Deposit on New Build before sale of our house. Crazy?

bensebborn

Hi

We've found a new build that myself and my wife love. The specific plot/house is not yet built (other houses on the same development are, and are looking good, so we have confidence in the site/builder).

They have just started to advertise this particular plot and we want to reserve it, as it has the best garden, etc. It will be ready in September.

When I enquired, I was told we couldn't reserve until we had a buyer on our house, as we'd be expected to exchange within 28 days of reserving (and paying 10% deposit)

I think we could go ahead with reserving if we'd be happy to pay the deposit after 28 days. We have the money to do this, but would need to sell our house to pay the balance.

Our house is in good condition and we'll be putting it on the market this week. My wife is due our first child in July, so not great timing, but we don't want to go ahead with everything, get a buyer then find out the plot we want has gone...

So, asking people with experience of buying new builds:

1) What is the risk in putting down a deposit before its built?

2) Are we crazy to commit/exchange before selling our own property?

3) Will we be in a stronger bargaining position doing this, or waiting until we've sold?

Any tips gratefully received!

davidmcn

1. The main risk is that you don't know when they'll finish it. At least try to agree a longstop date so you can pull out if they're ridiculously late in completing.
2. Yes, if you need the funds to complete the purchase, and you can't afford to wave goodbye to the deposit.
3. Bargaining for what? They'll understand why you'd prefer to wait until you've sold, but the risk is that they'll sell to someone else.

bensebborn

Feels like a head vs heart decision! I wouldn't usually consider, but houses in the area area hard to come by and it's a lovely area so don't want to miss out

By bargaining I mean on the new house deal - discount on asking price, extras thrown in,etc - it's always difficult balancing looking too keep and paying it cool and missing out!

ethank

You are still a dependent buyer. If they are a large building firm, they probably will not sell the property to you until you are in a proceedable position. You can't proceed if you don't have a buyer.

Have you considered part exchange?

bensebborn

True...

We can't use movemaker until the ground floor is laid and can't PX until the roof is on. Both are at least a month off.

Which does mean others wil be in the same position as us. Let's just hope a cash buyer doesn't come along. Hopefully less chance on a 5 bed house.

Marvel1

The risks as I see it:
* You need to get a buyer first
* A buyer may not be willing to wait until September or later due to delays
* If buyer does wait, they may find someone better and drop out
* To above you may lose deposit if you can't complete

The only you can do is if the buyer does not want to wait, can you move out and live somewhere temporary?

kingstreet

When you have an agreed sale, it should exchange contracts at the same time as your newbuild purchase.

Your buyer's deposit will pass up the chain, usually becoming a smaller percentage of your purchase, but sufficient for the builder. You will not normally need 10% deposit.

Once you are proceedable, ie you have received an acceptable offer for your property and agreed a sale, a builder will accept a reservation on a newbuild.

bensebborn

So, if I have a deposit already and the bank have agreed a mortgage in principle based on it being a second property (ie they are happy for the first to have not sold) then I guess we're in a position to go ahead?

We would look to sell our existing property asap but it means we're not restricted by that...

Ben

kingstreet

If you can demonstrate to a lender you can afford both properties and already have the deposit yourself, there's nothing to stop you.

However, bear in mind the SDLT 3% surcharge which will apply if you don't sell before you buy the new one.

If the plans go through as intended, you will get this refunded if you sell within eighteen months.

bensebborn

Thanks Kingstreet, and a useful tip about the stamp duty. Cheers.

visidigi

Dont worry about the 28 days either - We are buying a new build and the builder is okay for it to take longer as long as it keeps moving.

The new build solicitor actually caused the first delay on the process of 7 days, so I am really not worried about the 28 anymore..