Buying new build . When to sell current home?

robato

We are very interested in a new build development which will start selling from Sept 2017. However, the houses won't be completed until winter 2018 (i.e. Dec 2018) according to their website! I don't have experience with selling but I will need the equity from my current home to pay the deposit on the mortgage. I can afford the reservation fee in cash.

I understand I need to sell my home, in order to make a firm reservation. Although the price list hasn't been published yet, we're expecting to pay up to £800k. The mortgage part should be fine but I'm struggling to figure out what is the best time to do things, in particular when to sell my current home?

The developer does accept reservations where you have 3 months to sell your home. But if you don't sell, they'll refund the deposit or possibly extend the time to sell.

However, do I sell now (just before summer) so I am in the best possible position to negotiate? Or wait until Sept 2017 when they start marketing?

On the assumption that I do sell and accept an offer on my home, will any buyer wait over a year for my new build to complete? When would they expect to exchange contracts?

If I were a buyer, 6 months would probably be my limit. Are new builds always sold so far in advance? Any advice on timings or in general?

hammy1988

Having just purchased a new build I can only help you with what I know. For a start, cash buyers are in the best positions to negotiate prices on New Builds but you have to be prepared to wait for it to be built.

They do accept reservations but only on the condition that you can exchange contracts with them within short periods of three months only, and with this its a lot of hounding from them involved to push things along If you are selling yours to a ready buyer. If you are a cash buyer you will exchange contracts as soon as sometimes within four weeks however, this does not mean your house will be built sometimes for many months.

New builds always want buyers well before the house can sometimes even be built! You will get given an anticipated completion date when the house will be ready when reserving but it is FULLY noted in your contracts that this is only a anticipated date but on the positive side, they give you a certain amount of months before if it is still not ready built, you can walk away and get your money back. This was also in our contracts and it was about six months I believe in total so not too extreme of a wait.

In our experience if you wait to sell your house you need to make sure you have an offer on your house at least before you reserve a new build, especially if using help to buy scheme, this is the only way you can do it that way.

I wouldn't expect any buyer to be happy waiting for your new house to be built when they have bought your house... Also If they are in a chain...no chance. If you get lucky and get a cash buyer or a buy to let landlord you can ask to pay rent until your house is ready but not a guaranteed thing.

My opinion, cash buyer, sell your house and go and live in rented accommodation and wait to reserve a house when you can, walk in, say your a cash buyer and bag yourself a deal! They idolize cash buyers and you are really in a good position for haggling on price and getting things thrown in like carpets etc.

If you really want a new build sometimes you have to wait for them. Part and parcel of the system. The main thing is, when they release your plot for reservation then the anticipated build dates are not to far away..

Hope this helps a little.

Our New Build developer is Linden Homes.

P.s sorry for typos. On my mobile in bed lol.

hammy1988

I missed a point.

The system you have stated about selling your home within three months and if not ready they will back out or extend. Honestly, this will cause a lot of undue stress. You'll be wanting your new house but could get very frustrated wanting buyers for yours. The sales reps for New Builds are very hounding...not good for the blood pressure sometimes lol.

AnotherJoe

You could always put yours on the market sooner rather than later and go into rental.

robato

Thanks for the replies and useful insight. Rental is of course an option but am keen to explore less disruptive options for my family.

I just thought of one idea overnight. If I don't sell but instead keep my current home with the intention of letting it out, would developers accept a let to buy mortgage offer on my current home? I have about 50% equity so I think the numbers would work.

Then nearer the completion date, I either decide to actually let it out or just do a quick sale and cash in!

AnotherJoe

I don't think I'm understanding you. Why would the developer need to "accept" a LTB mortgage?

Also, a let to buy mortgage on your house mean she you'd need to move out. Where would you move to?

robato

AnotherJoe wrote: »

I don't think I'm understanding you. Why would the developer need to "accept" a LTB mortgage?

Also, a let to buy mortgage on your house mean she you'd need to move out. Where would you move to?

Sorry, I wasn't clear or maybe my idea isn't good.

My assumption is that normally, the developer would want to see a mortgage offer (for the new home) + an offer to buy my home i.e. ready and proceed-able. However, my idea is instead of selling my current home, I would get an LTB mortgage offer to contribute to the new home cost. So 2 mortgages to show I am ready!

The other intention here is the LTB mortgage would start at the same time I move into the new build (i.e. when my main mortgage starts), which solves the problem of where I would live. Of course, if I let it out now, it's the same as selling now and I would need to rent...

Would that work?

Slinky

I wouldn't want to be paying an extra 3% stamp duty on an £800K purchase. OK so you can get it back if you sell your previous home within 3 years, but it's still an extra £24K you'll need to find at purchase point.

robato

Slinky wrote: »

I wouldn't want to be paying an extra 3% stamp duty on an £800K purchase. OK so you can get it back if you sell your previous home within 3 years, but it's still an extra £24K you'll need to find at purchase point.

Thanks Slinky, very good point I didn't think of. I suppose we could still afford to pay this in cash but would need a slightly larger mortgage.

AnotherJoe

You started off with wanting to buy a new house.
Now you are looking at becoming a landlord, which is non-trivial, has many legal and tax implications, and is a lot of hassle, plus getting a larger mortgage.

Getting back to fundamentals, is a house of your choosing that you live in for a year or so (eg the rental option), really that much disruption? Is this a first world problem you are trying to avoid with cunning plans (that have a lot of downside)?

robato

AnotherJoe - yes, I am deviating a bit with my first world problems, I'll hold my hand up to that.

Rental is not the end of the world, let's be honest. We are actually frequent travelers and returning expats, having moved our rented homes every year or two for a period of 10 years in the past (more if you count Uni). But we're getting tired (old!) and thinking about our children now. Although we did move to our current home during our first pregnancy (so know full well what that involves), we are expecting another next year and would prefer to avoid a move during this pregnancy.

I'm just really fact finding and seeing if there are other options or not. In my job, I explore all options and possible solutions, no matter how ridiculous and just see problems as something to solve, not obstacles. You'll be surprised how often the most obvious answer isn't always chosen as the best solution by my clients. Obviously in my case, the UK property market isn't my area of expertise but I'm applying what I know, which not everyone might agree with.

I agree being a landlord and stamp duty isn't ideal but it's not a deal breaker for me and I should also consider possible upsides, long term opportunities etc as well as what new risks might be involved.

I suppose another option is to wait (do nothing) and see how popular the development is. The same developer still has a few unreserved homes in a different area they are selling but the remaining ones are over budget and into the 7 figure range.