Before making an offer
It’s tempting to start house hunting as soon as you decide you want to move or buy, but it’s wise to have a mortgage offer in place before you do – and if you’re selling, know what your home is likely to sell for. This means you’ll have a clearer idea of what you could borrow, so that you can search for properties in the price range that is appropriate to you.
It’s also a good idea to decide on which solicitor you want to act for you when it comes to the purchase. Offers are generally made through a solicitor so when you’ve found the right property you want to be ready.
Most homes are marketed at ‘fixed price’ or ‘offers over’. Occasionally, they will be inviting ‘offers in the region of…’ (OIRO). Fixed price offers are just that. In theory, if you offer the fixed price the property is yours. Offers over, on the other hand, means the price is the lowest the seller may accept. You are likely to have to offer more than that price if you hope to secure the property.
Often, ‘offers over’ prices will start below the true value of the home to generate interest. Once you’ve found a property you’re interested in, you need to instruct your solicitor to make a ‘note of interest’. This means the seller’s solicitor will advise you of the ‘closing date’.
The closing date
The closing date is set when the seller and their solicitor feel they have received enough notes of interest. This is typically three or more. If a property has received a great deal of interest from potential buyers, there may be many more notes of interest.
If you note interest in a property, it doesn’t mean that you have to follow through and make an offer. It simply means you will be informed of the closing date and can make a decision on whether or not to put in a bid. Typically, offers must be received by 12 noon on the closing date.
Offers are submitted by way of a sealed bid. This means you won’t know what other prospective parties are offering. All the envelopes are opened at the same time when the closing date deadline has passed and the solicitor will contact the seller and talk through the offers that have been received.
This is the nerve-wracking bit – you will need to wait for a phone call from your solicitor letting you know whether or not your offer was successful.
Deciding what to offer
The number of notes of interest will give you some idea of how popular the property is. If a property has several notes of interest, it follows that people are likely to bid substantially over the ‘offers over’ price. However, sometimes this is not the case. Occasionally, you can submit a moderate bid and be successful.
It’s tempting to put in a bid way above the offers over price in the hope of seeing off other buyers and securing the property, but unless you have surplus funds up your sleeve, it’s not always wise.
Remember, if your offer does not match your lender’s valuation you will be required to fund the difference. The rule of thumb is to bid what you feel the property is worth to you, but make sure it’s a sum you can afford.
Home reports and surveys
Sellers of properties in Scotland need to provide a Home Report for buyers. The Home Report includes a basic survey including a valuation, an Energy Performance Certificate (EPC) indicating how energy efficient the property is, plus a Property Questionnaire.
The Property Questionnaire is completed by the seller and should be an accurate account of details like the Council Tax band, any alterations, any Local Authority notices served and details of any previous flooding, amongst other things.
As above, the Home Report features a valuation. You need to remember that your lender will want to carry out their own valuation, which may not necessarily tally with the figure in the Home Report.
In addition to the Home Report, you may choose to have your own buildings survey done before you make an offer. There are both pros and cons to this. More information can be found in our article ‘Understanding surveys’.
As well as ensuring the property is sound or highlighting any issues, it will give you an additional valuation figure to consider, (which may or may not be in line with the Home Report’s valuation). It also means that when you make your offer, it isn’t ‘subject to survey’ which could make your offer more attractive than, say, a slightly higher offer that has a ‘subject to survey’ condition attached.
The downside is that if you are outbid and your offer rejected, you have paid for a survey for nothing. This can be costly if you bid for several properties and lose all of them. For this reason, many people rely on the Home Report and submit their offer ‘subject to survey.’
A binding contract
If you make an offer on a property and your offer is accepted, your solicitor will receive a written acceptance. This detailed letter will list a number of points concerning the property. Your solicitor will discuss these with you at length.
Once all of the details have been agreed in writing, a binding contract called concluded missives will have been formed. At this point you will be bound by the terms of the contract, even though you haven’t signed anything. Then new title deeds will be drawn up to transfer ownership of the property from the seller to you in order to go to completion.
Case study: a seller’s story
“When selling our last house, our solicitor had received five notes of interest. So we decided to go to a closing date. One couple had viewed the house three times and were very enthusiastic. They had brought along both sets of parents to see it and even visited the day before the closing date to take measurements for curtains. They told us how they were keeping everything crossed and hoped that their offer would be accepted. The next day, the deadline passed and our solicitor rang. We were amazed to discover the couple had decided not to put in an offer after all! Out of five notes of interest, we received two offers. One was a couple of thousand over the price, while the second was substantially above and the buyer had nothing to sell. We accepted the higher offer. It gave us the financial leeway to put in a generous offer on our next home, which we managed to secure. The offers over system can be great if you’re selling, but quite stressful if you’re buying!”
Mrs R. McFarland, Edinburgh
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The material contained in this article is intended for information purposes only and not as advice.
You should obtain professional legal or other advice if you are unsure about the effect on you of any matter in this article.
Published: 26 January 2018