Exchanging contracts can be so exciting – it is that point when the property becomes yours! Unfortunately it can also be very stressful. So we have some tips and advice to help you.
Until this point, either yourself or the seller can pull out of the house sale without incurring any penalties. Only once the identical contracts between buyers and sellers is signed and formally exchanged by the solicitors, is the sale legally binding. Either side can still pull out after contracts have exchanged, however, there will usually be large penalties to do so.
Contracts typically exchange between 5 and 28 days before completion (however, on some occasions, especially where cash buyers are involved, exchange and completion can sometimes occur on the same day). Everything needs to be in place at the time of exchanging contracts, therefore the following should be completed:
Please make sure you read the contract carefully and fully understand it before you sign.
Once this checklist is completed, you are ready to agree on a date and time to exchange contracts. This is usually handled by your solicitor.
You have gone through a lot to get to this point. Just a few more big steps and you are done – you will be ready to take possession and move in.
Are you looking to move and need mortgage advice? Have a look at the Just Mortgages website.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Howards introduce to Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority. Just Mortgages Direct Limited Registered Office: Colwyn House, Sheepen Place, Colchester, Essex, CO3 3LD. Registered in England No. 2412345
Sold STC (subject to contract) is when a seller has accepted an offer to buy their property, but before exchange of contracts. The estate agent should take the property off the market, put up a ‘Sold: STC’ sign outside the property and describe the property in online listings as ‘Sold STC’. There is, however, nothing legally binding about ‘Sold STC’ in England and Wales. It is an informal acceptance. Buyer and seller can both change their minds. If higher offers come in, an estate agent is legally obliged to pass them on to the seller. The buyer can also renegotiate the price or withdraw their interest in buying the property. It is only when contracts are exchanged that the purchase becomes legally binding. What is the difference between ‘under offer’ and ‘sold STC’’? When a property that is up for sale is described as being ‘under offer’, it means that an offer has been made by a prospective buyer. The sellers are considering it but not yet decided whether to accept it. Buyers can still make other offers. ‘Sold STC’ means that an offer has been accepted but contracts have yet to be exchanged. Nailed it! Our new Best Price Promise How long does sold STC take? There are no hard and fast rules for the length of time the sold (subject to contract) stage takes in the buying process. It will take as long as the financial and administrative aspects of the conveyancing process take to be put in place – such as the survey, the searches, the mortgage application, itemising the fixtures and fittings in the property. This might take anything between 6-12 weeks depending on the complexity of any issues found. Could the sale of a property sold STC fall through? Yes. There is nothing guaranteed about a property completing after it has sold STC. In fact 25% of all prospective purchases that reach under offer or Sold STC fall through. ‘Gazumping’ is a very real practice and there is nothing illegal about it. Sellers can still consider higher offers than the one they have accepted. Buyers can withdraw their original offer if the survey reveals a major problem with the building or a legal search has revealed planning issues about the area. Can you still live in a house sold STC? No, you can’t move into a house while it is still at the Sold STC stage. Contracts must have been exchanged and completed. When contracts are exchanged deposits are paid and there are major legal and financial implications in either buyer or seller pulling out. Protection from sold STC issues Because there is nothing legally binding about the ‘Sold (subject to contract)’ status, buyers and sellers have the freedom to do whatever they want up to the point when contracts are exchanged. Neither has more legal protection than the other while the property is still only Sold STC. Sign up today to be among the first to know about property for sale in your area. Let Howards help you find your next home We are dedicated to helping people buy a property. For more advice on the buying process, contact Howards today.
Think moving house is stressful? Then all of the added jargon that goes with the house buying and selling process can make it quite daunting. Our handy guide details some common terms and what they mean. Acceptance - If you wish to accept a lender’s mortgage offer, this document will need to be signed and returned to the lender. Amortisation - The gradual elimination of a liability, for example, a mortgage through regular payments over a set time period or the amount paid by way of capital or principle repayments on a loan annually. Annual Equivalent Rate (AER) - A notional rate that is often quoted on interest paid on savings and investments. It aims to demonstrate what your interest return would be if the interest was compounded and paid annually instead of monthly (or any other period). Annual Percentage Rate (APR) - The APR is a figure that is used to compare different mortgages. Defined by law, it includes repayments on the loan plus any fees such as booking, arrangement or redemption fees. The APR shows the true cost of borrowing, and should appear on all mortgage illustrations and quotes. Applicant - The name given to a potential purchaser, often used by estate agents/auctioneers. Appraisal Value – Property value as estimated by a surveyor. Appreciation – Increase in property value as a result of market condition changes. Arrangement Fee - This is a charge levied by the lender to cover the costs of administering and reserving the funds for certain types of mortgage. May be paid separately or added to the loan amount. Assured shorthold tenancy (ASTs) - This is the most common form of tenancy. A tenancy can only be an AST if you are a private landlord or housing association, the tenancy started on or after 15th Jan 1999, the property is the tenants' main accommodation and you do not live in the property. All of these must apply. Auction - A means of selling a property whereby it is listed at an auction and if the property does not reach the reserve price then it is not sold. If it does, then when the auctioneer's hammer falls that represents an exchange of contracts and the successful bidder is legally obliged to pay a 10% deposit and sign a memorandum of sale before leaving the auction. Completion usually takes places 28 days later and the buyer is not in a position to re-negotiate any of the stipulated terms and buys the property "as seen". Structural surveys and searches would have to be made in advance by a bidder. Base Rate - The lowest rate of interest a bank will charge when it lends money, used as a benchmark to set interest rates for borrowers. This rate is set by the Bank of England and is reviewed several times a year. Lenders will charge borrowers a margin above the base rate. Bridging Loan – A loan that is used to cover the overlap between the purchase of a new property and the sale of an old one. This will be a short-term loan. Building Survey – Full inspection of the property, carried out by a chartered surveyor. A detailed report will follow highlighting the condition of the property and any issues/defects. Buildings Insurance – An insurance policy that pays the cost of repair or rebuild in the event of your property being destroyed or damaged. This needs to be purchased before completion of your new property. Buy-to-let Mortgage – A type of mortgage specifically for those purchasing a property with the intention of letting the property out. Capital – Amount of money either put into buying a property or the deposit placed on a property. Capital Appreciation – Growth in the value of a property over time. Capital Gains Tax – A tax on profits above a fixed level made from the sale of financial assets such as property or shares. Capped-rate mortgage – A mortgage that sets a maximum rate on interest that a lender can charge for a specified period. Chain – Where a buyer is reliant on the completion of sale of their current property before they can complete on a purchase of a new property. Commission – An estate agent’s fee for selling the property. Comparative Search – The search that looks at sale values for similar properties in the same area as your property. Completion Date – The date of which the money is transferred from the buyer’s to the seller’s solicitor. The buyer will also become the legal owner of their new property on this date. Conditions of Sale – Details that set out the rights and duties of the seller and buyer. Contents Insurance – Insurance that covers the contents of your home such as your furniture, carpets, equipment like laptops and televisions. Conveyancing – The legal process surrounding the transfer of ownership of a property from a seller to a buyer. Covenants – The rules and regulations governing a property – these are contained in its Title Deeds or Lease. Deeds – The legal documents that prove ownership of a property. Deposit – Initial funds used as a payment upfront to a bank/financial institution in the purchase of property. Also known as mortgage deposit. Detached – A property that stands alone, and therefore not attached to another property. Disbursements - Fees paid by the solicitors on the behalf of a buyer. Examples include land registry and search fees and stamp duty. Also known as Legal Fees. Discharge Fee – Paid to some lenders for releasing their hold over a property once you have paid off you loan. This often occurs if you pay off your mortgage early before the standard term has run out. However, this is not always the case. Down Valuation – Where a lender restricts the amount you can borrow as a result of a surveyors valuation report indicates the property is not worth the sum sought. Draft Contract – A preliminary version of the contract drawn up when the sale is first agreed. This is uncorroborated version that will need to be confirmed by the seller’s solicitor and set out the conditions. Draft Transfer – A legal document issued by the purchaser’s solicitors setting out the terms and conditions of sale. Early Repayment Charge – A charge issued by the lender as a penalty if a mortgage is paid off within a specific period. Endowment Mortgage – Interest-only repayments combined with monthly premiums into an endowment policy. This is designed to pay off the loan at the end of the term. Energy Performance Certificate – This certificate measures the energy efficiency of a property using a scale of A to G. It is now a legal requirement to have a valid EPC before a property can be marketed. Equity – The amount of money either put into buying a property or the deposit placed on a property which exceeds the amount of any money borrowed against the property. Exchange of Contracts – The point at which confirmed and signed (by both purchasers and sellers) are physically exchanged. Both the buyer and the seller are now legal bound to the sale and purchase of the property at the agreed price. Fixed Rate Mortgage – A mortgage in which the interest rate is fixed/set for an agreed term or period of time. Fixtures and Fittings – These are the non-structural items included in the purchase of a property. These can include (but not limited to) light fitments, central heating boilers and radiators, bathroom suites, kitchen units, TV aerials and satellite dishes. Flexible Mortgage – An arrangement whereby you can increase or decrease your mortgage payments. Freehold – Where the owner of a property also owns the land that it is built on. Gazumping – This occurs when a seller accepts a higher offer on a property when they have already agreed on an offer from someone, prior to the exchange of contracts. Gazundering – This occurs when a buyer reduced their agreed offer prior to exchanging contracts. An example could be that the buyer has discovered some issues with the property following a survey report that was carried out, and therefore reduces the offer agreed accordingly. Ground Rent – A charge from the freeholder to the leaseholder. Guarantor – Someone who promises and signs to agree to pay the borrower’s debt or rent is the borrower or tenant defaults. Higher Lending Charge – An upfront, one-off charge to a lender to protect them against the borrower defaulting on the loan. This usually occurs on mortgages that are over 75% of the property value. Houses in Multiple Occupancy – A building of three floors or more that is occupied by three of more people. These people live as more than one household but share the use of facilities such as bathrooms and cooking facilities. Individual Savings Account Mortgage (ISA) - Interest-only mortgage linked to an ISA fund, which is designed to pay off the loan at the end of the period. Inflation - The rise in prices over time. Interest Charges – The charges that banks make on a loan, calculated as a percentage of the borrowed amount. Interest-only Mortgage – Now only offered with very strict lending criteria and aren’t available to everyone. A type of mortgage where the borrower only repays the interest on the loan for the duration of its term and repays the full loan amount at the end of the mortgage period. Joint Tenants – A form of ownership of land or property where there are two parties. If one of them passes away, their share of the property will transfer automatically to the remaining party which then gives them full ownership. Land Certificate – This document is issued by the Land Registry to the owner of the registered land as proof of ownership. This land document will include a copy of the register and the plan showing the extent of the land. Land Registry Fee – To be paid by a solicitor on behalf of the buyer to register ownership of property with the Land Registry (if freehold). Therefore once you purchase the property, you are the legal owner of the land. Land Search – This is where a formal application of an inspection of the Land Registry register. A certificate will be issued to show the current situation of the land in question. Lease – The legal document by which the Freehold or Leasehold owner of a property lets the premises or a part of it to another party for a specified length of time. Once this expires, the ownership reverts to the Freeholder. Leasehold – Where a person(s) owns a property but only for a set number of years. When the lease expires, the property returns to the freeholder. This is most common with flats; however, houses can also be built on leasehold land. Legal Fees - Fees paid by the solicitors on the behalf of a buyer. Examples include Land Registry and search fees and Stamp Duty. Also known as ‘Disbursements’. Listed Building – A building which has special architectural or historic interest which is officially listed so that it cannot be demolished or altered without prior local government approval. Maintenance Charge – Also known as service charges. These charges are the cost of repairing and maintaining external or internal communal parts of a building. These costs are charged to the tenant or leaseholder. Maisonette – An apartment, usually over one or two floors, which is self-contained and in a larger house. It will have its own entrance from the outside. Mortgage – An amount of money advanced by a lender (usually a bank or building society) on the security of a property. This is repayable over a long period of time. Mortgage Payment Protection – Insurance designed to pay your monthly mortgage for a limited period if you are unable to work due to illness, redundancy or disability. This is usually for a year. NHBC Scheme – A building guarantee that is available on some new build homes. Under this guarantee, any defects that occur within a specified time after construction are remedied. Negative Equity – When a property has decreased in value to below the level for which a loan was secured on it. Offer – The sum of money a buyer offers to pay for a property. Offer of a Loan – A formal document approving the mortgage you have requested and detailing the Terms and Conditions that apply. Office Copy Entry – The official document from the Land Registry which confirms the ownership of and borrowings against a property. Open House Event – A day or period of time of a day where a property for sale is open to a number of applicants to view at the same time. Open Market Value – The price a property should be able to achieve where there is a willing buyer and seller. Re-Mortgage – This is the refinancing of a property either by switching a mortgage from one lender to another or by taking out a second mortgage to take advantage of any equity gained by the rise in value of the property. Redemption – When a mortgage is fully repaid. Repayment Mortgage – A mortgage where the monthly payments are used to repay the interest and reduce the outstanding capital. This means that each month you’re paying off a small part of your mortgage. Repossession – This occurs when a mortgage lender takes possession of a property due to non-payment of the mortgage the property is secured against. Retention – Where a lender has the ability to hold back part of a mortgage until certain conditions are met. Searches – A request or enquiry for information about the property held by a local authority or by the Land Registry. Semi-Detached – A property which is joined to one other property – this will be a house or bungalow. Service Charge – These charges are paid by the owner to cover the cost of providing various services which include (but not limited to) maintenance or repair of the building, communal areas, heating, lighting or security. Share of Freehold – Where a limited company owns the freehold on which a property stands and the shareholders of that limited company are the owners of the property. Short-term Tenancy – Occupancy of a rental property that starts at one day and can last for a few weeks or a couple of months. Sitting Tenant – This refers to a tenant who occupies a rental property when there is a change of landlord or the landlord decides to sell. Sole Agent – When the seller has agreed to sell their property through one estate agent only. Stamp Duty – A government paid tax to be paid by the buyer on a property. Usually expressed as a percentage of the purchase price and will vary depending on the value of the property. Standard Variable Rate – Mortgage lenders standard rate of interest. This can go up or down in line with market rates such as the Bank of England base rate Surveys – Inspection of a property and reports that comments of the structural conditions and more depending of the survey of survey you commission. Studio Flat – A flat which consists of one room that contains the cooking, living and sleeping areas with a separate bathroom or shower room. Tenancy Agreement – A contract between a tenant and landlord. The tenancy agreement will outline the terms and conditions of the rental agreement. Tenure – Conditions on which a property is held, for example leasehold or freehold. Terraced House – A property that forms part of a connected row of houses. Title Deeds – The legal title documents that prove ownership of a property. These are transferred to the new owner on the sale of a property and a copy is held by the mortgage lender. Title Insurance – The insurance policy which a buyer can take out to allow a sale to complete where there is a potential problem with the documentation in proving legal ownership of some part of the land they are buying. Title Search – An investigation carried out by a conveyancer or solicitor into the history of ownership of a property. This search will check for liens, unpaid claims, restrictions and any other problems that may affect ownership. Tracker Mortgage – A mortgage where the interest charged by a lender is linked to a rate such as the Bank Of England base rate. This means your payments can go up or down. Under Offer – A status of a property that is for sale and the sellers have accepted an offer from a buyer. This is the status given before the exchange of contracts. Valuation – A basic survey of a property which estimates the value of the property for mortgage purposes. Mortgage lenders will need to see this before lending. Variable Base Rate – The basic rate of interest charged on a mortgage. Vendor – The seller of a property. Yield – The income from a property that is calculated as a percentage of its value.