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. Assuming that the funds aren’t being used for the purchase of another home, the answer depends on a number of factors.
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.
Because your conveyancing solicitor has to wait for the cheque to clear, they cannot make any payments until they have cleared funds.
If your conveyancing solicitor is paid the Price for the sale of your property by CHAPS (same-day electronic bank transfer), they will have cleared funds on the same day as the settlement date.
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, as 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, unless you are ‘porting’ it to another property that you are buying.
The first thing your conveyancing solicitor need 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 minimizes 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.
Double-Checking the Funds Payable
Your conveyancing solicitor calculates and subtract 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 solicitor has received on your behalf. This is all done prior to settlement so that your conveyancing solicitor know if there is an outstanding balance that your conveyancing solicitor require from you in order to allow us to make the payment of the purchase Price of your new property.
Once your solicitor have 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.
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 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 CHAPS or Cheque
Your conveyancing solicitor will tend to pay the free proceeds by CHAPS (same day electronic transfer). They will most often authorize all of their CHAPS transfers towards the end of the business day in one ‘batch’ authorization.
By redeeming mortgages by CHAPS, sellers save on paying a few days’ interest. There is also less chance of a CHAPS payment getting lost in the post than a cheque.
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.
If you have any questions why not give our team of legal experts in our Conveyancing Department a call on 0131 297 7999 or by [email protected] and one of our expert team will be delighted to help.