Buying a new build house (off plan) - what to consider??

JayneG

Hi all,

I'd really appreciate some advice from those that have more experience/knowledge than me.

As per the title, me and my husband have found a new build house that is just right for us. Now, we sold to rent last year, and were planning to wait a while longer, but this house has already been reduced by 23% and now looks like really good value compared to comparable pre-owned homes in the area. The development is well established, but the current phase of houses are being built as they are reserved, so we would have to wait 4 months from confirming our interest to the house being completed (actually ideal as this is exactly how long we have left on our tenancy period). I am not too concerned about 'living on a building site', as the part of the development we would be moving onto is pretty much finished anyway.

However, buying off plan isn't ideal I know, so I would really like some input from you all as to what kinds of things we should be aware of, and ideally what measures we can take to reduce our exposure to the risks.

ATM my main concern is the valuer down-valuing the property at the time of completion and us being liable for the difference (as we do need a mortgage) - could we write something into the contract that allows us to walk away in such an event if the developer won't reduce the price accordingly?

What else? :beer:

Thanks

JayneG

No takers? :huh:

Cat695

My initial response would normally be DON'T TOUCH new builds that haven't been built. But I'll be a little more helpful

You need to consider a few facts.

You pay a deposit lets say 10%for the house.....you agree on a price of say 170k....(so 17k deposit)...house gets built you apply for a mortgage and the bank values it at 140k.....the builder won't budge on price.......how are you going to find the other 30k??? and don't forget you will be in some sort of contract with the builder so you COULD lose your deposit....then what would you do??....as you have already mentioned in your post.

Also as seen on this thread many times (like my previous comment).....lets say they will have it built by dec.....then they change it to apr 2010 then change it again to Aug 2010...etc etc....what would you do then.

These are a couple of things I think you should think about.....as it happens ALOT in this current market. And IMHO would seriously put me off buying an off plan new build.

JayneG

Thanks Cat695. I asked the mortgage broker when I spoke to her a little earlier today and she explained that once I had reserved the property I would have a period of time, say 28 days, to exchange contracts. Prior to exchange I would need to apply for the mortgage and the valuation would be undertaken. Only at exchange would any deposit be paid, and therefore I would only pay a deposit once the lender and the builder were happy with the price on the table.

Let's say the build is completed on schedule and 3 months later we complete, our existing mortgage offer is still valid and no further valuation is required.

So, as I understand it, the situation I really need to protect us from is the build not being completed in the time period whilst the mortgage offer remains valid. Yes, that does concern me, I will need to raise it with the developer and ensure that we have something written into the contract that protects us in such an event.

Does anyone have any experience of doing this?

And, has anyone got any positive experience of building a new house off plan in the current climate?

Berkshiregirl

JayneG wrote: »

So, as I understand it, the situation I really need to protect us from is the build not being completed in the time period whilst the mortgage offer remains valid. Yes, that does concern me, I will need to raise it with the developer and ensure that we have something written into the contract that protects us in such an event.

I don't think you'll get them agreeing to do this - I've not heard of an example on here, as opposed to the dozens of horror stories of people being locked into purchases on new builds that aren't worth what they signed up to. It's not in the builder's interest.

If you're going to go ahead with it, make sure you're using an independent solicitor, and not one on the list provided by the builder. You would need to make sure any such clause was air tight eg if the build's not completed by X, then there's a break of contract and both parties are released.'

Good luck!

Feline_friendly

We are in the middle of buying a new biuld and due to move end of June. Our house was reduced alot before we reserved anyway...plus we got a little more knocked off. The house we are buying is in line with similar houses already biult in the town and been sold. It takes 4 months for a house to be biult from foundation stage. Our surveyor went in last week and has valued it at a price slightly higher than we are paying...so very happy. As long as the time scale isnt over 4 months...i wouldnt recommend waiting longer then there shouldnt be a problem...however, do your research first...how much were they selling last year as your development is established....have they knocked the price down recently. If you are happy..then like myself and a few others on here who have bought a new biuld you will be ok.

As for the contract...no you cant put in about it having to be biult by a certain time, well we couldnt anyway...however in our case they were all set to biuld the house...even stopping work on houses they were working on but were not reserved. Our roof is going on this week! So make sure they are ready to biuld now.

I dont think in this current market it is advisable to reserve a house that wont start to be biult for a month or 2...just to keep yourself safe really.

We have used the biulders solicitor..as have others on here....and have had no problems at all, in fact it has gone more smoother than when we bought our present home.

Things must be picking up..especially around here...as my development has now reserved all it's plots that it has released and that has been in the last 2 months since we have been involved.

bubblepop_2

Just be very careful - I moved into a new build a year ago with the promise that communal and public areas would be finished post completion and a year on they haven't done a thing - and the company has just gone bust as they have sold a fraction of the flats they'd expected to.
Personally I wish I'd stayed well clear of new builds....

JayneG

Thanks all, much appreciated.

Feline Friendly, nice to hear about your experience, hope the move in goes well.

Bubblepop, I read your other thread, what a nightmare! Luckily there are no communal areas on this development (all houses) so that particular issue shouldn't trouble us.

I'll keep thinking.

:mad: why do we have to fall in love with houses!!

terrierlady

what solicitor would allow u to exchange without having a mortgage in place? you put down a reservation fee of approx £1-2k then normally 28 days to exchange contracts by this time a surveyor or valuer will have come out and done an inspection, as long as you are seen to be doing all the devloper asks dont panic about 28 days, the search is out of your hands re timescale and so its the mortgage application turn around, so 4 months from reservation to legal completion is not a long time.
People either like new builds or they dont no in between.;)

dodgy

We had no problem if it helps. Bought a new build due for completion at end June, was reduced and also got some off the reduced price. Valuer went around last Friday and valued the half-built house at almost the price we are paying - and said that on completion it would be worth the price we are paying.

With that confirmation there doesn't seem too much to worry about - and this all happened before we exchange, so our total outlay so far is reservation fee (£500) plus valuation fee (£270) plus some of the solicitors fees for searches, etc.

JayneG

Thanks terrierlady and dodgy. Dodgy, are you using the developer-recommended solicitor? If so, how is that working out?

I'm assuming the reservation fee is deducted from the sale price, is that right?

Also, does anyone know what happens if a more attractive mortgage becomes available between now and completion (with the same or a different lender?) At which point am I tied in to the mortgage offer we completed on the basis of?

So many questions!!