Buying and selling on the same day? That sounds stressful. Yes it certainly can be, so why do so many people do it?
Anyone who needs to sell to buy will often find themselves doing everything on the same day, usually a Friday. Why?
n To try to save money;
n They don’t work at the weekend so want this time to unpack;
n They don’t want to have to pay for alternative accommodation whilst waiting for their new house to complete;
n Simply because they can!
Clients like the idea of packing up, selling the current house, collecting the keys, buying the takeaway and relaxing with a glass of something nice in their new abode, blissfully unaware of what could go wrong! There are a number of factors on the day outwith our control. Unexpected things can happen and clients are often naively unaware of the potential pitfalls, relying on other people moving out, funds, etc.
Undoubtedly the most common question from a buyer is ‘what time will we get our new keys?’ Solicitors are unable to give a specific time, as it’s entirely reliant on getting your sale completed first and the money in before you can settle the purchase. The moving around of money can be tricky and involves all parties transferring money seamlessly. Sometimes people can be found sitting or circling the block in a removal van.
Mortgage funds are requested and come in a few days prior to completion date so they are ready to be handed over as early as possible on the actual date. Interest is charged from when the solicitor receives the funds – buyers can often be unaware of this. If people are “porting” a product then it can be challenging if funds are coming in to be ready for a purchase, as lenders then have to work out whether they need to charge an early redemption penalty. Technically you are not completing on the same day, as the purchase funds have been drawn down early.
The Scottish system of settlements is quite antiquated and usually takes place by Solicitor’s cheque. If it is done by bank transfer, there is no guarantee when it hits the account of the other Solicitor. Banks often have a queueing system which can cause delays and there is no control over where you are in the queue. We usually recommend if doing a sale and purchase on the same day, do it by solicitor’s cheque, which is guaranteed and therefore cannot bounce. But because it’s a cheque, it does take the usual clearance time.
The solicitor’s settlement cheque is normally sent out the day before to be held as undelivered by the other solicitor, which means there has always been a huge amount of trust between solicitors.
So what happens if you sell first, but then there is a delay with the purchase? In short, you will be without a home and need alternative accommodation and your belongings will need to be placed into storage. Assuming there is a legally binding contract, there may be some comeback against the seller but this depends where you are contractually. If there is comeback it has to be kept to a minimum and the loss has to be reasonable. So no booking into a five-star hotel for the night! Thankfully it is extremely rare for contracts to be breached by this sort of delay.
Unfortunately, Scotland is becoming more and more like the English system. Contracts are not being concluded until very close to the completion date, which is unsatisfactory as this puts everyone at risk. This really started following the recession/credit crunch when lenders pulled funding at the last minute, making people and lawyers very nervous about concluding missives. Although its is a requirement of the Law Society that missives should be concluded as a matter of priority, this is often not adhered to.
An alternative would be not to settle on a Friday for the reasons we have stated, consider settling your sale first then put your belongings into storage and book a hotel for the night. It’s an additional cost but it means time to clear and clean, no huge pressure, and you can relax and await the purchase keys being released.
So we are not saying you can’t do everything on the same day. Of course you can – but go in with your eyes open.
Denise McKenzie is Head of Estate Agency, Morton Fraser