Buying New Build off plan - Legalities

katty10

I am trying to understand the process. We have a house currently, that maybe under offer in the coming weeks. Trying to understand the process of buying and selling. The house we are interested in is a New Build and would require a 25% deposit with an exchange of contracts in 28 days (although it is not even built yet), but we don't have these kind of funds in liquid assets, but we do have them in the equity of our home.

How would we be able to exchange contracts say in 28 days (if our house was under offer)? Just trying to understand the process, and can it be done?

molerat

Bridging loan.

MrJB

Are the purchasers of your home going to give you the required equity when they exchange (I suspect no).

Normally procedure is that deposit gets moved up the chain, but obviously in this instance you're required to produce a larger deposit. In addition - have you considered the likely completion date of the scheme, obviously you will get a mortgage offer before exchanging but this may only be valid for 6 months.

AnotherJoe

PeX with the housebuilder?

katty10

Thanks the builder doesn't do PEx so that's out. Although now I think I have a little more understanding thanks all.

eddddy

This sounds like it may be one of the higher risk off plan schemes.

Normally, when you buy, you would pay a 10% deposit on exchange, and the money sits in a solicitor's account. If, for example, the developer goes bust - the solicitor pays you back your money.

In this case, I suspect the 25% goes straight to the developer who is then free to spend it on doing the building (or whatever they choose to spend it on). So if the developer goes bust - you wouldn't get any money back.


You should think of this like lending money to the developer. Are you talking about £50k+?

If I was lending £50k to somebody, I would want to check them out pretty thoroughly first.