New Build Off Plan - Exchange without a mortgage?

Balarissa

Hello. I've had a read through but couldn't find a thread that was similar to my question. I am hoping for a bit of advice, but please no unhelpful comments about being mad to buy off-plan etc! Thanks.

Essentially we have offered on a new build, off plan and we are very pleased with the price, the house and the build quality of the development, and have investigated other sites by the same developer.
The problem is the completion and the exchange dates - completion is 'expected' in March 2010 but as we have now reserved the developer are pushing for a quick exchange - before we put down £500 to reserve our chosen plot they did tell us exchange ought to happen within 28 days of reserving but with only 1 suitable plot left in this phase we didn't want to miss out. (after our 28 days they have the 'right' to put it back on the market).

Now, our IFA has found us a mortgage (80% LTV) with A&L at a fixed rate and has told us they *might* hold the rate until completion but that we might be subject to going for a new product if completion doesn't happen within 6 months of us taking up the mortgage offer (which let's face it, it won't).
We aren't too worried about the rate inflating a *little* as we managed to haggle the price of the house down BUT what we are very concerned about is exchanging on this current mortgage, in 6 months time the mortgage being withdrawn and then, for some reason A&L refusing any product or only offering one that we can not commit to. We will then have exchanged and be facing completion with no mortgage and loosing our deposit would end our dreams of buying for many years. (Our IFA thinks this highly unlikely but the risk factor is giving me cold feet).

Has anyone any experience of buying off-plan like this with a quick exchange but long completion date?

Help appreciated, many thanks.

Mrs_Bumble

I personally would not be happy for any client of mine buy off plan at present, too many horror stories around.

If A&L won't extend their offer and you have exchanged what will you do? Make an application with a new lender? What if the property valuation is less than it is now?

PasturesNew

Your fears are not unfounded. They might withdraw the product, they might change the rules, the house might be valued less than today, you might lose your job and become unmortgageable.

Off plan is a risky business.... it's not really "meant" for regular people... it's only in the last few years that people have been able to get away with it as house prices were rising and there was a frenzy in the air.

What if they don't complete for a further year, what if the developer goes bankrupt or into administration, what if you're the only buyer and they flog the rest off as social housing.

There you go. Sleep tight.

Balarissa

Thankyou for quick responses!

The developer going bust was (is?) a concern - we actually know several people who have experience of buying off plan which is one of the reasons we were interested in the first place as we know that you do stand to get the same property for a cut-down price. However one of the off-plan places my parents have bought was with a company that has since gone into liquidation which has caused no end of trouble (luckily after completion so they did have a house before it all went wrong).
We don't forsee this as likely with the build we have chosen for various reasons. If this were to happen, however - or if we were to become unmortgageable, is the very worst that would happen that we would lose whatever deposit was paid at exchange or would be end up being legally bound to buy the property and then find ourselves being sued by the developer because we couldn't find the funds to complete?

Thanks again

getmore4less

You want watertight pentalies in any contract for the build being late or a pull out option with full refund.(try this and see if the builder will let you put these in)

If the builder has trouble selling they may stall the project and the site could be a building site for many years(I have family on a site like this)

You also want a contract that allows for full recovery of monies paid if the lender will not meet the lending requirements for the agreed price at the time of completion

Many people have found that the lenders have done new valuations and refuse to lend the amount needed they lose their deposits and risk getting sued for the rest.

Off plan exchange with no funds is not a game I would play in a falling market without getout clauses.

Balarissa

Thankyou, I hadn't really realised that you could add such things into contracts. We actually haven't met with our solicitor yet but will make sure we raise those issues with him.
The sales lady at the site put the spin on the situation that it was totally normal for people to exchange without a mortgage that was definately going to be solid for completion, I've been wondering what all the other buyers at this stage have planned, unless they are cash buyers perhaps.

maninthestreet

Balarissa wrote: »

Thankyou, I hadn't really realised that you could add such things into contracts. We actually haven't met with our solicitor yet but will make sure we raise those issues with him.
The sales lady at the site put the spin on the situation that it was totally normal for people to exchange without a mortgage that was definately going to be solid for completion, I've been wondering what all the other buyers at this stage have planned, unless they are cash buyers perhaps.

It is most definitely NOT normal to exhange contracts on a house purchase without funding in place!!