For anyone wishing to buy a residential property in Scotland, we have created a short guide to help you understand the process.
Conveyancing solicitors are often involved early in the process which helps to ensure both the buyer and seller are protected during the sale and to ensure both parties receive impartial advice.
Occasionally some homes in Scotland are sold at a fixed price or by auction, however most are sold through an ‘offers over’ system. This means the property will be listed for ‘offers over’ a certain price in line with the market conditions in the area it is being sold, with the listing accompanied by a separate Home Report valuation.
Prior to viewing it is useful to speak to an independent Mortgage Broker to assess your buying position, unless you are one of around 40% of buyers purchasing with cash. When you find a property you're interested in, ask the acting estate agent for a copy of the Home Report in order to start your research.
A Home Report is a document that gives you an overview of the properties condition and valuation and is created by an independent RICS Surveyor. All second-hand properties must have a Home Report to be advertised for sale and the agent or seller must give you access to the Home Report within nine days of you requesting it.
The report is split into three parts – a Single Survey and Mortgage Valuation, an Energy Report and the seller’s Property Questionnaire.
Single Survey and Mortgage Valuation
This single survey section, based on a visual inspection by a chartered surveyor, tells you about the property, its condition, its accessibility, and any repairs you may need to carry out based on a grading system from Category 1-3 (where ‘1’ is no immediate action or repair required and ‘3’ indicates urgent repairs or replacement required to improve some aspect of the property).
The mortgage valuation of the property provides the figure you will use to calculate your mortgage loan to value borrowing; the broker and lender will use this as part of your mortgage application. You will notice in different areas around Scotland that the ‘offers over’ asking price can be as much as 5% – 10% below this valuation price. This is a marketing strategy used by agents to attract viewing interest however most sellers are looking for at least the Home Report valuation level and in current market conditions, many properties are achieving sales at premiums well above the valuation due to high demand for certain locations, competition from multiple interested buyers and scarcity of certain types of property.
Energy Report
This section of the Home Report gives information on the energy efficiency in the form of an Energy Performance Certificate (EPC), with an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for 10 years.
This tells you about energy use and roughly how much it will cost you on average for heating, lighting and hot water.
It also rates the house's environmental impact in terms of carbon dioxide emissions and lists improvements suggestions on how to make the property more energy efficient and save fuel costs.
Property Questionnaire
This section of the Home Report is a questionnaire covering 16 different categories completed by the seller. This is designed to give you more information about the property.
These categories include:
- Council Tax band
- Parking facilities
- Any past issues that may have affected the property
- Any alterations or extensions that have been made to the property
- Factor fees & building insurance details, if applicable, and utility suppliers
- Details of any specialist works or guarantees
- Details of any notices that might affect the property
Making an Offer
If you find a property you're interested in buying and are happy with its Home Report, discuss it with your Mortgage Broker and inform your solicitor.
Your solicitor will then formally 'note' your interest with the estate agent or submit an offer on the property.
If there are multiple notes of interest or offers, the agent will suggest to the sellers that a Closing Date for offers is set. This will give you time to arrange your finances and offer accordingly through your solicitor.
If there's no Closing Date set, you may be able to negotiate an offer price more freely via the estate agent. This tends to happen if someone likes a property so much that they jump in with an early offer or if a property has been on the market for more than a couple of months and there is no other competition.
If your offer is accepted, your solicitor will be asked to submit a ‘formal offer’ to officially take the property off the market, usually the viewings cease at this point. We cover more on this below.
The agent, your solicitor and mortgage broker or lender then have a legal obligation to complete Anti-Money Laundering (AML) checks. The HMRC acts as the regulator of estate agents to ensure they meet their AML obligations and more information regarding the information buyers need to supply to comply with these regulations can be found on our website: Anti-money laundering | Rettie
Conveyancing and Missives
To begin the sale process, on receipt of your formal offer, the seller’s solicitor will send your solicitor a letter called a draft 'qualified acceptance', which means they accept the offer depending on certain conditions. The seller's solicitor and your solicitor will correspond, negotiating these conditions, reviewing title deeds, searches and requesting completion certificates or building warrants, where noted to be required.
Your solicitor will inspect the deeds and will:
- Make sure the seller owns and has a right to sell the property (the estate agent will have verified this for themselves before listing).
- Make sure there are no unusual conditions in the deeds that might affect the way you live there.
- Inform you of any communal repair works pending on the building. tell you if there are any burdens (legal limitations, like not being allowed to build a fence on the property).
- Tell you if there are any burdens (legal limitations, like not being allowed to build a fence on the property).
- Tell you if there are any obligations to let someone use the land or stop you making use of it.
- Make sure any existing mortgage or charges on the property are paid off when the property transfers to you.
Once both acting solicitors for the buyer and seller are satisfied, the buyer has a mortgage or cash funds to buy, and the various offer clauses agreed, then 'missives' can be concluded.
Once the missives are concluded both buyer and seller have a legally binding contract. A failure or breech of the missives may mean either party is liable to be sued however, thankfully, this rarely happens. Prior to completion of the sale, in the week leading up to the entry date, the seller signs a Disposition to transfer the deeds into the buyer’s name, this means they will go through the legal process that transfers ownership of the property from the seller to you.
Settlement
The last step in buying a property is the 'settlement'. This is when you get possession of the property, and usually happens on the agreed date of entry.
Settlement means your solicitor will:
- Confirm to your lender (if you have one) that the property is now officially in your name
- Get the loan cheque from your lender (if you have one)
- Get your contribution towards the cost of the property
In return for handing over the cheque or transferring the funds for the cost of the property, the solicitor will get the 'disposition' (the document that transfers ownership from the seller to you) and the deeds and the keys.
If you have a lender, the deeds will be given to them as security. If not, you should ask your solicitor to put the deeds in safekeeping.
Your keys will then be ready to collect from the estate agent, this can happen anytime from 9.30am until later in the day depending on when the purchase funds are authorised to be cashed, whether there are any late issues arising in conveyancing on the completion date or if the seller is moving out that day and is in need of a little more time in the property, always best to discuss this in advance of the day in order that your removal firm are kept up to speed on timings..
Registration
As part of the sale your details will be added to the land register. This is a register of who owns land and property in Scotland.
Your property will have a 'title sheet' on the register, which lists:
- The current owner (you)
- The price of the property
- Mortgage details
- Any conditions affecting the property
Outlays
As well as the fees you pay to your solicitor and your contribution to the cost of the property, there are also a number of other costs, called outlays.
These include:
- Fees and taxes payable to the government, like fees due to the Registers of Scotland
- Search fees
- Land and Buildings Transaction Tax (formerly stamp duty land tax)