Buying and selling a home is already a complicated process. Pair that with complex jargon, and you have got yourself a massive challenge to overcome when attempting to purchase the perfect home. If you want to understand all these confusing terms to understand what exactly you can expect when buying a home, then you are in the right place.
We will guide you through the various terms that you might encounter in the real estate world, particularly in the conveyancing process. Not sure what conveyancing means, either? Do not worry. We will outline as many terms for you as possible!
A title is a document that indicates who the owners of a home are. As such, if you have the title to a specific property, you legally own that property. In many cases, you will encounter this document when you sign other documents, such as a contract.
When you buy a property, the title will be sent to the Land Registry so that ownership can be transferred to your name. If you are the seller, the title that was previously under your name will be transferred to whoever is buying the property from you.
Equity signifies the percentage of the home you own in terms of value. For instance, if the home you are buying costs £1,000,000, and you still owe £750,000 in terms of mortgages so far, you have £250,00 equity on your home.
A deposit is something you will encounter when you apply for a mortgage. This is the initial amount of money you need to pay on top of the mortgage to purchase a home. In terms of conveyancing, the deposit you pay will be approximately ten per cent of the home's total cost.
Note that you can lose this deposit if you leave the contract as a buyer. As a seller, you may be able to keep a deposit if the buyer leaves, as it will serve as remuneration for your time and effort.
Freehold is a term used for properties that you fully own, including the land and everything on it. When you own a freehold property, you fully own it until you sell it. You are free to do anything you want with the land and property, considering any rules and regulations.
A contract is a document that outlines the terms and conditions of a home purchase. It includes various information, such as the purchase date, the agreed price, and so on. The contract is legally binding, meaning that you are obligated to adhere to it.
If the agreement states that you are buying a property, then you are compelled to buy it. If the contract says that you are selling and that you have agreed to sell, then you will have no choice but to do so. Breaking this contract can lead to consequences, such as fees and legal action.
If you have been "gazumped," it means that, as a buyer, you have been dismissed for another buyer. This is generally the case when a seller accepts your initial offer, but someone else comes along and gives a better deal.
While this situation will usually lead to disappointment, it can also cost you financially, especially if you have already spent money just to make an offer.
To avoid being gazumped, you can make an agreement with the seller that they will remove listings for the property as soon as you make an offer. If they are unwilling, look somewhere else.
The process of conveyancing is the legal act of transferring ownership from one individual to another. This means that if you are buying a home, the process of moving that title to your name, and every other activity that needs to be completed to make it happen, is part of conveyancing.
In many cases, you will work with a conveyancer to help make the process easy, as they can deal with all the forms and requirements to complete the purchase. Note that this also applies when you sell a home, as a conveyancer can also assist you in doing so.
Disbursements represent the money you pay to whoever helped you in the conveyancing process. This is to cover the various costs of looking for properties to purchase or searching for interested buyers, along with completing other tasks for you. In many cases, the disbursement will be an up-front fee you pay for such services.
9. Completion date
The completion date is the date when you, as a buyer, finally transfer the money and get the keys, meaning you own the home. For a seller, on the other hand, it is the date where they receive the money and relinquish the keys.
In short, the completion date is the date when the exchange officially takes place. This also requires that both parties, the seller and the buyer, including everyone else involved, are in agreement when the exchange happens.
10. Stamp duty land tax
The stamp duty land tax is the rate imposed by the government for sales of over £125,000. The higher the property's value, the higher the rate. For example, properties with a sales price of £125,001 to £250,000 will be subject to a two per cent tax. For properties over £1,500,000, it will be twelve per cent.
If you are a first-time buyer, you can opt for stamp duty tax relief. This will waive the tax for the first £300,000 as long as the home costs £500,000 or less.
11. Redemption statement
A redemption statement is a document provided to you by a mortgage lender if you want to cancel or switch mortgages. In this document, it will detail how much you still owe. It will also outline the penalties that you have incurred, known as redemption fees, which you will have to pay.
There are still plenty of terms you may encounter that we have not discussed so far. Regardless, we hope you have gained a better understanding of the conveyance process, allowing you a better glimpse into what you are getting into when buying or selling a property.
We highly recommend that you come up with a reference of your own, listing out as many terms used in the conveyance process. That way, whenever you run into a term you do not understand, you can quickly look up what it means to get you back in the know.
That said, we wish you all the best in the conveyancing process, and if you encounter trouble with any step, do not hesitate to contact a professional for help. They will be more than happy to assist you in your home purchasing or selling efforts, ensuring success for you and all of the other parties.
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