Buying or selling a property is a major event for anyone. But if you're doing both at the same time, it can be very stressful and all-consuming, particularly if there are delays.
It is important to understand how the legal process of a linked sale and purchase are synchronised so that both can be completed on the same day.
The first thing to appreciate is, the legal process of a linked property sale and purchase is essentially no different to the process involved in either selling or buying a property. For that reason, we suggest you read about the legal process of selling a property and buying a property to understand what’s involved.
If you're buying and selling property, you will have the same solicitor (or licensed conveyancer) carrying out the conveyancing of both the sale and the purchase; and your solicitor will have two separate files - one for the sale; one for the purchase.
The challenge lies in synchronising the sale and the purchase conveyancing process so that exchange on both can take place at the same time and, of course, that completion can take place on the same day.
So what are the key issues with a sale and purchase?
With three parties involved (you, the seller and your buyer) - and more parties if there is a bigger chain - the timescales desired by the individual parties will probably vary.
For example, suppose the buyer at the bottom of the chain is renting and they do not want to pay more than another month's rent after next month. They will be aiming for a completion date within a matter of weeks. However, at the top of the chain there is a seller who is in no hurry to move and has not yet found somewhere to buy.
Or, a common situation today with massive court delays: the property at the top of the chain is empty because the previous owner has died and a grant of probate is required to sell the property. However, there's no sign of the grant of probate being issued by the probate court because of a backlog of applications. The risk here is that the buyer at the bottom decides to drop out.
The only solution in situations like these is to negotiate and try to come to some workable arrangement to prevent the chain collapsing. Your solicitor will be able to talk you through the possible options to avoid a big problem in the chain.
The key stage in a sale and purchase is ensuring everything in in place to exchange contracts on the same day. This means the pre-contract conveyancing for the sale and for the purchase must be completed so that your solicitor is ready to exchange on both transactions at the same time.
This means, of course, that the same completion date usually needs to be agreed with your buyer and your seller. If completion for the sale and the purchase does not take place on the same day, you could end up with two properties - or none at all.
That said, completion can be on different days if alternative arrangements have been made. A seller may agree to move into rented accommodation to avoid their buyer pulling out; or they might be willing to pay their buyer's rent for an additional month if completion is delayed for some reason - with a downward adjustment to the purchase price on completion.
This means you should maintain good communication with your buyer and seller (and the agents involved) so that if you need to agree matters such as this, it should be relatively smooth.
The issue of purchase deposits can be confusing. How they work in practice in the case of a linked sale and purchase perplexes many people and this is entirely understandable. A property buyer is required to pay a deposit to the seller on exchange of contracts (usually 10% of the purchase price). The deposit makes the contract legally binding.
So if you are selling and buying, how will this work in practice?
Suppose you’re selling for £325,000. The buyer will send your solicitor £32,500 on exchange.
You’re buying for £425,000. Your solicitor will already hold £32,500 from your buyer so you will only need to provide a balance of £10,000 to make up the deposit on your purchase to the required £42,500.
However, if you’re downsizing and the purchase price is £200,000 - you will not have to give your solicitor any additional cash for the deposit as you will have more than enough from your buyer.
Once a completion date is agreed between all the parties and your solicitor is ready to exchange contracts on both your sale and purchase, they will then be in close contact with your buyer's solicitor and with your seller's solicitor to arrange exchange on the same day.
Contracts are invariably exchanged by telephone in accordance with specific formula set down by the Law Society. In a synchronised sale and purchase, the other solicitors undertake to exchange later that day if your solicitor calls to do so.
This removes the risk of your solicitor exchanging on your sale, only then to discover they cannot exchange on your purchase.
After exchange has taken place, your solicitor then carries out the necessary pre-completion work. Your sale and purchase will then be completed on the agreed completion date.
If you have any questions about the sale and purchase process and how it will work in your own situation, your conveyancing solicitor will be able to explain things to you in more detail.
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