When buying or selling a house, it is important you are keeping your eye on the pennies.
While you may be aware of the estate agents and solicitors’ fees to pay, you may not be aware that there is a number of disbursements payable on top.
Disbursements are fees paid for certain items or documents that are necessary for the transaction.
The following details the most common disbursements payable and what they actually are for, so you can be sure that your money is going to the right place.
When purchasing a property, your disbursements will mainly focus on searches.
These searches are crucial to ensuring that the property you are buying is safe and there will be no issues that will cause problems that you are not aware of.
Please refer to our ‘Conveyancing Searches Explained’ article on the Reading Room for more information on what exactly the searches cover.
In addition to searches on the property, it is necessary to also complete a search just at the end of the transaction to ensure the seller does still in fact own the property and they have the right to sell it.
The other big chunk out of your budget when purchasing a property is the Stamp Duty Land Tax (SDLT).
This is the tax payable on the purchase of property and differs in amount depending on a number of factors including:
– Price of the property
– Whether the buyer is moving into the property
– Whether you have owned a property before
– If the property is being bought in joint names or by an individual
– Whether the property is residential or commercial
Due to changes in the rules, the SDLT is now payable within 14 days of completion, however you will know the amount of SDLT payable at the beginning of the matter.
When selling a property, it is effectively your job to provide as much information to the buyer as possible.
Therefore, the main disbursements payable will be in relation to obtaining documents or providing indemnity policies if documents are missing.
We will download documents from the Land Registry, which have a fee of £3.00 per document.
If you are missing some documents, for example a building regulation certificate, the buyers may request an indemnity policy to cover it.
This is an insurance policy which protects the buyer if at a later date, an issue arises due to the missing document.
These indemnity policies can cover a wide range of issues and can differ greatly in price. It is also important to be aware that the need for an indemnity policy may not be apparent at the beginning of the matter and it may pop in the middle.
Therefore, a top tip is to always ensure you have some wiggle room in your budget for anything unexpected.
In most cases, sellers need to consider the redemption of their mortgage. If your property still has a mortgage on it, when it is sold, this mortgage must be redeemed (paid off) and an application must be made to the Land Registry to remove their charge.
This leaves the property free to be mortgaged by the buyer if necessary.
Throughout the transaction, we will obtain a redemption statement which states exactly how much is left on your mortgage and confirms how much will be paid out before you receive the sale funds.
In most cases, the sale proceeds is more than the amount left on the mortgage but this is not guaranteed and something you need to be wary of.
If you have any property questions, or would like to speak to one of our property team, please contact us today.