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So you are thinking about buying a home, you may be a first time buyer or you may be in the market trading up to a larger home. Whatever step of the property ladder you are on there are a few simple steps you will need to take now.
We have prepared a general guide to buying property in Ireland, and we hope you find our overview interesting and helpful.
How much can I afford?
The first step in buying your home is figuring out how much you can afford. Your first port of call should be to contact a mortgage advisor. They will be able to indicate how much you can borrow based on your earnings, your current financial commitments and any other savings you may have.
When successful with a mortgage application you will be given “Approval in Principle”. This is how much the lending institution is prepared to give you (in principle – i.e. terms and conditions apply). You now know how much you can afford but you should take into account the costs of buying a home before you go house hunting.
Cost of buying a home:
You should be aware that there are many costs involved in buying a home other than the obvious.
Stamp Duty has been reduced in Budget 2011 to 1% on all transactions up to 1 million euros, and 2% on all transactions over 1 million euros.
There is no standard charge for conveyancing (the term for the legal process of buying and selling property) but you should be prepared to set aside around 1% of the property price for your solicitor. Recently, due to the high price of property, some solicitors have started offering flat rate conveyancy. It’s worth shopping around to get a deal that suits you best.
Your lending institution will probably require a valuation report of the property you intend to purchase. This is needed as proof that the property you are buying is worth the money you are paying for it (This information is equally valuable to you). A valuation should cost no more than €150 + VAT.
Most lending institutions will require you to take home insurance on your property in case of fire or other damage. Further, you may also be required to have a life assurance policy with mortgage protection.
The best way of finding property is on Ireland’s largest property websites, myhome.ie and daft.ie, all leading Estate Agencies as O’Gorman will have their properties on view there, it’s also a good idea to drive around local areas that you would like to live, to see “For Sale” signs.
When you find a home that interests you, you need to make an offer. There are two methods by which property is commonly sold: private-treaty & public auction.
If a property is for sale by private treaty. You simply make a verbal offer to the seller or estate agent. If the seller is happy with your offer you get the property. If there are a number of people making offers for the same property it is up to the seller to decide who wins – this is usually the person with the highest offer. The benefit to the purchaser in a private-treaty sale is that the offer made is not legally binding and you can withdraw your offer (you may loose any deposit made). If your offer is accepted, you can then finalise the details with your lender who when satisfied they will give you a Letter of Offer. This letter is a formal agreement to lend you a particular amount.
In an auction the person with the highest bid wins. A bid at an auction is legally binding and you are unable to withdraw your offer. Generally you are required to pay your booking deposit immediately after a successful bid. Due to the legally binding nature of an auction it is necessary to have a Letter of Offer (i.e. full mortgage approval) from your lender before bidding.
Once you have decided to proceed with the purchase of the house and have been approved, at least in principle, for the loan, you should pay a booking deposit to O’Gorman if the case is that we are selling the property. You will also need to inform your Solicitor that you have paid your deposit and to expect confirmation details on the transaction from the Estate Agent. This deposit is refundable up to the point where contracts are signed. When O’Gorman as Estate Agent receives the booking deposit they issue a sale details to all parties.
This is prepared by O’Gorman and issued to you, your Solicitor and the Vendor’s Solicitor. It contains the price, conditions of sale, estimated closing date, names and addresses of all parties.
The seller’s Solicitor on receipt of the Sale Details, will issue the Contracts. The Contracts are sent in duplicate together with a copy of the Title Deeds to your Solicitor.
Once your Bank/Building Society has formally approved your loan in writing on the basis of the price of the house and information furnished by you, a formal loan pack is issued. Normally a Letter of Offer setting out the main details of the loan is issued to you and the Loan Pack comprising Mortgage Documentation, Acceptance of Letter of Offer and Assignment etc., is issued to your Solicitor. When your Solicitor has checked the Loan Pack and discussed key terms with you, various documents are signed and completed to enable the Bank/Building Society to proceed. This offer will include all the particulars of the mortgage such as rates and repayment term.
When your Solicitor has checked the Contracts you will be required to visit your solicitor to sign the Contracts and pay the Contract Deposit (10% of the purchase price less booking deposit already paid). With a new house you may not be obliged to pay a full 10%, instead a reduced payment (called a stage payment) is accepted. The amount of the stage payment is specified by O’Gorman at the outset. This should happen within 3 weeks of paying deposit. Your solicitor returns the Contracts and Building Agreements in duplicate signed by you together with the Contract Deposit/Stage Payment to the Seller’s Solicitor.
The Vendor’s Solicitor returns one copy of the Contract and Building Agreement. This creates a binding agreement between all parties, subject to the terms and conditions contained in the Contract.
All lenders require you and your partner to have Life Insurance, or more commonly known as Mortgage Protection. If either you or your partner dies before the mortgage has been repaid, insurance is designed to cover the mortgage amount outstanding, at the very minimum, depending on the type of life cover selected. Home Insurance is also highly advisable and is required by all lending institutions to insure your home and property against e.g fire, theft. This step often takes longer than many buyers expect so allocate time to making it happen.
On exchange of Contracts, your Solicitor returns the loan acceptance and ancillary documents to your Bank/Building Society.
Your Solicitor raises Requisitions (lengthy Questionnaire) on Title and these are sent to the Vendor’s Solicitor together with a draft Purchase Deed. The Vendor’s Solicitor replies in writing to the Requisitions received from your Solicitor and approves the Deed.
When the house is finished the Builder sends you and your Solicitor a “Completion Notice”. This is an important document and sets the meter running against you within which time period you must finalise completion. Immediately on receipt of the Completion Notice you must “snag” the house. This is a formal inspection by you or your inspector to establish that the house has been finalised. You draw up a list of any unfinished works. This list, known as a “snag list”, is prepared in duplicate and one copy retained by you and the other handed to the Site Foreman. You should contact the Site Foreman within a number of days to check if all the items of the “snag list” have been completed and that exercise should be repeated until all matters have been dealt with. Immediately the house has been completed to your satisfaction you should inform your Solicitor.
Once all queries raises and the Requisitions have been satisfied and all matters are dealt with a closing date and time is finalized to suit all parties. You should check with your Bank/Building Society that everything is in order to allow the loan cheque issue. A common cause of delay is that the Life Insurance or Fire Insurance has not been taken out in time. Your Solicitor will prepare a Statement setting out the balance required to complete the purchase and costs. This is sent to you in advance of the completion in order that you can deliver the balance of funds to your Solicitor (see 15 below). This takes into account any extras or allowances agreed by you and the Vendor.
This is received in advance of the completion date.
These are delivered by you, by Bank Draft made payable to your Solicitor in advance of the completion date. Normally the loan cheque and balance of funds are received the day before the completion date.
The completion is the formal completion of the purchase. This takes place at the Vendor’s Solicitors offices. You do not need to attend as your Solicitor will represent you. Your Solicitor checks the Vendor’s Title and when he/she receives good Title with fully signed documents hands over the balance of the purchase price. At that keys are handed over to your Solicitor. For a second hand purchase for a new house the Site Foreman is contacted by telephone following completion of the transaction and informed to release the keys to you. Usually you collect the keys from the Site Foreman.
Your Solicitor, on completion of registration, returns your Title Deeds, to your Bank/Building Society together with a Certificate confirming that you have acquired a good marketable Title. Usually, you will be notified that registration has completed and the Title Deeds have been returned. At this stage your Solicitor closes off your file.
After the sale is completed you must sign the Purchase Deed. This document is only handed over to your Solicitor at the closing and is not available for signature by you prior thereto. You must sign immediately following the closing as there are strict time limits for stamp duty.
Following signing by you of the Purchase Deed your Solicitor will proceed to stamp the Purchase Deed and Mortgages and then register same in the Land Registry/Registry of Deeds. Registration can take months, if not years, depending on the County and type of property involved.
At this stage you are registered as owner of the house in either the Land Registry or Registry of Deeds. Legal ownership to the property passes to you on completion of the purchase but registration may take a minimum of 6 months. This delay does not in any way undermine the fact that you are the legal and beneficial owner of the property. Indeed you can sell a property even though registration has not been finalised in the Land Registry or Registry of Deeds.
If you are thinking of selling your property in Wicklow or South Dublin area in the near future and would like a guide on how much it might be worth, please contact us. One of our property experts will be in touch to arrange the complimentary valuation. Please note, you are under no obligation at this time.