Agreeing a purchase is just the start of the house buying process and for many – especially those who are taking a first step onto the property ladder – you may encounter costs you were not expecting.
To ensure there are no unwelcome surprises, I’ve prepared the following overview of expenses you need to consider when budgeting for moving house.
Solicitors’ rules state that fees for conveyancing work should be fair and reasonable, taking into account the circumstances of each case i.e. the complexity of the matter, time spent and value of the property involved.
Most solicitors are able to provide a pretty accurate estimate of their costs, which will include the VAT charged on their fees and any other standard items, such as Land Registry charges, searches and stamp duty.
Stamp duty is the tax payable on properties worth £125,000 or more and is charged in bands of between 2% and 12% of the purchase price. (In all cases, the first £125,000 is tax free.)
The Land Registry fee is also related to the property’s purchase price. A house valued between £100,000 and £200,000 will incur a charge of £90 and from £200,000 to £500,000 the fee rises to £135.
Your solicitor will want to carry out a number of searches with the local council, drainage and water authorities and in some cases the coal board. These are essential to establish the property is not at risk of anything that could affect a future sale or its marketability.
A house is a major, if not the most important, investment you will make in your life and we need to carry out thorough investigations to be in a position to advise you how best to proceed with the purchase. The cost of searches will vary depending on the location, as they are set by the relevant authorities, but are normally in the region of £200 to £300.
If there is a possibility of flooding, your solicitor may also recommend a further search. Don’t assume because the property is at the top of a hill or on the 20th floor of an apartment block it is not at risk. Flooding can occur due to ground saturation as well as a direct consequence of overflowing rivers and lakes.
Although we are not qualified to advise directly on flood risk, the search we undertake provides an opinion on the likeliness of the property being affected. If this is a possibility, your solicitor will provide you with further information at the early stages of the transaction.
On the day of completion, you may be charged for the telegraphic transfer of money to the vendor’s solicitor, who will no doubt need to repay the client’s mortgage or purchase another property.
If you are buying a house that is leasehold, you may have additional costs in respect of any advance payments the seller has made for ground rent or a service charge. These will be included on your solicitor’s final statement.
After giving an estimate of the legal charges, we often ask for a contribution at the outset, particularly towards the searches. You will be expected to settle the balance on or before completion so the stamp duty can be paid to the Inland Revenue and the property’s sale recorded with the Land Registry.
Finally, those of you selling a house as well, will be pleased to know this is generally cheaper, as there is often less work to do and limited fixed costs.