Specialist, shared ownership solicitors, Holmes & Hills have put together this first time buyer guide exclusively for the readers of First Time Buyer magazine
We understand that buying your first home is not only an exciting milestone in your life, but it can also be a daunting experience, especially if it is also your first time dealing with a lawyer.
Through this guide, we hope to make the process as transparent as possible, to enable you to navigate the process with confidence.
The shared ownership home buying journey
1. Investigate finances and mortgage affordability
Before you start looking at properties you might be interested in, it is sensible to understand what you can afford. Many banks and building societies offer calculators that will help you work this out. However, you should be aware that the amount a calculator shows you may be able to borrow, may differ when you apply and a credit check is completed.
2. Find your dream home
Traditionally, buyers would register with local agents, but many people now just use online services. When looking for a shared ownership property, you can register your interest with the developer building the house where it is a new build, by speaking to the relevant shared ownership housing association or registering your interest on the Share to Buy website.
3. Agree a price
Once you have found your dream home, you may be able to negotiate the price if you are buying from a developer. If you are buying through a housing association, you will likely agree to the price they have set. This is because in most situations, a RICS valuation has been carried out which determines the market value.
If you are purchasing a new build shared ownership property, you will be required to pay a reservation fee. This fee is taken into account on completion and your completion amount will be reduced in line with the fee. Some housing associations may also ask for a small fee up front on a property that is already owned by another party.
4. Important note
One of the big differences between shared ownership and standard property transactions is the date of exchange or completion.
For new builds, the developer will usually require exchange to take place 21-28 days either from reservation or from the date that the contract is issued. For resale shared ownership properties, you only have until the RICS valuation expires. A RICS valuation is only valid for three months. It is worth noting that in some instances, which are determined by the circumstances of the buyer, extending either the RICS valuation or exchange deadline is possible.
It is important when proceeding to the next step that your chosen conveyancer has the expertise to deal with this process as the shared ownership timelines vary greatly from standard conveyancing transactions.
5. Get a conveyancing quote
Once you know how much you are purchasing your home for, you can contact any number of conveyancers and get a quote for the legal costs for the purchase.
There are many fees involved when purchasing a property and getting a quote will allow you to see what is being charged. On occasion we have found that fees can be hidden, or not quoted for. At Holmes & Hills we have a policy of being transparent and as long as the transaction is relatively straight forward, you can be confident that the price you are quoted is the price you will pay. You may find a developer will have a recommended or preferred panel of solicitors, but you are in no way obliged to use any of them and can instruct your own preferred lawyer.
When buying a shared ownership property, especially a new build, we would recommend using a specialist lawyer who is experienced in the nuances of this type of transaction as it does differ to standard conveyancing. As such, there are conveyancers that will not deal with shared ownership transactions for this very reason.
Holmes & Hills has a specialist New Build and Shared Ownership department, and a quote can be obtained on 01206 593933 (please state you found us via First Time Buyer magazine).
6. Obtain mortgage offer
Now you have settled on a purchase price and have your conveyancing quotations, you will need to apply for the mortgage product you have chosen. You can do this earlier in the process if you want to be sure of the offer amount you will receive, but most mortgage offers come with an expiry date, so again, it is personal choice when you would prefer to do this. If, however, you leave it later in the process to apply, you may find yourself in a position whereby you do not have enough funds to complete the transaction. In addition, many Estate Agents will require evidence of your funding for the property and most lenders will provide an offer in principle to assist you with this element.
It is worth noting that some shared ownership mortgage providers require you to have a mortgage broker for an application to be accepted. The estate agent/housing association may have a list of recommended brokers you can contact.
7. Instruct a lawyer
You have received one or more conveyancing quotes, and now you will need to choose a lawyer to represent you for your property purchase. At this point you will need to:
a. pay money on account.
The amount will depend on the lawyer and is used to pay for initial searches and any other costs that arise immediately.
b. provide certified photo ID
This will be a copy of a driving licence or passport that has been certified as a legitimate copy by someone who has an occupation on an approved list that will be sent to you. Alternatively, you can visit the office of your lawyer with your driving licence or passport, and they can do this for you.
c. provide certified proof of address
As above, you will need to provide a certified copy of an approved document type that confirms your current address. A list of approved document types should be sent to you.
d. complete buyer details questionnaire
This will be a standard form which you will need to complete to ensure your lawyer has all the information they need to ensure they can perform required checks such as a bankruptcy search.
e. You will need to provide evidence of the funds you are to pay towards the purchase of the property together with the source of the funds, for example, savings, inheritance, lottery win etc.
If you are receiving a gift as part of your deposit, the gifter will also need to provide evidence of funds, identification and a letter providing certain declarations required for your mortgage lender’s purposes
8. Arrange for mortgage survey, if required
Your mortgage offer may be subject to having a survey carried out. This should be instructed at the earliest possible opportunity to ensure your mortgage offer is still valid.
9. Lawyer requests searches
The types of searches requested will depend upon the purchase type. If you are purchasing a new build shared ownership property, some searches will not be able to be completed as the paperwork may not yet have been submitted to the relevant authority. For example, water and drainage searches will not be required as the information will likely not yet be available. However, in these situations, a specialist conveyancer will know what information should be obtained in lieu of these searches. In some instances, the housing association will provide searches for the property as part of the sale. You will be required to contribute towards the cost of obtaining these searches.
A solicitor should be able to request standard searches for a resale shared ownership property. Searches are requested to check for evidence of subsidence in the area, flood risk etc.
10. Lawyer approves contract pack and raises enquiries
a. A contract pack contains the draft contract pack for approval. In the case of a new build property, we are provided with the first lease that will be granted for the property, all planning permissions and building control certificates so far as they relate to the property, all title deeds, any relevant information we must know about the site, any warranty documents, insurance documents and the proposed budgets for any service charge payable at the development. For resale properties, a copy of all title deeds, completed property forms such as a Fittings & Contents form which contains details of the items to remain at the property, property information form and copies of any planning documents or certificates. Again, for resale shared ownership properties, you would normally receive a management pack detailing the services charges, ground rent, buildings insurance etc.
The Lawyer will review the contract pack and raise enquiries to help understand any possible defects with the property, such as rights of way, private roads, missing documents etc.
11. Lawyer receives replies to enquiries and search results
If upon receipt of search and enquiry results, any potential problems are arise, your lawyer will advise you, and request your guidance on how you wish to proceed. Your lawyer can explain what the problems may mean for you in the future, but ultimately it is your decision as to whether those problems result in you aborting the purchase.
12. Lawyer receives mortgage offer and deals with any special conditions
Any special conditions would have been outlined in your mortgage offer. These can relate to repayment of the mortgage or may depend on things such as the results of a search or survey. There may be more conditions imposed on a mortgage for shared ownership, again highlighting the need for your conveyancer to have specialist knowledge of this type of transaction. It is worth noting that your conveyancer is likely to be acting for both you and your mortgage lender in the transaction. They must therefore comply with any lender conditions in your offer, including obtaining approval of your offer from the housing association. There is occasionally a fee for this, depending on the housing association’s approval procedure.
13. Sale contract and mortgage paperwork sent to client for agreement and signature and returned to lawyer
Once your lawyer has received all relevant paperwork from the various parties, the contract will be sent to you for you to sign, along with a report which will outline the main points of the transaction you need to be aware of. It is vital you read all paperwork to ensure you happy with all details, as this forms the contract. Once it is signed, you have agreed to all points within the contract. Your lawyer will need to be holding all signed papers, prior to exchange of contracts.
14. Buyer and seller agree completion date via respective lawyers
Once the signed contract has been received by your lawyer, the completion date, and if not yet set, the exchange date, can be agreed.
In the case of new build shared ownership properties, you will likely complete on notice.
This means you will be given an anticipated completion date which cannot usually be changed. The completion date is not confirmed until notice is served. This is usually served 10-14 days before the completion date. If you fail to complete on the notified completion date, there can be penalties imposed. For resale properties, you are likely to fix a completion date. Most mortgage lenders and housing associations will require a minimum of between 5-10 working days between exchange and completion to allow sufficient time to have everything put in place and to prepare a completion statement which would include any apportionments payable.
15. Home insurance
When purchasing less than 100% of a shared ownership property, the building’s insurance will be dealt with by the housing authority. You will be required to contribute towards the cost of the building’s insurance and this is likely to be collected from you in your service charge. You will therefore only need to consider contents insurance.
16. Buyer transfers mortgage deposit to lawyer’s client account by BACS/CHAPS
Payment of the exchange deposit cannot be made by credit card, and must be in the client account of your lawyer the day before exchange, to ensure there are no delays. BACS payments are usually free to make, but can take up to 5 days to process. CHAPS payments can be done on the same day, but your bank will usually charge for this.
All monies should be paid into a client account owned by the law firm you are using. This keeps your money separate from the general business accounts and provides protection, as money from the client account cannot be used for business operating costs.
Once exchange has happened, both buyer and seller are under contract. If the sale falls through at this point, there are usually penalties for the party pulling out of the sale.
At this point:
a. Your lawyer sends the transfer deed to the seller’s lawyer for signing
b. Money is requested from the client’s mortgage company
c. The remaining balance is requested from the client, if applicable
d. Final land registry and bankruptcy searches made
The final Land Registry searches are carried out to ensure nothing has changed since the previous searches were done
e. A completion statement is prepared which will detail the final balance owed from you in order to complete. This will include any apportionments you are liable for, your lawyer’s fees and any other fees quoted to you throughout the transaction.
18. Mortgage monies and balance of client purchase monies received
Your lawyer will receive your mortgage advance, usually the day before completion so funds
are held in readiness for exchange
19. Lawyer receives final Land Registry searches
There are rarely problems at this stage, but if the searches do come back with any problems,
your lawyer will discuss this with you urgently.
20. Completion – congratulations, you own your first home!
Your lawyer will send the balance required to complete to the housing association’s solicitors for a new build purchase, or the seller’s solicitors in a re-sale transaction. Once the solicitor confirms receipt of the funds, completion has taken place.
21. Lawyer will confirm completion
Your lawyer will likely call you to confirm that payment has been made and the seller’s lawyer has received the money. At that point, you are able to take possession of the property.
22. Agent will call to arrange collection of the keys
In the event of a new build transaction, you may need to liaise with the site office to arrange for key collection. You should liaise with your agent/sales representative prior to completion to discuss their requirements for collecting keys.
The key to a successful shared ownership property transaction is employing a specialist lawyer who can guide you through the process and is able to advise you on what you need to know. Holmes & Hills are happy to discuss any questions you have around your shared ownership purchase, and areable to offer a no obligation conveyancing quote on 01206 593933.