After going through the process of selling a home, the question of when a seller will get their money is understandably one of the most commonly asked questions that property sellers have.
At MOV8 our in-house conveyancing department will always aim to distribute any free proceeds of a sale within 24 hours of the settlement of the sale and to redeem the mortgage the same day as the settlement. However, the full answer depends on a number of factors detailed below.
If you are looking for advice on the process of buying or selling a home, get in touch with our team today at [email protected].
Cleared Funds Selling a Property
Your conveyancing solicitor will require to have cleared funds before they can pay money out to you. This means that the money must be available in their bank account, as cleared funds, before they can instruct a payment to our clients. When will they have cleared funds?
If your conveyancing solicitor is paid the Price for the sale of your property by cheque, they will have cleared funds within approximately 4 working days of banking that cheque on the settlement date. Cheques are very rarely used to settle property transactions nowadays
Because your conveyancing solicitor has to wait for the cheque to clear, they cannot make any payments until they have cleared funds.
Same Day Bank Transfer
If your conveyancing solicitor is paid the Price for the sale of your property by same-day electronic bank transfer, which is by far the most common method of payment, nowadays, they will have cleared funds on the same day as the settlement date, but please note that, in some situations, the sale price may be received late in the day, on the settlement day.
Final Checks, Cash Account and Fee Note
Before your conveyancing solicitor can pay monies to you, they have to do a number of checks. These checks ensure that they retaining the correct amount of money to pay all necessary outlays and fees on your case, and that your retaining enough funds to pay-off the balance of your mortgage (if applicable), before then distributing the rest of the funds (the ‘Free Proceeds’) of the sale.
Your conveyancing solicitor will also have to send you a Fee Note (Invoice for their fees) and, often, a Cash Account that tells you the movement of all monies in and out of their Client Account and that are associated with your transaction.
With law firms under increasing scrutiny and financial crime regulations becoming ever stricter, there can be a number of parties involved in dealing with the distribution of funds, from staff members within the firm’s Cashroom, to Anti-Money Laundering and Compliance personnel and separate members of staff who have a level of authorisation that allows them to ‘release’ large payments from the Client Bank Account.
As a rule of thumb, the following steps usually have to take place before any monies can be distributed to sellers.
Redeeming the Mortgage
If you have a mortgage, your conveyancing solicitor will have to pay-off that mortgage. This applies even in cases where you are “porting” your current mortgage product to the property which you are purchasing (e.g. if, including the porting sum, the redemption sum due for your current mortgage is £100,000 (with £40,000 of that sum being ported to the purchase property), the sum to be repaid to the lender, for the sale property, will be £100,000, i.e. not £60,000. In this case, the new mortgage amount to be received from the same mortgage lender for the purchase will include the said sum of £40,000, including the rest of the new mortgage amount
The first thing your conveyancing solicitor needs to do, after they are in possession of cleared funds for your sale, is to make a payment to clear that balance/redeem your mortgage as it minimises the interest that you will pay on the mortgage.
The priority is, most often, to redeem the mortgage on the Date of Settlement as the interest rate on your mortgage is usually far higher than any interest that you would be able to earn on the money if it were transferred to your bank account as a higher priority. It will also be the case that, as long as you have approved the redemption statement for your current mortgage, the redemption payment can be made to your current lender, as soon as the sale completes. With regard to any free sale proceeds due to you, it can take a little bit longer to finalise the cash account and fee note(s) for your sale (which need to be checked by the finance department, in case there have been any changes to those documents close to settlement) , which is one of the reasons why payment of free sale proceeds are not made instantly on completion of a sale completion.
Double-Checking the Funds Payable
Your conveyancing solicitor calculates and subtracts the amount that you have to pay to them for their fees, plus any outlays that have been incurred on your behalf during the transaction. In most cases, this will leave a balance that is due to you, the client. If there is a shortfall, your solicitor will get in touch with you to arrange payment of that shortfall.
If you are purchasing another property, your conveyancing solicitor calculates their fees and any outlays due, the amount that you paid for the new property less any mortgage funds that your they have received on your behalf.
This is all done prior to settlement so that your conveyancing solicitor knows if there is an outstanding balance that is required from you in order to allow them to make the payment of the purchase Price of your new property.
Once your solicitor has gone through this process and made all of the payments to the various parties that need to be paid, they will be in a position to transfer the remaining balance from the transaction(s) to you, acting in conjunction with the finance department
Before releasing any sums of money to a client, it is recommended that further Risk Assessments are carried-out and documented and that all Anti-Money Laundering documentation and previous Risk Assessments carried-out on the transaction are double-checked for accuracy.
It is hoped that these further checks don’t raise any issues that might delay the distribution of funds. However, as they are designed to prevent payments from being released in certain, thankfully rare circumstances, the results of these checks sometimes have to be escalated and double-checked by one of the most senior solicitors in the conveyancer’s firm.
Before your conveyancing solicitor can distribute the Free Proceeds to you, in some cases they will have to ensure that they have a completed bank mandate from you and any other parties who would be due to receive monies from the proceeds of sale. This is true, for example, where a couple selling a home wish for the free proceeds to be paid to a bank account that is in the name of just one of the parties to the sale.
Your solicitor (or a member of the MOV8 compliance team) will tend to double-check the details in that bank mandate with the people whom the mandate refers to, to ensure that the bank details are correct and to ensure that they are paying the funds to the correct person with the permission of everyone involved.
Depending on when your conveyancing solicitor received the Mandate and on how many people are named on the mandate, this can mean that there are a number of people whose details they need to confirm with them. If your solicitor is unable to contact the people named on the mandate, this can cause some delays with distributing the funds.
Payment by Same Day Bank Transfer or Cheque
Your conveyancing solicitor will tend to pay the free proceeds by same day bank transfer. They will, most often, authorise all of their same day bank transfers transfers towards the end of the business day in one ‘batch’ authorisation, particularly on a busy settlement day, such as a Friday
Cheques are only very rarely used to redeem mortgages nowadays.
Most mortgage lenders insist on mortgages being redeemed by same day bank transfer. Cheque payments to redeem mortgages are quite rare nowadays. In most cases it is cheaper to redeem a mortgage by same day bank transfer, due to daily interest which has to be added to a cheque payment.
We’re Here to Help
If you are thinking of buying or selling a property MOV8 is perfectly placed to help. Our 5 star rated team of property experts can help guide you through each stage of the property process.
If you are thinking of selling your home or investment property, get in touch with us by calling 0345 646 0208 (Option 1) or by emailing [email protected] to organise a free valuation of your home or to get a full, transparent breakdown of the costs of selling your home.
If you are looking to buy a property as a home or investment, please call 0345 646 0208 (Option 2) or email [email protected] and we will be happy to help.