by Síne Enright
Q. Buying a house– what is involved from booking deposit to completion?
A. Buying a property is one of the biggest investments you will ever make. A very straightforward transaction can take at least 6 weeks to complete. However, that would be the exception rather than the rule and, as there are so many variables involved, it is impossible to say exactly how long it will take to complete your purchase. The following is a guide to the three main stages in a purchase from the time you place your booking deposit with the Estate Agent until the entire transaction is complete. Some of the main costs associated with purchasing a residential property are also outlined.
1. Before you sign the Contract
If you are buying through an Estate Agent remember that placing a booking deposit on a property does not mean that it is yours.
You do not have a binding agreement until the Contract has been signed by both the buyer and the seller and the entire deposit has been paid to the seller’s solicitor.
Once your offer has been accepted by the seller and you have placed your booking deposit, the Estate Agent will typically send a Sales Advice Note to your chosen solicitor, advising them of your intention to purchase the property. The seller’s solicitor will draft the Contract and send it in duplicate to your solicitor with a copy of the title documentation. The title documentation proves that the seller owns the property and therefore has a right to sell it.
Once your solicitor has received the Contract and title documentation, they will commence reading the Contract and “investigating” the title. Your solicitor will then consider what issues require further information, clarification or amendment before you sign the Contract and they will address these issues by raising “pre-contract enquiries” with the seller’s solicitor.
Always instruct your solicitor of your intended use of the property as it is possible that the title contains certain stipulations against certain usages. For instance, it would not be uncommon for a restrictive covenant to exist in the title to a property in a housing estate preventing the use of the property as a holiday home.
You should conduct your own due-diligence by retaining an Engineer to inspect the property and the boundaries and to carry out a planning search of the area. Your solicitor does not advise you on the physical state of the property and the principle of caveat emptor “buyer beware” applies here. The seller has absolutely no obligation to inform you of any physical defects in the property and you have no recourse against the seller if, after you purchase a property, you discover that the roof is close to falling in.
If you are purchasing a property as an investment with a number of other people, such as your siblings, it may be advisable to enter into a Co-ownership agreement prior to signing the Contract for Sale. A Co-ownership agreement can be drafted in such a way as to set out your intended shareholding in the property, your plans for maintaining the property, the division of rental income and it may also deal with the circumstance where one co-owner wants to opt out of the investment or sell their share in the property.
2. Signing the Contract
Once your solicitor is satisfied with the Contract, the title, the sellers’ solicitor’s replies to pre-Contract enquiries and with your Engineer’s survey, you are then ready to sign the Contract. The Contract is signed in duplicate and returned to the seller’s solicitor with your deposit. You are now bound to the terms of the Contract, but the seller is not! If you have paid a booking deposit to the Estate Agent, this amount will be deducted from the overall deposit, which is usually 10% of the purchase price.
If the seller is still interested in selling their property to you, they will sign the Contract, in duplicate, and return one-part to your solicitor. You now have a binding agreement. Furthermore, you now have beneficial interest in the property so it is advisable that you would see to it that the property is insured.
3. Closing the sale and registering you as owner
Your solicitor will raise Objections and Requisitions on Title. These are a standard set of queries pertaining to the title and to many other practical matters such as whether and how the property is serviced with water and drainage. These issues may have been addressed in the pre-Contract stage also, but raising them at this point legally binds the seller’s solicitors to the answers they give. Your solicitor will draft the appropriate Deed that transfers the legal interest in the property to you. The seller will sign the Deed and various other documents.
If you are availing of a loan from a lending institution, ensure that your life cover is in order. Not having your life cover in place is an unnecessary cause of delay in the process of drawing down funds. If you don’t meet the closing date, the seller is entitled to charge you interest (usually 8% of the purchase price) for delaying the completion of the transaction.
Once you have put your solicitor in funds to close the sale, they will transfer the balance of the purchase price to the seller’s solicitor. Your solicitor will also conduct last-minute Searches to ensure, amongst other things, that a Judgement has not been registered on the property or that the seller has not been declared bankrupt.
Once the sale is complete, (and subject to you putting your solicitor in funds for the the Stamp Duty and registration fees) your solicitor will then proceed with paying the Stamp Duty on the Deed of Transfer and making an application to register the property in your name with the Property Registration Authority. Depending upon the nature of the property and the type of title involved, this registration process can take
anything from 3 months to a number of years. In the meantime, although you are not officially registered as the owner of the property, you are the legal owner. If you are availing of a loan from a lending institution, your solicitor will register the Mortgage on your title.
When your registration is complete, your solicitor will store your title deeds in their safe. If you are availing of a loan from a lending institution, your solicitor will give the title deeds to your lending institution.
Your solicitor can provide you with precise details of the costs associated with your particular purchase however the main costs are as follows:-
1. Stamp Duty on Deed – 1% of the purchase price for residential property and 2% of the purchase price for non-residential. You are entitled to the lower rate of 1% for a house plus one acre. Any land in excess of one acre is stampable at 2%.
2. Property Registration Authority Fees – €400.00 – €800.00 to register the property in your name and €175.00 to register a Mortgage in favour of your lending institution, if applicable.
3. First Registration (if your title is a Registry of Deeds title) – €130.00 or €500.00, depending on the nature of the title.
Finally, now that you are a property owner, it is important that you make a Will to deal with how you want your property to be disposed of after you die.
Disclaimer – The information set out in this article does not constitute or contain legal advice. The author cannot guarantee that all information will be applicable to your situation or that it is, from time to time, accurate or complete. Both the author and the West Cork Times disclaim any liability in connection with any actions taken or not taken based on the content of this article.