New build

Barpeeler

Hi,

My partner and I are looking to buy a new build property in our area, we paid a £250 refundable deposit for the plot and were told once it was released for sale we would have 48 hours to cancel or pay another £250 (non-refundable).

The last in the show home says that once we make the 2nd payment they look to exchange contracts within 30 days!

What's meant by exchange contracts?
We don't have a mortgage AIP yet.
We have our deposit, when would this be paid?

Thanks

AnotherJoe

There are books on house buying, you had better get one asap to understand the process.i think it's also explained in here somewhere.

Exchange contracts is the point at which you are committed to buy and cannot change your mind and back out without losing huge sums of money.

Bottom line you need to be very confident you'll get a mortgage before paying the second £250. Have you spoken to a mortgage broker or a lender yet ?

Deposit is paid at exchange of contracts.

Anzhelka

I am afraid that you have to pay another £250, otherwise they won't start selling process at all. we have lost like that our money but it was worth our fault that purchase didn't happen.

rtho782

Once you pay the 2nd £250, the house is "reserved" for you and you can't pull out without losing the £500.

I would suggest that £500 is nothing if you do change your mind though, and this is the last point you can pull out without losing a *lot*, so don't avoid it completely.

DO NOT use the recommended solicitors, the recommended mortgage broker is OK but you NEED a solicitor on your side with a new build, as the housebuilders can and will bully you into doing everything on their terms.

If you have an agreed sale price, you could start the process now, and get a mortgage offer, get a solicitor to conduct searches, etc.

Once you've done these things, you will have incurred more non-refundable charges. The mortgage may charge you an arrangement fee and/or a valuation fee. The solicitor will charge you for searches. So don't start this unless you are sure.

The new build people will tell you 30 days is a deadline for exchange, but if you overrun slightly but are showing signs of progress, they are not going to find a new buyer (and give them a new 30 days) unless you look like you are timewasting.

Once you have the mortgage offer, and the valuation, and the solicitor has done his searches, you come to exchange. This is when you sign a legal contract to buy the house, and you pay your deposit.

If you pull out after this time, you lose usually 10% of the house value (so if you have paid a 5% deposit you could be left with a big bill) plus they can sue you for costs (e.g. now they have to remarket the house etc). So you really don't want to pull out at this point.

Being a newbuild you will have been given an estimated completion date. This can and will slip, which depending on your current housing situation could put you in a bad position.

Part of the reason for using your own solicitors is that you need protection from this. Your solicitor should be putting a calendar backstop in the contract when you exchange - e.g. if you are expecting completion late june, you might have a calendar backstop of july, so that if it's not completed by then THEY have breached contract and are liable. Solicitors they recommend won't help you with this sort of stuff for fear of loosing business from the builders in the future.

You also want to look into snagging surveys. New builds commonly have many snags, these may not be immediately obvious, and it could save you tons of hassle long term. If you can get the builders to agree to it, you want the snagging inspector to go round just before completion and you want the issues resolved before completion. If you were buying a new car, and your mechanic friend found issues with it, would you expect the dealer to just say "ah well, take it now, we'll come round yours and fix it sometime"?

They will look at you funny, tell you "why would you want to pay for something you can do yourself", and then say (at least initially) that they won't let anyone in until completion. Ask yourself why this is.

Final thing to be concerned about, if you are buying a freehold, is "Estate Charges".

If you are on a private road that will never be adopted by the council, it is common for the builder to charge estate charges. This is like paying service charges on a leasehold except you have absolutely no protection or grounds of appeal whatsoever.

So, you might have been told you are going to be paying £180 a year in estate charges and think this is fine, but you won't get any reduction in council tax for the fact that you are paying someone else to maintain the road and power the streetlights. More to the point, you will be told that "oh it's fine, they can only charge you whatever it costs them". Yeah. Right. So if I'm the manager of this estate company, set up by the builder, and run for their profit, I apply a £500,000 management charge, then I hire my brother to cut the grass at £500 an hour, and I run a broom around the road once a month and charge another £2,500 an hour for that, and then I decide my wages are £100,000 a year. This money is divided between all the freeholders and they CANNOT challenge it in any way.

Seems crazy right? I know people living in newbuilds who have seen these charges start of reasonable, and then double every year. It quickly becomes expensive.

New builds can be good but there is LOTS to be careful about, it's an unusual situation in that the balance of power is very different to a normal house, you are often a couple of FTBs dealing with a massive company with piles of money.