5. The Home Buying Process - D - G Flashcards
What is the role of the lender in the buying or selling process? Give some examples
They play no role, but are a source of information and advice on the following -
Whether applicants will be considered
Maximum amount that they will lend and % LTV
Additional costs
Importance of appointing a solicitor
The need for valuation + levels of valuation
The steps following a mortgage being required/approved
Mortgage conditions
The purchase of home insurance cover (may be advised by solicitor)
What are the roles of the surveyor/valuer?
Basic valuation - The applicant should be made aware of the limitations of the valuation and discouraged from relying on it as a guide to value for money
Energy Efficiency Report
What is the role of the Mortgage Adviser in relation to valuation?
Point out limitations of the basic valuation and the advantages of a more detailed report.
In the case of a self-build, what must be done?
The lender will insist that the builder is a member of NHBC or a similar body. If not, it must be supervised by a qualified architect.
A final inspection must be carried out by a qualified person to ensure the work si complete
What must a solicitor confirm before a property can be sold?
The seller is entitled to sell
The property offered is exactly what the purchaser believes it to be
How is an investigation of title generally carried out/
Searching the Land registry/Land register of Scotland in the case of registered land
Land Charged Registry/General Register of Sasines in the case of unregistered land
What does land registry confirm?
Matters relating to the property - charges, burdens etc. This guarantees that the particulars registered are correct.
In the case of unregistered land the solicitor must establish a root of title, how do they do this?
Search the history of the property over the last 15 years
What deposit is generally asked for by solicitors as an indication of good faith from the buyer?
10%
What must a solicitor ensure before an exchange of contracts is permitted?
There is good title
Sufficient funds in place to complete the transaction
Other factors such as the sale of an existing property, bridging finance etc are in order
When would a solicitor advise the buyer to put buildings insurance in place?
Before contracts are exchanged, as any defects that arise after the fact will not stop the buyer from having to go through with the purchase.
It is easier to be inadvertently bound to a purchase in Scotland, why is this?
If an offer is made unconditionally, this is legally binding and there is no need for consideration (value) to flow both ways in order to create a contract.
In a conditional offer in Scotland, when is the contract formed?
Once conditions are accepted by the buyer - this means there may be a series of offers and counter offers involved.
What will a purchaser’s solicitor ensure before they draft the offer to purchase? (Scotland)
Sufficient funds are available to complete the bargain
The purchaser has been advised on all relevant matters, including the need to insure the property before missives are concluded.
Builders often have their own pro forma documentation containing conditions of the sale, what must a purchaser receive before signing?
Advice from a solicitor
A builder may permit a specified number of days to reserve the property, why is this?
To allow the purchaser to put finance in place for the purchase
What is a Legal charge / Standard Security?
Lesser used terms for a mortgage deed
Other than the mortgage deed, what else may a solicitor have to draw up?
Deed of assignment - IE. Lenders rights over a life insurance policy
Guarantor contract (some lenders insist that the guarantor must sign the mortgage deed itself)
What financial aspects does a solicitor have to deal with?
Redemption of any existing mortgage owed by the buyer
Requesting advance monies from the lender
Handling the funds needed to meet the balance between the purchase price and the mortgage
Payment of all relevant fees
Stamp duty etc
Who does the buyers solicitor also have a duty to advise?
The lender
What are the 5 main property defects?
Dry Rot
Wet Rot
Subsidence and heave
Damp
Electrical Defects
What is dry rot?
A very serious defect which affects timber. To resolve this ALL infected timber up to a meter beyond the contaminated area must be removed - this can be very expensive.
What is wet rot?
A less serious defect as it can be more easily treated than dry rot, buy if untreated can still cause extensive damage.
To resolve this the root cause must be remedied (ie. leaks) and badly damaged timber must be replaced
What is subsidence and heave?
Subsidence is when the land beneath the property drops, heave is when it rises.
This can often cause cracks in plaster/brickwork or cause doors and windows to jam.
What are the three main causes of damp and how do they arise?
Rising damp - ground water rising through the brickwork. Common in older buildings without damp-proof course. This is treated by adding damp-proof course.
Condensation - Lack of ventilation
Leaks - Loose or missing roof tiles, leaking windows, appliances.
What is a valuer likely to do if they believe wiring needs replacing?
Recommend a retention to the lender.
If defects are identified, what are the three options a lender has?
Accept - Nothing required
Decline - Problems are too severe for the property to serve as adequate security
Conditional acceptance - An undertaking/retention
What is an undertaking?
When a property is basically a good security but requires work, the lender may inspect the property months after the loan to ensure it has been carried out.
What is a retention?
The repairs needed are so vital that the lender with withhold some of the loan, only to be released once repairs have been carried out to an acceptable lender. (ie. dry rot)
If defects are discovered the valuer may decide that the property is not worth the asking price. In this case a lender will only lend up to the amount of the valuation with one of the following results, what are they?
The buyer makes a reduced offer
The buyer goes through with the transaction and makes up the difference in the price and the loan through other means.
The deal falls through
