Reservation Deposit on New Build

Jennie2827

Does anyone know why a new build property has a reservation fee? You don't pay a reservation fee on other properties.....and this fee is completely non refundable.

I have been stalling in paying this, but the time has come where I think I am just going to have to pay it! But, I am nervous about not being able to secure the mortgage on it.....and then I am stuck! Has anyone ever negotiated these fees at all?

I have my equity loan in place for the help to buy and my mortgage application is being submitted on Tues with Woolich. Am I likely to know in about a week as to whether I have passed the initial stage?

Many thanks for sharing your experiences....

Mavvy

When I bought my new-build property there was a reservation fee of £250 IIRC, I actually never paid it, but if I had it would have been deducted from the purchase price. Perhaps you need to check your small print>

Jennie2827

Thanks Mavvy.....it's £500 and will come off the purchase price, but only if I secure a mortgage! If i am declined, then I lose the money to the builder. . At the moment, I am thinking I will tell him that I cannot take the risk with this new MMR affordability coming into play until my application has been underwritten. He will probably put it back on the market, but that may be the chance I have to take.

Thrugelmir

Jennie2827 wrote: »

Does anyone know why a new build property has a reservation fee? You don't pay a reservation fee on other properties.....and this fee is completely non refundable.

Reserves the property exclusively for you for a period of time. In essence stops time wasters. The fee is there to focus peoples minds.

ethank

Jennie2827 wrote: »

it's £500 and will come off the purchase price, but only if I secure a mortgage! If i am declined, then I lose the money to the builder. . At the moment, I am thinking I will tell him that I cannot take the risk with this new MMR affordability coming into play until my application has been underwritten.

The builder wants you to commit to them and putting up your hard earned cash is indicative of that. This time last Easter I was attending lots of new build sites trying to find my home - it is going to be a busy weekend for the developers - and they will have lots of people who will make the commitment if you won't.

Generally, the builder would want an AIP for the house purchase price before they allow you to reserve. Have you spoken to a broker? If you do fail the mortgage ask them what there policy would be on a refund - some may keep part/all of the fee

You seem worried about losing £500. Buying houses is unfortunately risky. If you think that this might be the only money you could potentially lose, then you need to give some more thought whether buying a house is really for you.

Last year, on the first house we reserved, everything fell through due to my flat sale falling through, I had paid out for a valuation, searches, solicitors fees - and that was all money I just lost. I never got it back. The builder did give me back my £1k reservation fee in full though.

Jennie2827

Thank you for the reply.

I wish it was just the £500 that I was concerned about. Yes I do have a broker and yes I did already get a DIP with two lenders. However, with these new MMR rules coming into force, nothing is guaranteed. The builders want £500 every 28 days until exchange, and they have an absolutely no refund policy. Between selling my house, the valuation fee and one lot of £500 worth of deposit already (coming up to payment 2).....I will be approaching £2k that is lost before I know whether or not I can really get a mortgage. If the new help to buy agents continue to waste time as they have done since April 1st, I will have to shell out quite a few lots of £500 in the process. The builders also have a clause that if they choose to accept an offer from another buyer, then my money is also non refundable.

I understand its risky business, but it's approaching silly levels for families....

dgtazzman

Just because the builder has put certain clauses into their contract, doesn't necessarily make them legally enforceable. They can only keep a reasonable amount of money for losses they can proove (i.e. admin fees). The rest must be refunded. Asking 500 pounds for every new 28 day period till exchange is also having a laugh. Most developers will retain 100-200 pounds of reservation fees if you pull out, anything over that is unreasonable and probably wouldn't stand up to legal scrutiny.

ethank

Jennie2827 wrote: »

Thank you for the reply.

The builders want £500 every 28 days until exchange, and they have an absolutely no refund policy.

I have never heard this before. Normally you pay a reservation fee for a 28 day reservation fee, and they tell you they want to exchange in 28 days.

I didn't exchange in the 28 days - it was more like 60. I did not get charged another reservation fee! The reservation fee also comes off the money you need to settle on exchange. Any money you pay to reserve the property is part payment and forms part of your deposit.

What the builders are saying to you does not comply with the Consumer Code for Housebuilders.

chanz4

part of it is refundable with barratts