If you are renting a property or living with parents or friends, the procedure for buying a house is fairly straightforward. You organise your budget and arrange a mortgage, agree the sale with the vendor, engage a solicitor and proceed to the completion stage of the transaction, which is when the purchase monies are exchanged for the keys to the house.
Things are slightly different if you are selling your current house and buying another. You don’t want to be in a position where you have sold your own house but aren’t yet able to move into your new house but you need the sale proceeds in order to complete the purchase. In other words, you don’t want to have a period of time between the sale and purchase where you will technically be homeless. So how do you avoid this and ensure a smooth transition from one home to another?
Let’s start with the purchase of your new property. It is likely that you will need the funds available from the sale of your current home in order to buy the new house and so you will need to agree the sale of one and purchase of the other around about the same time. The purchase will be dependent on the sale and if the sale falls through, then you won’t have the funds to complete the purchase.
The procedures for the sale and purchase are the same at this point and the work done by your solicitor will not change. Things change when it comes to the point of agreeing legally binding contracts. In any property transaction, each party is legally bound to the transaction once contracts have been exchanged and the full deposit paid. At this stage, a closing date is agreed between the parties so that everyone knows when the transaction will complete.
In the case of a sale and purchase, the date on which legally binding contracts are agreed must be carefully lined up. You cannot enter into a binding contract to purchase a property until you know that you are already in a binding contract to complete the sale of your own house. This is achieved a number of steps taking place in the following order:-
- Contracts signed by the purchasers of your house are returned to your solicitor together with the payment of the deposit.
- These contracts are held by your solicitor and you do not sign them at this stage.
- You sign the contracts for the purchase of your new property and these are sent back to the vendor’s solicitor.
- The vendor’s solicitor will arrange for them to sign the contracts. At this stage, they will have a contract in duplicate, each one signed by you and the vendor.
- The vendor’s solicitor will return one contract to your solicitor. He will keep the other signed contract on his own file.
- Once your solicitor receives the signed contract from the vendor’s solicitor, both you and the vendor are legally bound to complete transaction.
- At this stage, your solicitor will return the contract for the sale of your own house to the solicitor who acts for the purchaser. This means that both you, and the purchaser are legally bound to complete the transaction.
- You are now legally bound to complete both transactions which means that you will have the proceeds from the sale to complete the purchase.
- The next thing that has to be determined is the date on which you will complete the sale and purchase. Your solicitor will liaise with the other two solicitors in order to agree a date which will suit all parties so, for example, the sale of your property will complete in the morning and the funds will be used to complete the purchase of your new property in the afternoon.
A transaction like this is described as a “chain”. This means that one transaction is dependent on another. You could have several properties in a chain like this, but in practice it is unusual to have more than one.
What can you do to make the process easier?
There are 2 things that will make a sale and purchase transaction more straightforward. The first is transparency, and the second is preparation.
It is important from the outset to be fully transparent will all parties so that there is no confusion down the line. You need to make it clear to your estate agent, and the agent acting for the vendor, that you are in a chain and will only be able to complete a purchase when the sale of your own property is finalised. This is important so that everyone knows the basis on which agreement is being reached. This will also make things easier for your solicitor when they are agreeing a completion date for the transactions as everyone involved will know that a chain is involved.
The second important item is preparation. Once the completion date is agreed, make sure you’re going to be ready to move. Get your packing done in good time. Make sure that everything your solicitor has asked for in terms of documentation is ready and make sure that you have submitted everything that your bank needs so that there is no delay on drawdown.
The sale and purchase procedure can appear daunting at first but it can easily be a smooth transaction once everyone is aware of the situation, and the necessary preparations are made.
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