemented. Failure to provide a Home Information Pack, or supplying an incomplete pack carries a fine of £200.
Home Information Packs should cost between £300 – £600 for most properties in England and Wales. Some estate agents are offering HIPs for free, however the Law Society recommends you use independent HIP providers, to avoid being tied in or triggering penalty clauses.
The Conservative Party is against HIPs and has promised to scrap them when it comes to power at the next election.
If you are looking to buy property in Scotland these are the steps:
- hunt for the desired property
- hire a solicitor
- arrange the survey
- make the offer, if the offer is accepted you are then legally bound to complete the transfer. This ensures financial reimbursement should the seller or buyer suddenly back-out in the middle of a transaction. A buyer receives payment to cover for survey and valuation costs. The seller receives compensation for lost interest and other costs.
- go on with the conveyancing, if there no problems
- contracts are then signed
- money and deeds and keys are exchanged
The components of each step are generally similar to the processes in practice in the rest of the UK.