In the process of acquiring a house or a property, you will meet a lot new terms . A memorandum of sale is one of those terms that may seem complex at first, but are actually quite simple. Every purchase you will ever make on the house will require you to have this document.
It plays an important role when selling a house, especially if you need to make a quick sale of the property. It is advisable that before you put your house out in the market or start accepting any offers, get to know what the memorandum of sales is and the vital role it plays in this process.
A memorandum of sale summarises the seller’s terms of sale and the buyer’s intent.
It confirms a price has been agreed between the buyer and seller and both of them are comfortable with the terms. However, it is not legally binding. Once you both receive the memorandum of sale, the vendor must take the house off the market as it is no longer up for sale. The document can help to prevent the buyer from being gazumped.
Even though a memorandum is a contract, it does not legally bind the two parties. The role that it plays is to clarify the terms of an agreement before being put in place. With a memorandum in place, you get the chance to go through the terms and confirm if you are satisfied with them or not. It ensures that both parties are in agreement before any formal and legally binding documents can be signed.
It is an essential document when purchasing a house or property. You have the chance to assess the document, and if you do not understand all terms perfectly, you can contact a solicitor to help you go through it.
When a Memorandum of Sale is Needed
Even though you have agreed verbally with the seller or estate agent, getting a memorandum of sale is vital. If you are purchasing the property with a mortgage, your mortgage advisor could advise you to present the sale memorandum before submitting your full mortgage application.
They need to know the amount of money you will pay in the end so that they know how much to provide you with. Solicitors and mortgage advisors will have the information they need to start legal processes and mortgage applications. They can also use it as a supporting document.
What Information should a Memorandum of Sale Contain?
Just like any document, there are specific details that should not be missed in a memorandum of sale. They include the following:
- Name, address, telephone number and email address of the seller. You need to know how you can be able to reach the vendor. You may have a pressing issue that you would wish to discuss with the vendor.
- The name, address, telephone number and email address of the buyer. Details of whether the buyer will use cash to make the purchase or require a mortgage. You will also know the type of transaction that will commence during the purchase, and be able to make preparations for it.
- Details of the mortgage advisor in case the buyer will be using a mortgage.
- Details of any property chain involved.
- Contact for the buyer’s solicitor
- Land registration number of the property
- Amount of deposit that the buyer needs to make and check to see if it undergoes verification or confirmation.
- Whether the purchase of the company is under any company
- The dates that payment should be completed
- Fittings and fixtures involved in the site
- Any legal issues involving the property, such as rights of way.
- Contact details of the seller’s solicitor
If you formulate any special conditions or any other remarks, include them in the memorandum of sale as a point of reference. The conditions may be; cash in advance delayed completion of an option agreement. You know how important it is to have a handwritten document as proof.
As a buyer, you need to know familiarise yourself with the memorandum of sale document. You should know all the essential details to be certain during the entire process.
When should you Receive a Memorandum of Sale
Most of the time, buyers suffer from gazumping because they delay receiving their memorandum of sale document; therefore, the seller will not take the property off-market immediately. It is your duty as a buyer to see that the property is no longer on the market.
Your estate agent should not have an issue with this. Although, at times, they may deliberately delay sending the document to you in the bid to try and convince you to use their in-house services. You are at liberty to refuse it since it is not a must.
Is the Document Legally Binding?
It is not legally binding. You may then be questioning its relevance. A Memorandum of sale is a written document that seals a contract between a seller and a buyer. When you have a memorandum of sale document with you, the process of getting to draft a contract of sale on receipt becomes faster.
Remember, you are free to work with your independent solicitor. The estate agent does not need to convince you to use their solicitor. Do your research well to find a solicitor that is right for you.
Why is it Necessary?
The document is necessary because it confirms whether the buyer and the seller agree to payment of the property. The relevant information for a property purchase is in the memorandum of sale.
A memorandum of sale will save you a lot of time and energy that you will use in moving around trying to sell a house. A memorandum of sale is an official document and once you both agree, the agent needs to take it off the market.
The sale can start immediately and effectively once the estate agent circulates the document. This happens immediately after the sale is confirmed. Do not forget that the memorandum of sale does not legally bind. As a buyer, you can still be able to back out at this stage. You may not like certain terms, or you may have a change of heart regarding the house.
There is no problem when you decide to withdraw and shift your interests somewhere else. However, you need to appear like an ethical person. You should be honest with the vendor from the start and keep every information clear. Be transparent; state whether you like the house or not. Do not be afraid to state your feelings and preferences regarding the house.
In the end, it is you who will be making payment. Therefore, let your money count. If you are not going to take the house, let the vendor know so that you can both save each other’s time and resources. Bear in mind that you do not have to sign the document.
What happens after you send the Memorandum of Sale
Once all the solicitors receive the document, the actual property acquisition process can now begin. As a buyer, at least you can relax with the knowledge that you are free from gazumping. A memorandum of sale is among the very first steps you need to take in the property sale.
After receiving the memorandum of sale from the sellers estate agent, you can get started with the conveyancing process. This requires you to instruct your selected conveyancing solicitor to begin the process. They will proceed to carry out a number of essential checks. This includes verifying your identity and confirming you have the relevant funds to pay for the property.
You may choose to have a home survey performed on the property. There are several to choose from, each offering varying levels of depth in their inspection. You should evaluate the quality and age of the property and choose wisely. Your mortgage lender may also request a valuation report on the property at this stage.
Meanwhile, your solicitor will gather further information regarding the seller and their property. This will include warranties, property information, fittings and contents. After gathering this information, your solicitor will provide you with a report on the property. The goal of this document is to inform you of their findings, as well as assist in drawing up the contracts.
The sellers solicitor will be responsible for providing the title plan, the title deed, an official copy of the land registry and a copy of the lease.
Once both parties are happy with the conditions of the sale and the state of the property, a contract can be drawn up and negotiated. It is useful to heavily involve your solicitor during this stage as negotiations can be difficult. After all sides are satisfied, contracts can be signed and exchanged. This is now a legally binding agreement for the sale of the property.
The memorandum of sale would have been a precursor to the exchange contract but these details are finalised in the signed document.
Problems that may arise
Time it takes the document to be processed.
For the sale of a property to proceed, you need to present the memorandum of sale.. When such delays occur, it gives room for gazumping to take place.
Delays may occur because sometimes one party may fail to provide the necessary information on time, or the buyer may suddenly change their mind. The agent may also have a lot on their hands, and the property sale may not be a priority to them. To avoid all these unnecessary delays, gather adequate information in advance about the property in sale.
Participating in chain
A property chain comes about when the buyer or the seller’s transaction depends on another sale. It is usually the case where the seller is selling the current property and depends on the funds from the current home to facilitate their move; unless they are a first-time homebuyer.
The problem arises when one link breaks. It means that either the seller cannot procure a house or has decided against moving after all. The key thing to resolve this is by communication. Analyse the problem and look for ways to formulate alternative funding if it is related to money. You can borrow money from your friends or family members.
At least communicate to the seller. If the property were on-demand, they would replace you with another buyer. A lot of documentation has already been done at this stage, but a good solicitor will know how to resolve the issue quickly. In some cases, the seller may decide to reduce the price for the buyer, hoping that they will be able to manage it.
Either party can still drop out of the sale
Since the memorandum of sale is not a legally binding document, one party can decide to withdraw whenever they please. They will not be charged with any penalties whatsoever. For most buyers, it will not cost you a thing to be open about your financial capabilities. If you cannot pay for the house instantly with cash, opt for a mortgage and follow the right procedure in securing one. If you do not wish to buy the house at all, save the real estate agents and vendors the time and energy, they will use in helping you secure a house.
You will realise that the whole process of trying to get a house is quite overwhelming. Securing a memorandum of sale is not an easy thing but it makes it worthwhile by taking time to familiarise yourself with it. If it all seems too complex for you, it is better if you seek the help of professionals. If you intend to buy or sell a property quickly, then get in contact with some of the best real estate agents who will take you through the necessary steps. In shared ownership applications, a memorandum of sale is still required.