It's a well-known fact that being a homeowner is a sign of financial security. Consequently, being a homeowner is also a responsibility because you need to protect your investment. However, before you can purchase a house, you'll need to go through a long process full of paperwork and payments. Among these steps, conveyancing is one of the more important ones.
Conveyancing is the transfer of ownership from one person or entity to another. In the case of homeownership, money is exchanged to transfer the property's deed from the seller to the buyer. A solicitor will help the buyer, and they also need to be paid for their services. Not many people, particularly first-time homebuyers, are aware of how their payment works, so we'll discuss the details in this article.
How Much Should a Solicitor Be Paid?
Usually, solicitors' fees for conveyancing depend on certain factors. These include:
The potential house sale's value
Charging by the hour
Solicitor's fees also range from £300 to £5,000, regardless of whether you're selling privately, working with a high street property agent, or an online agent. The exact amount of work will be exerted, meaning you can't take shortcuts to lower the bill. The amount should also be enough to cover all the legal fees involved.
Is a Solicitor Necessary?
While you can sell a house on your own, the ideal choice is to hire the services of a solicitor. While it may be tempting to save money by not hiring a solicitor, you shouldn't simply because it will only lead to later frustrations.
When you're selling a house on your own, you will be responsible for paying the rest of the transaction, such as the stamp duty and other fees. The slightest mistake can also jeopardise the entire transaction so that you might second-guess everything. For example, you probably won't know the right price for your house, even if you have a set budget. You also probably won't know the standard procedures in the industry, so it will be hard to negotiate.
There's also the matter of additional fees, such as ID checks and Land Registry charges, which can be quite costly to pay. When you factor in all these costs, you might be more likely to spend more than you intended to.
What’s Included When You Pay for Solicitor Fees?
When you pay for solicitor fees, you're paying for the following:
Organising payments (land registry, stamp duty, and the transfer for buying the property)
Planning permission and restrictions
Environmental factor research
These fees are necessary because you need to secure your house by checking the title and ensuring there are no outstanding mortgages. You'll also need to ensure it complies with all the legal requirements, including obtaining planning permission if necessary. This is a one-time payment, and you don't need to pay for these services in the future.
When you hire a conveyancer, you can take advantage of the additional services. Conveyancers will check the documents you have and give suggestions on improving the deal. They'll also arrange the payments and oversee the entire transaction on your behalf.
When Should the Legal Fees Be Paid?
The fees should be paid as soon as each stage is completed. For example, you'll need to pay the solicitors a small amount for their work in the early stages, like checking the title and completing the documents. The rest of the payment should be made when the conveyancing is finished.
If you're buying the house through the help of a mortgage, the lender will require you to pay a fee as a condition of the mortgage. You'll have to pay this fee as a condition of the mortgage.
Other Fees Involved When Buying a House
Beyond the initial conveyancing fees, you also need to pay for other expenses. These include:
Mortgage Broker Fees
This is a fee charged by a mortgage broker to help you find a loan. If you're going to get a mortgage, you'll need a mortgage broker to help you go through the application process. The fee for a mortgage broker is usually 0.35%, though it also depends on how much you're planning to borrow.
This is the fee charged by a mortgage broker, and it's usually paid when you first meet. The broker will pursue your financial matters and help you get a mortgage from this point on. The fee could range from £500 to £2,000 depending on the amount of money you'll borrow.
The deposit is the money you'll need to pay to secure the mortgage. This is sometimes called an "evidence of funds", and it's usually equivalent to 10% of the house's value. The money should be directly paid to the seller or their property agent.
This is a fee charged by a property appraiser. The appraiser will review the property and provide a valuation of its value. This is an essential document for insurance purposes, and the fee is usually £400.
CHAPS Fee (TT Fee or Telegraphic Transfer Fee)
Also known as the telegraphic transfer fee, this fee is charged by the home buyer's solicitor at a rate of between £15 - £45. This fee is charged when the solicitor sends the money to the seller's solicitor.
If you're buying a house in England and Wales, the Stamp Duty should be paid to the HMRC. The Stamp Duty is 0% for properties priced at less than £125,000 but is 5% for properties priced at £125,001 to £250,000. The Stamp Duty increases to 10% for properties priced at £250,001 to £925,000 and reaches 12% for properties above £925,000.
Why Paying for Legal Fees Is Necessary
For first-time homebuyers, it can be challenging to get a mortgage. While most lenders require you to have a deposit of 10% or more, some will only accept a deposit of 5%. If you don't have a big deposit, you'll have less control over the house you can buy. This can cause your home buying experience more stressful because you'll have to settle for something less ideal.
When you hire a solicitor, you don't need to worry about this. A solicitor will make sure you're taking advantage of the best mortgage deals and help you transfer the house's title. This can mitigate the risks involved in the middle of the transaction.
What If the Deal Doesn’t Push Through?
The legal fees should be returned if the seller intends to back out of the deal. If, however, the buyer backs out, only a proportion of the legal fees will be refunded. In the case of a mutual contract, the solicitor must still need to fulfil their part of the contract.
However, if you feel like the solicitor is unwilling to return your money, you can file a complaint with the Legal Ombudsman. This is a government body that will help resolve disputes with solicitors. It also provides a scheme to protect homebuyers from solicitors who don't follow through.
Having a solicitor when buying a house is necessary, especially if you're a first-time homebuyer. It will save you from the hassle of running around to pay fees, and you'll also be able to secure the best mortgage deals. Just remember to work with a competent solicitor and one that has a good reputation for ensuring that you'll have little to no problems.
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