Before you exchange the contracts during a real estate transaction, both you and the seller can still get out of the deal without incurring serious legal consequences. That is why you need to perform proper due diligence on the contract of sale before you complete and exchange it to finalise the property purchase. Here are some critical questions that you need to ask before performing the exchange:
Do I need to carry out a survey?
The main purpose of the property survey is to assess the physical state of the property and highlight its main defects. There are plenty of surveys that you can perform on a property. You can speak to a qualified property surveyor and ask them to recommend for you the most appropriate options. In case you are buying your property with a mortgage, the lender will order a property survey in order to ascertain the value of their property and cover their backs. A word of advice is to not rely on the seller’s survey as it tends to be a bit “conservative”. A good approach is to hire an expert to carry out a survey and highlight the physical condition of the property you are planning to purchase.
Are the searches complete?
Before buying a property, you need to hire a conveyancing lawyer or solicitor to carry out a number of property searches and inquiries. Do not exchange the contracts before the searches are complete.
Conveyancing searches provide critical information about the property that can help you make prudent decisions such as whether it is in the way of some planned highway or whether it has been served with any notices in the past. Some of the areas covered by conveyancing searches include the following:
- The environment
- Past plumbing records/history
- Health inspections on the property
- Building information
- Rate searches etc
Do you have your mortgage offer in writing?
This is also an important consideration to keep in mind before an exchange of contracts. Make sure you have the mortgage offer from the lender in writing as this will serve as a guarantee during the transactions. This typically takes time so make sure you contact your lender and see how your application is progressing and how soon you can get the written offer. Usually, once you have a valuation, you should be able to get an offer within a few days if there are no outstanding documents or issues.
Do you have funds for your mortgage deposit?
It is inconceivable that anyone would go into a real estate transaction without funds for your mortgage deposit. Make sure you have sufficient funds to cover other fees involved in the real estate transaction.
What are the terms and conditions?
Every transaction and exchange of contracts includes numerous terms and conditions. Before the exchange of the contract, talk to a lawyer or solicitor to evaluate the terms and conditions and advise and explain any terms or conditions that you may not understand in the contract.
Where is my boundary?
The precise boundary lines of the property may not be clearly delineated and the plans that you will get from the land registry may not necessarily be legally binding. Because of this, you need to take the extra initiative to determine the exact delineation of your property boundary. Take the plan on the land registry and compare it against the boundary “on the ground” to ensure that there is no discrepancy. Alternatively, you may hire a professional surveyor to help you determine the exact position of your boundary.
When should I start paying for the building Insurance?
Because the buyer is liable for the risk, you should start paying the building insurance as soon as the exchange of contract has happened. This will insure that the insurance will cover your building in case damage occurs between the contract exchange and the completion.