Buying a house is one of the biggest financial decisions that you will make in your life. It is a lengthy and complicated business, which while exciting is often fraught with stress and worry.
It is important to note that there are fundamental differences between the Scottish system for house sale and purchase and the system in England and Wales. As a result, an offer made in Scotland becomes legally binding at an earlier stage and irrespective of any subsequent change in circumstances of the buyer or the property being purchased.
It is important to have a good understanding of the process as it will help you to avoid some of the most common hazards of home-buying.
Buying a property in Scotland
How the Scottish property process works and what you will need to pay for along the way.
Get a mortgage ‘in principle’
Before you can put in a bid on a property, you need a mortgage lender to confirm that it is prepared to lend you money. This is called a mortgage ‘in principle’. Without this, your offer won’t be taken seriously.
Properties are marketed with either a fixed price or offers over, which is the lowest price the seller will accept
How much can you afford to borrow?
Be careful not to overstretch yourself. Remember there are many other expenses you will need to cover, including mortgage fees, legal fees and, on properties costing more than £145,000, Land and Buildings Transaction Tax.
Once you have agreed a mortgage ‘in principle’ you may have to pay a booking fee or other fee to reserve it. Typical cost: £99-£250.
Find a solicitor
You’ll need a solicitor before you can make an offer on a property. Solicitors are responsible for putting in the offer, negotiating and checking the contract as well as organising the transfer of the Title and Money.
When you’ve found a property you want to buy, your solicitor will register a ‘note of interest’ with the seller’s agent. This shows that you are interested in the property and want to be kept advised of developments such as the fixing of a closing date to submit offers.
Submitting searches
Your solicitor will undertake searches in the property and personal registers to ensure that there is nothing which might prevent the seller from being able to sell the property. The solicitor will also check with the local authority to see if there are any planning issues that might affect the value of your property and whether any roads adjacent to the property have been adopted by the local authority. Typical cost: £250-£300.
Home Report and survey
Sellers, prior to marketing the property for sale, have to arrange a Home Report to show to buyers interested in their property. This must include:
- Survey – an assessment by a qualified surveyor from the Royal Institution of Chartered Surveyors (RICS) pointing out the condition of the property, where repairs are needed and a valuation of the property.
- Energy Performance Certificate (EPC) – this reveals how energy efficient the property is and where improvements could be made
- Property Questionnaire – sellers have to provide an accurate account of the property including its Council Tax band, any Local Authority notices served on it, alterations made, parking, any history of flooding as well as factoring in arrangements covering any repair and maintenance.
Your mortgage valuation report:-Once you have a mortgage in principle, your lender will arrange for a mortgage valuation to make sure the property you’re buying is worth the price you’re paying. Typical cost: £150-£1,500
Surveys: If you decide to obtain your own, there are three types:
- Home condition survey – the cheapest and most basic survey. Typical cost: £250.
- Homebuyer’s report – a more detailed survey looking thoroughly inside and outside a property. It also includes a valuation. Typical cost: £400+.
- Building or structural survey – the most comprehensive survey suitable for an older building or one of non-standard construction Typical cost: £600+.
Making an offer
Once you have the survey results, you need to decide how much to offer.
Your solicitor will do this in a formal letter. If there are several competing bids, the seller’s solicitor will open them at the same time on the closing date and ring your solicitor to tell you if you’ve been successful or not.
If your offer is accepted – the seller’s solicitor issues a qualified acceptance, which means that the property will be yours if contract details can be worked out. The solicitor will also hand over information about the property such as the title deeds and planning papers.
Agreeing the contract
Once all the contract details have been agreed, the two solicitors exchange letters. These letters are known as ‘conclusion of missives’. Both parties are now legally committed to the sale.
Title burdens:- Your solicitor will check the title deeds and discuss with you the ‘title burdens’ – conditions attached to owning the property ranging from where rubbish bins can be put to more serious restrictions on how the property can be used and altered. The seller then signs the transfer of the title deeds, known as the ‘disposition’.
Contact your lender:- Your solicitor should contact your mortgage lender and let them know that the purchase is going ahead along with the proposed date of entry. This will allow your lender to issue their loan and security instructions to their nominated solicitor.
The arrangement fee:- In order to set up the mortgage there is often a fee – usually referred to as an arrangement fee. Typical cost: £0-£2,000.
Completion and final steps
After your offer has been accepted, the sale will be completed on the date of entry agreed with the seller.
The seller’s solicitor will ask your lender for the remaining money owed in preparation for the date of entry.
The Costs associated when buying a home :-(approx.)
- Deposit 5 to 20%
- Land and Buildings Transaction Tax paid on home over £125 001 ( stamp duty)
- The interest on a mortgage Loan
- Valuation fee £150 to £1500
- Removal costs £300 to £600
- Local Searches £250 to £300
- Surveyors fees £250 to £600
- Legal fees £500 to £1500
- Estate agents’ fees 1% to 3% of sale price + 20% VAT
- Mortgage booking fee £99 to £250
- Mortgage arrangement fee up to £2000
- Mortgage valuation fee £150
What Stamp Duty rate will I have to pay on property in Scotland?
In Scotland a Land & Buildings Transaction Tax is payable on property purchase. Like the system in the rest of the UK, the rate payable leaps up at a set of thresholds – but, you only pay the proportion of the purchase price that’s actually above the thresholds at the higher rate. However, the bandings are different in Scotland as shown in the table below.
What Land & Buildings Transaction Tax rate will I pay?
| PURCHASE PRICE | Land & Buildings Transaction Tax Rate ON THAT PORTION OF THE PURCHASE PRICE |
|---|---|
| Up to £145,000 | 0% |
| £145,000.01 – £250,000 | 2% |
| £250,000.01 – £325,000 | 5% |
| £325,000.01 – £750,000 | 10% |
| £750,000.01 + | 12% |
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