Your coronavirus house buying questions answered
Can I still buy a home?
The Government has said that anyone wanting to move home, whether a buyer or a renter, should delay the transaction where possible while the coronavirus 'stay-at-home' measures are in place. Physical surveys are out, but homeowners wishing to get a move under way can lay the groundwork of instructing agents, a solicitor, and applying for a mortgage, in anticipation of the restrictions lifting. In some situations it is still possible to exchange and complete.
What happens if you have already exchanged contracts?
Where a buyer and seller have exchanged contracts, ministers want the parties to postpone completion until the restrictions come to an end. If a deal can't be postponed for legal reasons, "people must follow advice on staying away from others to minimise the spread of the virus," it added. If contracts were exchanged before the restrictions came into effect, it may be possible to enter into a supplemental agreement whereby the parties agree to delay completion until a mutually agreeable date after the restriction have been lifted.
What if the house is already empty?
Where a home is already vacant or no physical move is involved, a transaction may go ahead, as long as any removals that take place are carried out in accordance with the rules on social distancing. In such cases a simultaneous exchange and completion will be preferable. This means you exchange and complete on the same day and therefore reduce the risks of your circumstances changing between exchange and completion.
Buyers who have exchanged and have a mortgage offer in place for only a limited period can take advantage of a three-month delay being offered by mortgage lenders to prevent a deal from collapsing.
You have exchanged, but not completed
If you have exchanged but not completed, doing nothing brings its own risks. The Law Society has said that if completion does not take place after contracts have been exchanged due to coronavirus, "the parties not completing will be in default". You could consider a supplemental agreement delaying the completion date but remember to check your mortgage offer will still be available if you extend the window between exchange and completion.
Can you pause a house sale?
Could a sale be "parked" with legal agreements in place rather than entirely abandoned? Yes, you can either complete the due diligence so that the parties are ready to exchange as soon as the restriction lift or you could exchange contract now (after carefully consideration) with provision to agree complete dates after the restrictions are lifted.
What if your search results are out of date?
One thing you may not have considered is the impact of the delay on your property search results, which can also be a problem throughout a chain.
If you are obtaining mortgage finance, most mainstream lenders require searches to be undertaken and for those search results to be not more than six months old at the date of legal completion of the purchase.
If you find yourself in a situation where your search results are out of date, then to renew those searches could cost between £200 and £400. However, you may find your lender is willing to accept search validation insurance. Search validation insurance is an indemnity policy that can be obtained for a small one off premium, which is much cheaper and quicker than having to undertake the searches again which will inevitably could lead to further delay. The insurance policy premium will depend on the value of the property or in some cases the amount of the mortgage lending but could be less than £20.00.
The policy effectively covers you (and your lender) against any reduction in market value suffered as a result of an adverse search result which was not revealed in the initial searches undertaken.
We suggest you ask your solicitor to confirm the date of your search results and check whether your chosen lender will proceed with search validation insurance in good time. If your lender is not prepared to proceed in this manner, make sure you allow time to order new searches, as some of the search results are taking a lot longer than usual as a result of the COVID-19 restrictions, up to 6 - 8 weeks in some cases.
The good news is most high street lenders - for example, Barclays, Halifax, Lloyds, NatWest and Santander - in principle do accept search validation insurance. However, it is important to note not all lenders do. You should check each matter specifically with the relevant lender at the time, as lenders may change their rules and lending criteria at any given time and on a case by case basis.