Buying off plan risks

cameronh9

Hi all,

I'm intending to buy a property off plan (est. 16 months to completion) within the next week, but was wondering the risks. It's fairly unlikely I'll lose my job since it's been very stable, even through difficult times.

Apparently the contract is not assignable, but I was wondering what could be done in the event that at completion, I was unable to get a mortgage [edited], and what can be done in the mean time to mitigate any such risks. My parents, who own property worth far more than this property have said that they'd gladly buy it off me in the event that I couldn't afford it. However, since it's not assignable, would that mean that I first need to convince a bank to give me a mortgage before I can even have a chance to sell it, even if I have a buyer immediately ready? Would there be any way I could get the bank to give me the mortgage but then immediately re-assign it to the wealthy buyer, even if I had no job and no money (just theoretically -- I hope )?

Thanks!

lukekelly_2

pinkshoes

cameronh9 wrote: »

Hi all,

I'm intending to buy a property off plan (est. 16 months to completion) within the next week, but was wondering the risks. It's fairly unlikely I'll lose my job since it's been very stable, even through difficult times.

Apparently the contract is not assignable, but I was wondering what could be done in the event that at completion, I was unable to pay the deposit, and what can be done in the mean time to mitigate any such risks. My parents, who own property worth far more than this property have said that they'd gladly buy it off me in the event that I couldn't afford it. However, since it's not assignable, would that mean that I first need to convince a bank to give me a mortgage before I can even have a chance to sell it, even if I have a buyer immediately ready? Would there be any way I could get the bank to give me the mortgage but then immediately re-assign it to the wealthy buyer, even if I had no job and no money (just theoretically -- I hope )?

Thanks!

Why would there be any question of whether you have a deposit or not? Surely you have the deposit NOW? (if not, I suggest saving, then waiting until you have a 10% deposit...)

Don't you have to pay a 10% deposit and exchange now, then the rest upon completion, whenever that is?

I'd be more worried about the building company going bust! If you do go ahead, you should ask for a clause in the contract stating if they're not finished by <date>, then you get ALL your money back and have the right to pull out.

pinkshoes

lukekelly wrote: »

You've only been a member for a couple of months, so perhaps you are the troll??

Seems a genuine question to me, so your post is rude.

globalds

cameronh9

@lukekelly, globalds: Wow, very pleasant way to be greeted. The hospitality of people on the internet never ceases to amaze me!

This is a genuine question, except I did make a think-o when typing. I actually meant this: "I was wondering what could be done in the event that at completion, I was unable to get a mortgage.

I can indeed pay the deposit now since I've been saving for some time, and I am intending to agree to pay it within the next week assuming I can't find any reason not to. Anyway, I really can't see the building company going bust, they're huge property developers in my location and have a number of large recently completed developments that are selling extremely well. I've assessed this risk to the best of my ability, spoken to people who're living in their existing properties, etc.

The question remains though. If I couldn't get a mortgage, but someone I know can and is willing to buy it, would I be able to immediately sell it to them, despite having nothing myself? I can't see it happening, I just like to be certain I understand the situation.

elspeth240

If this is a serious query then, if you reserve the property and cannot get a mortgage (you won't) in 16 months time because the property value has dropped (it will) you will be sued by the builder for any remarketing costs along with any interest from the day of completion until the property is resold. The remarketing costs will include the drop in value so will end up costing you tens of thousands of pounds.

lukekelly_2

pinkshoes wrote: »

Seems a genuine question to me, so your post is rude.

If it is a genuine post then I apologise. It still looks remarkably dodgy though...

And my serious answer. Don't do it! Run a mile! Don't even contemplate buying a property off plan at the moment! Why buy off plan now, taking many large risks (no mortgage, no house, no housebuilder, no desire to live there etc), when you could buy it substantially cheaper when it's actually built?!

m_13

I'm surprised that builders are even trying to get people to buy off plan. 16 months sounds like a long time to finish a property?

Search on this forum for 'buying off plan' and you'll find posts from people who bought off plan, paid the deposit and have now found that the property is unlikely to ever be finished and if it is, will be well below the value they paid for it.

There are plenty of new builds that are being reduced so why not buy one of those if you are desperate for something sparkly and new? You may be caught by the mortgage lenders revised attitudes to new builds if it's a flat though; they've realised that there is oversupply and so aren't lending high LTV.

However, reading back through your post you appear to be hoping that you can buy off plan now and then sell when completed to a 'wealthy buyer' who will pay more than you? In the current climate this is a highly risky strategy and it almost guaranteed to fail. You'd be better off investing your money in a repossession property than giving your deposit to a builder for 16 months.

Richard_Webster

I'm surprised that builders are even trying to get people to buy off plan. 16 months sounds like a long time to finish a property?

Search on this forum for 'buying off plan' and you'll find posts from people who bought off plan, paid the deposit and have now found that the property is unlikely to ever be finished and if it is, will be well below the value they paid for it.

There are plenty of new builds that are being reduced so why not buy one of those if you are desperate for something sparkly and new? You may be caught by the mortgage lenders revised attitudes to new builds if it's a flat though; they've realised that there is oversupply and so aren't lending high LTV.

However, reading back through your post you appear to be hoping that you can buy off plan now and then sell when completed to a 'wealthy buyer' who will pay more than you? In the current climate this is a highly risky strategy and it almost guaranteed to fail. You'd be better off investing your money in a repossession property than giving your deposit to a builder for 16 months.

Yes, go ahead, but I assume you will be effectively saying to the builder that if he is mad enough to expect anyone with any brains to buy a property off plan in the present climate you will only agree to pay him say 65% of his price! Its got to be really really cheap to make it worthwhile. Why should anyone buy off plan when builders are struggling to sell completed houses?

cameronh9

The property is far cheaper than it would be normally. My location hasn't had it's prices significantly hit by the credit crunch, nor have people lost their jobs in any significant numbers, but selling has slowed to a crawl since people seem to be holding onto their property until after the credit crunch.

I'm intending to buy this place to live in it, not make money or do any risky buy to sell strategy. I don't intend to lose my job, nor do intend to sell it in the near future. All I want to know is if I can transfer the mortgage obligations to my far more wealthy and asset-rich parents should something happen between now and then. I suppose I could borrow money off them and they could take out a mortgage on their existing property... but they want to own something they're paying for.

As for the property, it's in a location that is about to be given a massive state-funded overhaul, and already is quite a decent location. Almost everyone I've spoken to said they'd go for it if they were looking at the moment.

Basically, my question is about whether I can transfer a propety on completion to someone else, if they're ready and able financially to get a mortgage (the bank will lend) or pay for it.