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Buying a New Build - Developers Deposit
Smudger78
Posts: 164 Forumite
Hi,
We're looking into buying a new build and intend to sell our house and move into rented for a few months whilst they finish building it. The developer wants a £500 deposit to reserve the plot and then to exchange contracts 28 days after this. The issue is they have also said they want a deposit of 10% of the value of the property upon exchange and that this is standard practice and would be held by the solicitors. For us there are two issues with this:
1. It's unlikely our sale will have completed when we exchange and we need the equity from our sale for the deposit.
2. Even when we have completed our sale giving what would be a significant amount of money to a developer before the house has been built just doesn't seem right. Basically the money is better in our bank than theirs.
The justification the developer has given for requiring the 10% deposit is that it helps them fund the overall build and also safeguards them were we to walk away (as even though we'd have exchanged contracts so they could sue us they probably wouldn't as it wouldn't be financially viable). Is it me or is this a bit unreasonable? If it's standard practice on new builds fair enough but from our perspective the exchange of contracts gives them the protection they need and we shouldn't be expected to provide cash flow to cover their development costs/finance their business.
By way of background the developer is relatively small and so far have refused to budge on price and not offered anything as an incentive.
As standard we would get: turfed garden, double oven, hob, fridge freezer, dishwasher
We wouldn't get: carpet/flooring, wardrobes
They've basically said that its a small development in a popular area, they've sold half in a short space of time and the believe the property is competitively priced so they wont be doing any deals.
This is the first time we've ever even considered buying a new build off plan so as I say maybe this is "normal". It would be good to hear from anyone who has been through this process and bought off plan recently.
Thanks
We're looking into buying a new build and intend to sell our house and move into rented for a few months whilst they finish building it. The developer wants a £500 deposit to reserve the plot and then to exchange contracts 28 days after this. The issue is they have also said they want a deposit of 10% of the value of the property upon exchange and that this is standard practice and would be held by the solicitors. For us there are two issues with this:
1. It's unlikely our sale will have completed when we exchange and we need the equity from our sale for the deposit.
2. Even when we have completed our sale giving what would be a significant amount of money to a developer before the house has been built just doesn't seem right. Basically the money is better in our bank than theirs.
The justification the developer has given for requiring the 10% deposit is that it helps them fund the overall build and also safeguards them were we to walk away (as even though we'd have exchanged contracts so they could sue us they probably wouldn't as it wouldn't be financially viable). Is it me or is this a bit unreasonable? If it's standard practice on new builds fair enough but from our perspective the exchange of contracts gives them the protection they need and we shouldn't be expected to provide cash flow to cover their development costs/finance their business.
By way of background the developer is relatively small and so far have refused to budge on price and not offered anything as an incentive.
As standard we would get: turfed garden, double oven, hob, fridge freezer, dishwasher
We wouldn't get: carpet/flooring, wardrobes
They've basically said that its a small development in a popular area, they've sold half in a short space of time and the believe the property is competitively priced so they wont be doing any deals.
This is the first time we've ever even considered buying a new build off plan so as I say maybe this is "normal". It would be good to hear from anyone who has been through this process and bought off plan recently.
Thanks
0
Comments
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Yes it's standard practise for new build homes, especially off plan. I have done the same just last month. Due completion early July 2014.0
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Your buyer's deposit will pass up the chain at exchange of contracts as it usually does, so you won't be having to come up with 10%. The solicitors normally organise it among themselves, with the cash from the bottom of the chain passing up to the top, becoming a smaller percentage of usually a bigger purchase price the higher up you go.
If you don't exchange contracts the builder won't fit out the property to your spec. Only your legal obligation to purchase assures them you will definitely go ahead.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
If you are dependent on your sale in order to exchange, you will not be able to exchange on the purchase until you have exchanged on your sale.0
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If you are dependent on your sale in order to exchange, you will not be able to exchange on the purchase until you have exchanged on your sale.
Likelihood is that our sale, which we are well on with, will exchange before we need to exchange on our new build so don't think it will be an issue. Thanks for responses everyone, its put my mind at rest in as much it appears this is quite normal and the deposit being held by our solicitor rather than the developer also sits much better with us...
The only things that irks a bit is we have got nothing off of the price and nothing thrown in as its a small development in a very popular area and they are selling well so developer is taking a firm stance - suppose you cant win em all.....0 -
The only things that irks a bit is we have got nothing off of the price and nothing thrown in as its a small development in a very popular area and they are selling well so developer is taking a firm stance - suppose you cant win em all.....
If you think about it from the vendors point of view: They are selling chain free property, they are not desperate for the money (as it probably cost a fraction of the selling price to build and purchase the land), its a popular area and they know they'll get the full asking price if they wait (and house prices are going up all over the uk), so would accept an offer below the asking price?
If you don't accept the asking price or the T&Cs, then someone else will, so if you want the plot/house then there's only one think you can do...0 -
To be honest most new builds dont include turfDon't put your trust into an Experian score - it is not a number any bank will ever use & it is generally a waste of money to purchase it. They are also selling you insurance you dont need.0
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