So here at Quick Property Buyer, we have prepared this guide for you.
1. What is a Memorandum of Sale?
The Memorandum of Sale is a document that records the main details and terms of the property sale. The estate agent, auction house or Quick Property Buyer company will draw it up and send it out to relevant parties.
2. Is a Memorandum of Sale legally binding?
No, it is not legally binding. The actual legal terms of the sale will be included in the sales contract which is signed on or before exchange. Therefore the terms of your property deal only become legally binding at the exchange stage, not when the Memorandum of Sale is issued. The Memorandum of Sale reflects the understanding of the parties in advance of proceeding to the contract stage. It is not usually a document the parties would sign.
3. When is the Memorandum of Sale sent out?
Once an offer is accepted by the seller, the estate agent should send out the Memorandum of Sale within a few days. They either send the document by email, put it in the post or do both. Because it clarifies the headline terms, the earlier this document is sent out the better.
4. What information should a Memorandum of Sale contain?
The Memorandum of Sale should contain the details of the property, the sale, the parties involved and any terms of the transaction that may be specific to the transaction. The more information the better. The document would usually include:
- Property details: The full address, whether it is leasehold or freehold and the land registry number;
- Agreed price;
- Seller’s details;
- Buyer’s details;
- Solicitors’ details for both parties;
- Estate agent’s details;
- Mortgage broker details;
- Mortgage lender details;
- Timescales for exchange and completion;
- Any special terms such as planning restrictions;
- Details of the deposit to be paid at exchange; and
- Any legal points to be considered and other observations.
5. Is the Memorandum of Sale important?
The Memorandum of Sale can be very useful in flushing out any misunderstandings of either party, before instructing the solicitors and incurring costs. Indeed we have often picked up mistakes in these documents and have asked estate agents to reissue them with the correct details. As many property sales may be agreed over the phone (although our recommendation would be to do as much as possible in email) misunderstandings can and do occur. The document can also be sent to the solicitors for both sides and used as quick reference points by them during the conveyance.
The issuance of the Memorandum of Sale is the stage that records that a sale has been agreed. If the property has not already been taken off the market, this document should trigger the property coming off, with Sale Agreed being put on relevant websites.
6. What happens after the Memorandum of Sale has been sent out?
This will lead to the start of the conveyance process. It will give the solicitors enough information for them to get going.
7. How long after a Memorandum of Sale will a property sale complete?
This is a hard question to answer. It depends on various factors such as whether a chain exists, the state of the mortgage market the time and the efficiency and commitment level of the parties. Indeed a large amount of properties on the open market never do get to completion for one reason or another. In terms of time, estate agents for sellers often so say around 6 weeks, but from experience, those in the open market that are lucky enough to get to completion seem to take on average 4 months.
8. The estate agent not sending the Memorandum of Sale
If you have not received the Memorandum of Sale within a few days of the offer being accepted, don’t feel embarrassed to chase up the estate agent. It could be that the seller has not provided all the required information such as their solicitors’ details. But more likely is that the estate agent may not be the most efficient, which is not a great sign of things to come. Being cynical, it could also mean that the seller has not committed to the sale yet. So keep checking the online portals to check it has been taken off the market.
9. Problems with a Memorandum of Sale and how to protect against them
As above, the Memorandum of Sale is not a legally binding document. Unlike in many jurisdictions abroad where financial commitments need to be made by the parties at the beginning, in the UK property deals can fall through at any time up to the point of exchange of contracts.
One common reason is that the buyer may have overestimated his or her finances and they then struggle to raise the funds to follow through on the purchase. Therefore it is important that the estate agent has thoroughly vetted the buyer from the outset to lower the risk of this happening.
Another reason for terms in the Memorandum of Sale not being kept to, is the collapse of a chain. If the buyer or seller are part in a chain, one break in any link could result in all the transactions in the chain coming to an end or at least being delayed. Obviously it is hard to protect against issues happening elsewhere, but when deciding who to sell to, it does help to follow your head rather than your heart. If you do have a choice between a cash buyer, someone who is not in a chain or someone that is, don’t go with those in a chain just because you warmed to them being a young family or they seemed the nicest.
Another reason can be buyer remorse. They originally loved your property, agreed a price but then 3 months later, they changed their mind, found somewhere they like more or simply got cold feet about buying a property altogether. So the quicker the buying process, the less risk there is of this happening.
Therefore there can be delays for a number of reasons, especially as the timescales in the Memorandum of Sale are not legally binding. To reduce the risk of such problems, our advice would be to not go cheap on solicitors and estate agents. Instruct the best you can afford rather than choosing a solicitor or estate agent because they happen to be the cheapest around. It’s a cliché, but you do get what you pay for and as property transactions can be very stressful, it is always helpful to have the best people you can around you.
The Memorandum of Sale may seem official and daunting, but do not be overly concerned as it is not a legally binding document. When you do receive one, make sure you read it carefully and even though it is not a signed document, don’t feel embarrassed to correct mistakes. If you would like to know more or are looking to sell a property quickly, please do contact our friendly team here at Quick Property Buyer who would love to assist you.
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