I was asked by long-standing family friends to help them decide which offer to accept on the property they are selling. They put their two bedroom flat on the market for sale because they are expecting their second child and need to move up the property ladder into a larger home. They need to control the timing of the conveyancing transaction because they feel they have not found the house that they want to buy as this is primarily driven by the proximity to school for their first child to ensure that they are in the correct school catchment area.
They received two offers on the flat, one for the asking price and the other for slightly below the asking price. My friends called me to ask how they should consider the offers, and what my opinion was on which offer to accept. This blog post sets out the 7 tips that I advised my friends to consider when deciding which offer to accept. My friends asked me for my advice because, apart from being an experienced property solicitor I am also a property investor and someone who has moved home four times so far! So, here are my 7 tips.
- Is the Buyer a First Time Buyer or Second Home Mover?
The first question to find out is what is the buyer’s position? Is the buyer a first time buyer or a second home mover. This determines how long the conveyancing chain will be as clearly the longer the chain, the more complicated and lengthier the conveyancing transaction with more opportunities for the chain to break and therefore the transaction to go abortive. A first time buyer will usually have a notice period to serve on their landlord which is usually a month – this will naturally delay the time between exchange in completion because a first time buyer would want to ensure they have exhausted their notice period on their rental property before moving in to your property. This is usually because they do not wish to pay rent and mortgage for the same month.
If it is a second home mover, you should check whether their property is on the market and whether they have accepted an offer. Naturally, if a second home mover has not yet even marketed their property for sale then the transaction may well take some time, which in the case of my friend, works in their favour.
- Is the buyer a cash purchaser or dependent on a mortgage?
A cash purchaser usually means the transaction will move much more quickly because there would be no delay associated with the mortgage application process. A cash purchaser does not necessarily mean that they are the end of the chain as they could well be downsizing and in the process paying off their mortgage which is how they end up being a cash purchaser. A cash buyer can also be more flexible with their requirements and can be more forgiving on legal decisions whilst a mortgage lender would not so the buyer’s conveyancing lawyer would have more requirements to satisfy to a mortgage lender.
- Does the buyer already have an agreement in principle, sometimes known as a decision in principle from a mortgage lender?
If a buyer who is dependent on a mortgage does not yet have an agreement in principle from a mortgage lender, then the offer ought to be treated with some caution because until the buyer has had an agreement in principle from a mortgage lender, it is uncertain that the buyer will actually qualify for a mortgage in which case the offer may be weak. If you are using a traditional high street estate agent who are good at what they do, they will usually qualify the buyer and that usually means requesting a copy of the agreement in principle or decision in principle by their mortgage broker or if they have not yet seen or appointed a mortgage broker, most traditional high street estate agents would ask the buyer to meet their in-house mortgage broker in order to qualify them.
- Is any part of the chain in using an online agent?
Online estate agents usually do not communicate much or actively participate after an offer has been accepted. Most online estate agents are paid a fixed flat fee, usually upfront. Our experience is that once the initial marketing has been done, they are not involved in the conveyancing process a great deal, if at all. This lack of communication makes it somewhat difficult for the chain to remain intact and for progress to be made swiftly and coherently. (See our related blog post on why negotiating certain issues might be difficult when an online estate agent is involved in a conveyancing chain.)
- Is any part of the chain using a conveyancing factory?
I use the term “conveyancing factory” to refer to the cheap conveyancing firms who because they charge a very low fee for conveyancing will usually have to take on a higher volume of transactions in order to still make a profit. This higher volume of transactions usually means that the conveyancing firm is very much process driven and multiple people are involved in the transaction. This usually causes difficulties in respect of coherent and swift communication and fast progress of transactions. There are of course exceptions and I do not want to paint all such firms with a broad negative brush but in my view, the overall experience has not been pleasant with conveyancing factories.
- Does the buyer have imminent holiday plans?
It continues to surprise me how often buyers will go on holiday once their offer on a property has been accepted. In some instances, as soon as the buyer has instructed their conveyancing solicitor, they go away on holiday, before carrying out any of the initial client on boarding process with the solicitors. This includes providing “KYC” documentation and other information to their conveyancing solicitor. In some instances, I have known of buyers going away on an extended holiday lasting up to four weeks! This period of distance and lack of communication naturally causes delays to the transaction and may well affect your own plans. It is thus important to check whether your buyer has imminent holiday plans which could affect progress of your own home move!
- Is the offer conditional on anything?
We have sometimes seen that buyers make their offers conditional on something such as a lease extension or that white goods are included in the purchase price. Occasionally, buyers do not actually mention these conditions while making the offer preferring instead to mention them later. In some instances, we have seen buyers had just presumed that everybody understood that their offer was conditional but had failed to express say this when submitting their offer. It is important to ensure that you understand what those conditions are and how difficult they will be to satisfy, especially with regards to timing and potential costs.
An offer conditional on a lease extension especially is something to be quite wary of because the lease extension process can be quite long, arduous and costly. In that instance, it is important to identify whether the buyer’s offer also includes being responsible for the legal costs associated with the lease extension.
From your own experience, do you have anything to add to the above list? If yes, we’d love to hear from you.
Tariq Mubarak – rhw Solicitors llp