Sale of PropertyThe first step in buying or selling a property is usually to contact a real estate agent. The real estate agents either belong to the Royal Institution of Chartered Surveyors (RICS) or the National Association of Estate Agents (NAEA). These have certain codes of conduct for their agents which need to be followed. A buyer or seller or property would get into a contract clarifying the fact that the agent has been instructed for finding a buyer for a certain land and what amount of commission needs to be paid. Again, if a buyer and not interested in availing other services provided by the real estate agent, the agent should not discriminate between the buyers on the basis of the fact that he can make more profit from other buyers.
During selling, the sellers are not liable to point out any defects on the property but again are also not supposed to mislead the buyer by answering his queries incorrectly.
During the sale of property, one needs to maintain the following information and documents relating to property. This as per the advice of HM Revenue and Customs (HMRC):
- Contracts for the purchase or sale, lease or exchange of the property
- Documentation that validates the acquired properties. These would be the properties that one has got through inheritance or as a gift but has not bought them.
- Details of any property that one has donated or given away to a trust
- Copies of any valuations taken into account in your calculation of gains or losses
- Bills, invoices or other evidence of payment records such as bank statements and cheque stubs for costs you claim for the purchase, improvement or sale of the property
It would also be sensible to keep correspondence with buyers or sellers leading up to the sale of the property.
If one is into sale of properties, it is important to also understand the following two terms:
Gazumping and gazundering in property selling
Gazumping is the case when a seller accepts a more profitable offer from another buyer but after agreeing verbally to sell to one buyer. Since this is before contracts are in place, a buyer can not do anything about this. This situation can be avoided if the buyer signs out a lock-out agreement which specifies that the sale is frozen and the seller can not accept anyone else's offer. Also, this lock out agreement can done along with a token amount which usually is a percentage of the sale price of the property.
Gazundering is an act by the buyer's part when a buyer reduces his offer price just before the contracts are exchanged even though he had originally agreed on another price. In this case, on the brink of a sale, the seller usually succumbs to the buyer and goes ahead with the deal.
A way to avoid this situation is a ‘pre-contract deposit agreement' which is a legal agreement. In this, each side pays a deposit that they will lose if either party withdraws without a valid reason.
The Home Information Pack (HIP)
To avoid certain frauds, the UK government has recently introduced a law which specifies that before introducing the property into the market, the seller or the agent on behalf of the seller needs to prepare a Home information pack with specific details such as:
- evidence of title (proof of who owns the property);
- a ‘sale statement', with basic information about the property;
- standard searches from the land register and the local authority, which include information such as relevant planning decisions and road-building proposals;
- An energy performance certificate- This is introduced to find out the energy efficiency of the household property. Grades from A to G are allocated with A being the most energy efficient. This certificate can be prepared only by the accredited energy assessors.
- If the property is leasehold or common hold
- Home condition report- the general state of home (this is not compulsory by law)
The HIP is aimed at making the sale process more smooth and hassle free. However it still does not imply that the seller or the agent on behalf of the seller has to declare any defects with the property.
Pricing of a property
When there are other items that is a part of the property or asset, they need to be clearly mentioned in the offer in writing under what is often known as fixtures and fittings. Some examples of these items can be electrical equipments like lights etc, furniture etc. This is generally made by the solicitors and it forms a part of the final agreement.
It needs to be mentioned clearly that out of the equipments, what can be:
- taken away by the seller;
- included in the sale; or
- Offered for sale separately.
Once selling is complete, the seller needs to pay taxes which are called as Capital Gains Tax (CGT) - is a tax on capital 'gains'. This is since after the sale of an asset, one needs to pay tax on the profits gained by the deal. CGT is worked out for each tax year (which runs from 6 April one year to 5 April the following year). CGT is only charged when one has sold a property which is more than £6,000.
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