Should I Buy a New Build property?
Why is buying a ‘New Build Property’ different?
There are many reasons why buying a new build property differs from buying any other type of home, not least of which is that the house may not even be built at the point you are looking to buy!
You can find new build properties being constructed by small developers, who are looking to build only one or two bespoke houses, or by large national builders, such as Persimmon Homes, Redrow or David Wilson, who will usually build several hundred properties on larger estates.
Can you view your property before agreeing to buy it?
If a developer has not yet finished building any of the proposed properties on the site before marketing them for sale, you will be required to buy your chosen property ‘off plan’. This means you would choose your plot from the estate plan prepared by the developer rather than by viewing the property style you wish to purchase, like you would normally do. Once the developer has completed the first property on the site, this home becomes what is known as the ‘show home’ and buyers are able to view this property before deciding whether to buy a house on the estate. You may however, still be unable to view the property style you are actually buying, due to the fact that it may not have been built yet.
This is probably one of, if not the, biggest difference between buying a new build and buying an older property. It is usually the case that a new build property will not be ready for occupation when you agree to purchase the property. The developer will expect you to reserve your plot by providing them with a deposit and signing a Reservation Form/Agreement, which confirms the plot number and the price of the property. The reservation deposit is agreed at this time and can be any sum but usually no less than £500. If either party decides to withdraw from the purchase, it is likely that a proportion of the reservation fee is forfeited to the developer.
When do you have to exchange contracts?
Developers will normally impose a deadline by which you must exchange contracts and this tends to not be negotiable. It is usually 4 weeks from the date of the reservation and your conveyancer will be advised of the date by the developer’s solicitor as soon as possible. If you do not exchange contracts within that 4-week period, the developer is able to withdraw any incentives that they have agreed to give you. The developer will expect you to exchange contracts even if the house is not yet ready for you to move into and the contract will provide details of how and when completion will take place once the property is ready.
What is an incentive?
An incentive is just what is says on the tin, it is something that the developer will give you to make you want to buy their property. These incentives can be financial (a developer may offer to pay your Stamp Duty or moving costs, such as Estate Agents Fees) or physical (such as installing certain types of carpet or kitchen counter tops). These incentives must be reported to your mortgage lender, if you are buying with the help of a mortgage, and the lender must confirm they are aware of them and be happy to proceed on that basis.
Completion of your purchase
If you are very lucky, the house will be ready for occupation at the time you exchange contracts, and a fixed completion date will be agreed between you and the developer. It is more likely, however, that the property will be due to be completed several months after the contracts are exchanged. You will therefore be asked to agree to a completion ‘on Notice’. This means that when the property is ready, the developer will send a notice to your conveyancer confirming this and advising that the solicitors will have to complete the matter within 10 working days of receipt of the notification. There is no negotiating with the developer over the date and you must complete your purchase transaction within the stated timeframe.
New Build Warranty
Every new build property will have a new build warranty of some description, the most well-known of which is the National House Building Council (NHBC). This is a warranty given in respect of the building and can be relied upon in the event that there are major structural issues with the property within 10 years of the house being sold. Please note, the warranty does not cover minor issues such as ill-fitting doors or badly installed trims or issues of a similar minor nature.
There are many New Build Warranty providers from which developers can choose, however, you will need to ensure that your lender is happy with the provider as not all mortgage lenders accept all warranties. If the lender does not accept the particular warranty offered by the developer, you may need to change your mortgage lender in order to secure a mortgage on the property. It is helpful to let your conveyancer know as early as possible which lender you are using, so that they can double check this for you.
Talk to Tollers
When buying a new build property getting the best advice and guidance is invaluable. If you are looking to purchase a new build property…Talk to Tollers on 01604 258101, our experienced conveyancing teams are on hand to assist you through the process.