new build - avoiding problems

slopemaster

I know everyone says avoid like the plague.
But I have seen one in the area I want and it seems realistically priced even BEFORE negotiating a deal - ie less than is being asked for second hand properties of similar floor area in the area.

My reservation is - when I say "seen", they aren't built yet. (Started, completion due April 09)
I am wondering, if I manage to negotiate a price and decide to go for it, whether there is also scope for negotiating on the contract I would have to sign, and what best to ask for.

I know they wouldn't agree (don't suppose so anyway) to clauses letting me out if value falls in next 6 months, or if I can't get a mortgage. (The latter seems unlikely as I have 50% deposit, but who knows - I do need a high income multiple as I have a low income at present.)

What I am wondering is whether there is a way to avoid the scenario where they are late completing, but i am locked into the deal.
Would it be feasible to negotiate the insertion of a clause which said completion is due in April, and if not complete by June I can walk away and get my deposit back? If so, presumably I would need to pay a solicitor to draft it???

Also, does anyone know whether the deposit is protected in case of the builder going bust?

Thanks if anyone has ideas or can shed light ...

Cat695

DO NOT WHATEVER YOU DO SIGN ANYTHING BEFORE IT IS BUILT>>>>EVER EVER EVER

because yes they say April 09 but what they actually mean is whenwe can be bothered because we're now not making any money so what we will do is take a deposit off you then make you pay the price as of today even though the house could have dropped by 20/30/40% by april or even more when we have finished building it.

I'm not saying don't buy it (though I HATE NEWBUILDS) but you would be VERY FOOLISH to sign anything before it is built!!! infact MAD MENTAL STUPID.....end of rant

they will not sign anything that says they must complete by april....stay away until their built....i can assure you you will get it cheaper!!

redrabbit29

Read this:
http://forums.moneysavingexpert.com/showthread.html?t=1241741

End of thread.

poppysarah

Not built yet? Huge warning signs should be flashing now. It might not get built at all.

Do not use the solicitor they want you to. I know the legal eagle says they're supposed to act in your interests but before you know it you'll be tied into buying a house that might not get built for 5 years.

I'd say steer clear until they're built - bet you a packet of humbugs that they won't be built by next year at all.

pinkshoes

It depends what they're wanting in advance! DO NOT exchange contracts until it's built... BUT, you could negotiate a reservation fee of say £1000, which means the house is yours, and you will exchange contracts upon completion. You would also need to negotiate into the clause that if completion was delayed beyond the agreed date, then you could have your £1000 refunded with no further commitment.

Ours was a supposed to be a £1000 non-refundable deposit, but we actually discovered that if they didn't refund it, they couldn't actually sell the property to anyone else either...

uk_steve

im no big house buyer but have a few and to be honest i wouldnt dream of buying anything before its built in todays market!
Those gambles have well gone.. re look in 10-15 years maybe

(if you like a gamble that is)

Premier_2

There are basically two or 3 risks with buying a new build in todays climate, as far as I can see.

1. You exchange contracts and pay the normal 10% deposit, yet the builder stops building, holding you to the contract indefinitely. The only way around this is for the contract to include a long-stop date for completion. Unfortunately most major developers still will not include this in their sales contract, but you might be able to pursuade a smaller developer to include a long-stop date.

2. Your mortgage offer expires, or is terminated, prior to completion. This will need you to arrange alternative borrowing which should the value of the home decrease and you are borrowing at near the maximum LTV today, may be difficult in the future. The way to overcome this is ensure you are not needing to borrow anywhere near the maximum LTV limit today.

3. The neighbouring houses are not completed, because the developer cannot find a buyer. This is a risk that happens on all new builds at any time, not just in todays climate. You need to take your own view on the likliehood of this happening based on how well the neighbouring properties are selling/are in demand.
Worst case scenario would be that the developer opts not to finish the development, eventually sells the surrounding land, and the new owner then applies for (and is granted) planning permission for alternative type of housing.


Regarding the security of your deposit - that is as secure as it can be. In the event the developer goes bust, NHBC (or equivilent cover) will arrange for the property to be completed.

slopemaster

Thanks all for ideas
I certainly wouldn't use their solicitor, or pay more than a 'holding' deposit...
will decide whether to just wait until the properties are close to completion, or to negotiate the inclusion of an escape clause if completion is delayed...

slopemaster

Well, I just went to look at the show flat - very nice.
But impossible to get them to agree to anything that says if they don't complete by, say 3 months after they are supposed to, I can pull out.
They will not even consider it, they say, no you have to give a holding deposit now, and exchange contracts in 28 days from now - on flats they haven't started building yet - and no, the completion date is not April as the EA said, but maybe June - but its out of our control and could be later!!!!!

So I said :rotfl:
I'm amazed that ANYONE would sign up to that.
Now looking at second-hand places - that already exist!