5. The Home Buying Process - D - G

Question 1

What is the role of the lender in the buying or selling process? Give some examples

Answer 1

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)

Question 2

What are the roles of the surveyor/valuer?

Answer 2

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

Question 3

What is the role of the Mortgage Adviser in relation to valuation?

Answer 3

Point out limitations of the basic valuation and the advantages of a more detailed report.

Question 4

In the case of a self-build, what must be done?

Answer 4

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

Question 5

What must a solicitor confirm before a property can be sold?

Answer 5

The seller is entitled to sell

The property offered is exactly what the purchaser believes it to be

Question 6

How is an investigation of title generally carried out/

Answer 6

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

Question 7

What does land registry confirm?

Answer 7

Matters relating to the property - charges, burdens etc. This guarantees that the particulars registered are correct.

Question 8

In the case of unregistered land the solicitor must establish a root of title, how do they do this?

Answer 8

Search the history of the property over the last 15 years

Question 9

What deposit is generally asked for by solicitors as an indication of good faith from the buyer?

Answer 9

10%

Question 10

What must a solicitor ensure before an exchange of contracts is permitted?

Answer 10

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

Question 11

When would a solicitor advise the buyer to put buildings insurance in place?

Answer 11

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.

Question 12

It is easier to be inadvertently bound to a purchase in Scotland, why is this?

Answer 12

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.

Question 13

In a conditional offer in Scotland, when is the contract formed?

Answer 13

Once conditions are accepted by the buyer - this means there may be a series of offers and counter offers involved.

Question 14

What will a purchaser’s solicitor ensure before they draft the offer to purchase? (Scotland)

Answer 14

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.

Question 15

Builders often have their own pro forma documentation containing conditions of the sale, what must a purchaser receive before signing?

Answer 15

Advice from a solicitor

Question 16

A builder may permit a specified number of days to reserve the property, why is this?

Answer 16

To allow the purchaser to put finance in place for the purchase

Question 17

What is a Legal charge / Standard Security?

Answer 17

Lesser used terms for a mortgage deed

Question 18

Other than the mortgage deed, what else may a solicitor have to draw up?

Answer 18

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)

Question 19

What financial aspects does a solicitor have to deal with?

Answer 19

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

Question 20

Who does the buyers solicitor also have a duty to advise?

Answer 20

The lender

Question 21

What are the 5 main property defects?

Answer 21

Dry Rot

Wet Rot

Subsidence and heave

Damp

Electrical Defects

Question 22

What is dry rot?

Answer 22

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.

Question 23

What is wet rot?

Answer 23

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

Question 24

What is subsidence and heave?

Answer 24

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.

Question 25

What are the three main causes of damp and how do they arise?

Answer 25

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.

Question 26

What is a valuer likely to do if they believe wiring needs replacing?

Answer 26

Recommend a retention to the lender.

Question 27

If defects are identified, what are the three options a lender has?

Answer 27

Accept - Nothing required

Decline - Problems are too severe for the property to serve as adequate security

Conditional acceptance - An undertaking/retention

Question 28

What is an undertaking?

Answer 28

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.

Question 29

What is a retention?

Answer 29

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)

Question 30

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?

Answer 30

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