What is a memorandum of sale? Do you need one?
Should you be taking this sales memo more seriously? We spill the beans...
Memorandum Of Sale is a complex term that often has both buyers and sellers screwing up their faces in bewilderment, and it’s not hard to see why.
Not only does a ‘memorandum’ sound like something you really need to be aware of (clue: that’s not wrong), but it also plays a crucial role when selling your house, particularly if you're after a fast sale.
But that being said, a Memorandum Of Sale isn't the only piece of complex jargon you'll come across when selling your house, be it through the open market or a 'Sell House Fast' company' like us. Its twin 'Sale Agreed' raises some eyebrows too.
SPOILER: Every house sale requires this sales memo, so this isn't a term you can avoid! (gulp!)
Not that it matters because we've dissected it all for you, down to the very last detail.
So before you even think about putting your house on the market or accepting any offers, read on to discover why this sales memorandum is SO important and all the ins and outs of how it works.
After something specific about the Memorandum Of Sale?
Is a memorandum a contract?
Yes, a memorandum is a contract, but that doesn't mean it's legally binding. Memorandums are more a preliminary measure done to clarify the terms of an agreement before it's put in place.
Think of them as a gentlemen's agreement, only without the handshake.
A memorandum also gives both parties the chance to check they are satisfied with the terms of the agreement before legally committing themselves - a MUST when selling a house!
NOTE: Don't be fooled though, some types of memorandum CAN be legally binding, although a Memorandum Of Sale is not.
This is because in the UK we use what's called a Memorandum Of Understanding for the sale of property, not a Memorandum Of Agreement. These MOAs are the legally binding type that you've got to watch out for!
What is a Memorandum Of Sale?
The Memorandum Of Sale is a document that details the 'sale agreed' part of a property purchase. It summarises the intent of the buyer as well as the seller's terms of sale.
As mentioned above, a Memorandum Of Sale is NOT legally binding, merely written confirmation that a price has been agreed between both the buyer and seller.
But don't fall into the trap of thinking this sales memo is insignificant.
As soon as the Memorandum Of Sale is issued, the estate agent or 'Sell House Fast' company gets the ball rolling.
They'll remove the house from the market, change its status to Sold SSTC and will begin looking into the sale in finer detail, contacting solicitors and scheduling surveys. All pretty big steps for the buyer, which mean for a seller they're less likely to get gazumped.
So, what is 'Sale Agreed'?
Sale agreed describes the status of the sale once a Memorandum Of Sale has been issued. Sale agreed is much like it sounds - a deal for a sale of a property has been agreed between a purchaser and a vendor. A memo of sale will then transfer this agreement to paper.
What details are on a Memorandum Of Sale?
A Memorandum Of Sale provides a comprehensive overview of a property sale using the following details:
The address of the property being sold and the agreed purchase price.
The contact details of the vendor + a contact address if the property being sold is not their main place of residence.
Full contact details of both the buyer and seller's solicitor. Because we pay all your legal fees this isn't something you need to worry about, unless you choose to do your legals privately.
Expected dates for exchange and completion.
Proof that ownership of the property has been checked with HM Land Registry. This can include a HM Land Registry number.
Specifics on the property including its tenure and the length on the lease (if applicable).
Any special conditions agreed as part of the sale. For instance a sale at X price on the basis that the roof is replaced or certain fixtures and fittings remain.
For auction sales, additional details may need to be provided.
Our Memorandum Of Sale template
To give you a better idea of what a typical Memorandum Of Sale looks like, here's a template of the form we use...
*The keen eyed among you will have noticed that there's no space in our template for the buyer's details. That's because with a name like The Property Buying Company, we thought that this would be pretty obvious, so to simplify the form, we've removed this part.
Is the Memorandum Of Sale confidential?
Because the Memorandum Of Sale is signed by your solicitor, you're unlikely to see a copy. Think of the sales memo as the first part of in-house communication between your agent/ house sale company and your solicitor.
NOTE: You're more likely to come across a property memorandum if you're selling your house privately and are dealing with the solicitor directly. For instance, selling your house to a friend or relative.
HELP! The estate agent is not sending a memorandum of sale!
If your agent is slow in issuing a Memorandum Of Sale for the property you're looking to buy, it may not a good sign of things to come.
Typically an agent will try and issue a Memo Of Sale on the day the price is agreed to get the sale moving.
Remember, the faster the sale, the quicker the agent gets their commission, so be suspicious of any agent who is particularly slow to do this. Although before you pick up the phone and politely tell them to 'GET ON WITH IT', consider these few points.
The reason your agent is yet to issue this property Memorandum could be because...
The seller hasn't yet decided on a solicitor or is yet to share these details with the agent.
The agents involved in progressing the sale are slow and disorganised.
The seller is waiting on more viewings before accepting your offer.
NOTE: House sale companies like us take viewings out of the equation and arrange all your legals for you which enables the Memo Of Sale to be issued FAST! In the past we have completed on purchases in as little as 24 hours!
What happens to this sales memo if you sell your house quickly
When speed is of the essence and you're not selling through the open market, the Memo Of Sale is used in a slightly different way. We've summed up the main differences below...
Selling to house sale companies
Cash property sales are all about saving time. Unlike with an open market sale, where the solicitor has weeks, even months to push the sale through, with a cash buyer they're put on fast forward, so providing them with a comprehensive memo of sale is essential.
The more information they have up front, the easier it makes their searches and raising any enquiries.
It's because of timesaving moves like this that anyone who sells to a cash property buyer will be given an accurate exchange and completion date as soon as the memo is signed.
Choose us and this could be you.
Selling at auction
If you're selling through an auction the whole Memo Of Sale scenario changes once more. Buyer and seller exchange contracts instantly with an auction purchase (as soon as the hammer drops), which means the Memorandum Of Sale must be filled out instantly after the sale.
An auction will also demand buyers to pay a percentage up front (somewhere between 10 - 25%). The seller will also be required to foot the auction fees (usually around 2% + VAT). From here the memo will makes its way to the relevant solicitors who will begin processing the sale.
What comes after memorandum of sale?
Once the memorandum of sale is signed, a buyer may schedule an independent survey to check that their offer is reasonable.
If the survey uncovers any issues that the buyer wasn't aware of, the buyer is perfectly within their rights to terminate this sales memo or change their stance in the agreement.
This could be by demanding a lower price or bargaining for fixtures and fittings.
Providing an agreement is reached between the buyer and seller, the next step is conveyancing...
Stage 1 - Check the buyer is eligible
Before conveyancing actually starts, it's worth checking that your buyer is still eligible and can afford the price stated on the Memorandum Of Sale.
A lot can change since they were initially 'qualified' by the agent, so it's best to double check before making any financial commitments. Providing your buyer qualifies then you can continue to stage 2.
Stage 2 - Details and information
Now your solicitors are talking to one another (or should be), ID checks and other basic information will be first on the agenda. Your solicitor will require...
2 forms of ID - this is usually one that's photographic such as a driving licence or passport and another that's written, so a bank statement or utility bill.
Proof of funds - this could be a copy of your mortgage in principal (MIP) or a recent bank statement clearly showing your available balance.
Any warranties or guarantees you have for the property, be they for the roof, double glazing or some pointing work.
A Fixtures & Fittings Form (AKA the TA10)
The Property Information Form (AKA the TA6)
If the property you're selling is leasehold you may also require the Leasehold Information Form (AKA the TA7)
Stage 3 - Raise enquiries
Now you and your buyer have both being qualified for the purchase, it's time for your solicitor to examine the draft contract and raise any enquiries they feel necessary with the seller's solicitor.
However, don't rely on your solicitor to check the length of the lease, you need to do that yourself.
Leases with less than 80 years left on them can make a property unmortgageable and cost a fair bit to renew - anywhere from £500 to over £15,000!
Stage 4 - Searches
Searches are arguably one of the most crucial parts of selling a property, as they're a bunch of checks that not even a survey can flag up.
Searches come in two types, mandatory and optional. We go through just a handful of these below...
Searches for the title register and title plan - two documents that are both required for the sale of a house and act as proof of ownership. The majority today are stored with the Land Registry online.
Local authority searches - these tell you a lot about plans for the local area as well as potential hazards. HS2 would be a common one to look out for.
Water authority searches - a deeper look into how you get your water and the sourage system for your area.
Environmental searches - sourced either from Landmark or Groundsure, this report highlights issues to do with landfill sites, precautions for flooding, contaminated land, radon gas and so on.
these are extra searches that you may wish to look into depending on your property's type, location or how you plan to use it.
Mining searches in Ripon, Cornwall, Pontefract and any other place that was heavily mined.
Further questions on public footpaths, communal land or noise pollution etc. that are posed to the local council.
Stage 5 - validating your mortgage
If you're using a 'Sell House Fast' company like us, you can skip this step. If not, read on...
Now that the property has been qualified by the solicitor, your mortgages is next on the list.
Here your solicitor will receive a copy of the mortgage offer and look through the conditions. For certain types of properties you may require a certain type of mortgages, for instance some share of freehold flats and buy to lets.
At this point the solicitor will also confirm your deposit.
Stage 6 - Surveys
You'll also need to get mortgage valuation which will should be done by a RICS surveyor - a member of the Royal Institute of Chartered Surveyors.
Lenders require to survey a property themselves to ensure their loan is secure, so the surveyor has a lot riding on their shoulders.
TIP: If you want this to be as accurate result as possible, don't tell them your sale price.
Usually, the mortgages survey will cost anywhere between £150 and £800. The price varies depending on the size of your home, where it's located and it's value. But some lenders will throw in your mortgage survey for free as a way to entice you to choose them. If your lender hasn't included your for free, try haggling with them and see where you get.
Stage 7 - Contracts are signed and exchanged
Once both parties and their solicitors are happy with the sale, the draft contracts are waived and the real ones are signed. Your solicitor will do this on your behalf. Once contracts on both sides have been signed, they're exchanged by the solicitors and the sale becomes legally binding.
However, a quick as exchange of contracts sounds, it does take time. Usually between 8-12 weeks, that's unless you sell to a cash property buyer like us. We can exchange contracts on a sale in just a matter of days.
What can cause a sale to fall through?
One of the reasons that can cause a Memorandum Of Sale can fall through is time. The longer a sale takes, the higher the chance that either buyer or seller becomes 'unsettled' and tries to renegotiate or worse, back out.
What do we mean by 'unsettled'? Here's just a handful of ways how unsettled buyers can cause your memo of sale to fall through...
A buyer pulls out before exchange because another house has caught their attention after a recent price reduction.
A change of circumstances means a buyer no longer wants to move or is forced to pull out.
A black mark on a survey puts a buyer off completely or causes them to gazunder you, the seller.
How to avoid your sale falling through
Knowing what make a Memorandum of sale fall through is one thing, but knowing how to stop it from occurring is another thing altogether. After all, knowledge is power.
Not only can it save you a bunch of time, money and effort in the process, but it'll also ensure that selling your house isn't so much a chore, more of a breeze, so long as you play your cards right.
With this in mind, we've drawn from our 50+ years of industry knowledge some of the most vital tips for preventing your memo of sale falling through...
Strong communication means a strong memo of sale
Pretty sure your estate agent will have told you this when they first pitched to you, but eh, we'll reiterate it again.
Communication is the driving force of a property sale. From solicitors and surveyors to buyers and sellers, strong communication works to keep all parties connected and ensure transparency from sales memo to completion.
All of which builds trust, keeping the chain strong and reducing the likelihood of a buyer pulling out before exchange.
NOTE: Trust won't build itself, so it's worth putting some time aside to getting to know the other parties in your chain.
Build a personal connection with them and they'll be far less likely to let you down as your sale progresses. Maybe have a group phone call or if your chain's not very big, meet up for a coffee.
Save your Memorandum Of Sale through your agent
In the event that your buyer pulls out before exchange, you can try to repair your chain through your agent, although whether this can be done all depends on the interest in your house.
If your original buyer was part of a mass bidding war for your property and it sold for above the agent's valuation in a matter of days then yes, chances are your agent will be able to find you another buyer.
However, if viewings weren't exactly 'on the up' then you may not be so lucky.
It's also worth bearing in mind any changes in the market could affect just how viable this route is.
For instance, if when you sold the market was BOOMING, but during the X amount of months your sale has been going through, the market has slumped, then your agent may not be able to find you a replacement buyer.
In this instance not even a strong position (no dependant sale) or stand out property can save you, as if you have no interest you can't use it to your advantage.
And even if they were to find you a buyer that at first glance appears to tick all the boxes, how can you be sure that come a few months down the line, they won't do the same?
Repair your chain another way... the fastest way we know
In a situation where your memo or sale has fallen through, there's only so much you can do. As we've said earlier, the longer the sale, the more likely it is to fall through in which case speed really is of the essence, especially when you've only go so long to find your new buyer.
Thankfully, you needn't struggle - in fact your buyer may be closer than you think.
As a leading cash buyer of property across England and Wales, we'll buy your home in as little as 7 days, no matter its condition or location.
That's right, we'll be your buyer who won't back out even if you're stuck in a lengthy chain or a survey comes back with black marks. No joke!
And as a special thank you, we'll also cover all your legal costs and make sure they're muscled through quickly too.
In some cases we've even helped to negotiate the price of your onward purchase on your behalf; our team have over 50 years' experience in the industry so know a good property when they see one.