Help on buying an off build - urgent!

MMG

Hey all,

Currently thinking about purchasing a new build property. It was originally on for £270-£280k last year, and now the builder will accept £195k on it.

However, it's not been built yet, and the builders say it will be 7-8 months until completion. If an offer is accepted, a £1000 holding deposit has to be paid, with contracts signed within around 8 weeks.

I'm assuming that after a mortgage is applied for and agreed, then a bigger deposit is paid to the builders.

However, I'm slightly worried - What happens to this money if the builder goes bust, or if the whole development is left unfinished if this happens?

Any advice appreciated.

maryotuam

You lose it, unfortunately.

MMG

And is there any way of simply paying the £1000 until the build is nearing completion etc, without having tied up a substantial amount of funds?

uropachild

If the developer is with the NHBC you would get your deposit back if they went bust and the house was unbuilt. However, if they went bust after you had moved in and the development was incomplete - roads not tarmac'ed and adopted by the council etc. You would be left on a building site.

bob79

Be very careful. There have been several posts on this forum by people who bought off-plan, whose house wasn't completed before their mortgage offer ran out, who couldn't get a new mortgage offer (because of tighter lending criteria and/or a drop in the valuation of the property) and are now facing bankruptcy.

It's your decision of course, but I would stay clear of it.

llh189

I would agree with the other posts, buying off plan the moment would be a bad idea, by the time the property is completed, your financial situation might have changed and because of this or market forces at the time you might not be able to get a mortgage but you will still be liable for buying the property.

HTH

geoffky

SO MANY HAVE BEEN ON HERE AFTER BEING SHAFTED I WOULD DO A LOT OF HOMEWORK...what if they are going bust ect ect

geoffky

‘Off-plan timebomb’ threatens housebuilders

March 19, 2009 on 5:17 pm | In News | House builders are considering their options to deal with the large number of customers expected to default on off-plan deals signed before house prices crashed.
Heating & Ventilation News - 19 March 2009
With a wave of developments started before the credit crunch hit set to be completed this year, one of the major listed house builders described the situation as an “off-plan timebomb”.
Firms fear that consumers who put down deposits on properties a year or more ago will either discover they can’t find a mortgage to cover the balance, or will be prepared to lose their deposits rather than put themselves in negative equity.


http://www.landlordzone.co.uk/blog/news/off-plan-timebomb-threatens-housebuilders