What is a Memorandum of Sale?
A memorandum of sale is written confirmation of a property sale transaction. It is used to record that a sale of residential property has been agreed between a seller and a buyer subject to contract.
The document is simple and to the point without a large amount of legal jargon. This is drawn up by an estate agent, auctioneer or home buying company after the sale is agreed. Once drafted, this is passed on to the conveyancers representing the buyer and the seller.
Compare My Move work with property experts to bring you the most up to date information on the conveyancing process and what a memorandum of sale entails. In this article, we review why it is an important document, what it is used for and what it includes.
How Important is the Memorandum of Sale?
Whilst a memorandum of sale - also referred to as a “notification of sale” - is not a legally binding document, it is still an important step in the buying and selling process. Every house sale requires a memorandum of sale. Signing this document will act as a precursor before the final contracts are drafted and exchanged. It will act as written evidence that an offer has been accepted on the property in question.
Under UK property law, a sale is only binding after the exchange of contracts or missives in Scotland. However, the seller’s conveyancer or property solicitor will only draft the contract of sale once the memorandum of sale has been received. It is therefore essential to the legal process of the transaction and a key part of your official mortgage application.
Compare Local Conveyancers
Speak to Accredited Conveyancers & Save Today!
Who Provides It and How Long Does It Take?
The document is drawn up by either the seller’s estate agent, auctioneer or home buying company, depending on how and with whom the property is sold. This is usually drafted as soon as possible, typically within a few days, following a verbal agreement of the sale. It is then sent via email or through the post to the solicitors for both parties.
A memorandum of sale can take longer if the estate agent, or party responsible for drafting the document, does not have all the necessary information to hand. For example, if either the buyer or seller has not supplied the information. To ensure the process moves quickly and as smoothly as possible, it is highly recommended that you have all the relevant documents and information prepared beforehand.
What Does It Contain?
The memorandum of sale document contains all the essential information about the property sale, the sale agreement and any special conditions. This includes:
- Name and contact details of the buyer
- Name and contact details of the property seller
- Solicitor contact details for both the buyer and the seller
- The full address of the property in question
- Details of the tenure, lease (freehold or leasehold) and any special conditions, such as planning restrictions or specified rights concerning the land.
- The agreed price for the property
- The proposed deposit percentage and amount
- If it is an auction sale, information as to the date of the exchange (when the auctioneer’s bevel fell) should also be included.
Compare Local Conveyancers
Speak to Accredited Conveyancers & Save Today!
What Happens after the Memorandum of Sale?
After the memorandum of sale is drawn up and signed, there are still a number of steps before you exchange contracts and complete the sale. It is at this point that the conveyancing process gets underway and a property survey can take place.
Buyer Checks
As part of the conveyancing process, the buyer’s solicitor will check their financial position. This includes whether the buyer has obtained an agreement in principle (see below) and can also include proof of the deposit funds. The conveyancer will need to make additional checks if the deposit is gifted.
Formal Mortgage Application
At this point, you should have had a Mortgage Agreement in Principle from your chosen mortgage provider and can now officially apply for a mortgage.
Surveys
A buyer has the option of organising a survey on the property to ensure it is a sound investment. Usually either a homebuyer survey or a full building survey. It is up to the buyer to decide which surrey they arrange.
The survey results can give the buyer an overview of the condition of the property - and any work or repair that it may need. If this is the case, the buyer may wish to negotiate the price of the property. It's common for a buyer to try to renegotiate an offer, but you should be aware of gazundering. This is when a buyer will lower thier offer at the last minute to try and put you in a difficult situation.
Conveyancing Searches
In addition to being responsible for the legal aspect of property purchase, your conveyancer will organise relevant searches and surveys on your behalf.
Local Land Charges searches are an essential part of the conveyancing process. The results of these searches can inform buyers of any essential information about the property in question and the surrounding area. This includes ensuring the property is not in a flood risk area, near contaminated land, in an area with high Radon Gas levels or at risk of subsidence.
Exchange of Contracts
As the final step before completion, contracts are signed and exchanged. It is at this point that the sale becomes legally binding and any party which back out of the sale at this point will likely face penalties.
Compare Local Conveyancers
Speak to Accredited Conveyancers & Save Today!
How Long From Memorandum of Sale to Completion?
From the point where the sale is agreed, the house buying process takes on average 2-3 months in the UK. However, this can vary greatly, especially if you are part of a property chain where a line of transactions depend on each other and any delay will impact the others within the chain.
Next Steps of Selling a House
This article is part of our selling a house guide. In our next article we look at everything you need to know about Energy Performance Certificates as they are essential purchase before you can sell your house. To learn more read energy performance certificates.
