offering a new build off plan

mj2014

My partner and I are FTBs and have been looking for a house for about 3 months now We've looked at about 10 houses, and have decided to reserve a new build in a small development by a local developer that looks very nice. Ours hasn't been built yet, but will be the last of 21 homes in the development. We looked at a nearly finished identical house on the development and were happy with how the finish of things look. The type of house we reserved was listed at 249,950. We lost out to another couple on an identical plot that was supposed to be the last one available, but the sale fell through on the current plot we've made the deposit on. When we lost out to the last one, I had said to the EA we were prepared to make an offer, but that it wasn't the asking price. He said it would have to be the asking price to get it. We had only just started looking at houses then and didn't want to rush and so we let it go. After looking around over the next 2 months following this conversation, we really didn't find anything we liked as much in our price range, so decided to just pay the asking price on this plot that became available. The EA called and said 'this plot is bigger so we were going to list it as 10k more, but the developer has said if you reserve it now he is happy to honour the asking price of 249950'...I said okay, as that's what I was expecting. We are tired of looking around and do like the house, but have I just been told that to get me to offer the full asking price or should I have made a lower offer? 18 or 19 of these 21 houses in the development are already reserved or sold, and they aren't finished yet, so I thought that it was a good sign. But it is scary spending this much money and I am worried we will later find out everyone else paid like 240 or less or something...we figured worst case scenario if we have to pull out is we've lost £1000...but as long as we're not drastically overpaying, I am okay continuing with the purchase. Is it common for smaller development new builds to sell before they are complete and is this a good measure that the house is probably worth what they've asked? I know that's subjective, but I do wonder what the other people have paid for the identical houses on different plots...Our plot is supposedly a bit bigger, but not noticeably so...

AnotherJoe

So you have buyers remorse? There's no way to know if you could have got it cheaper. I'd say it is a good sign so many are reserved/sold (I always wonder when you see the sign that says "only one left" why developers think thats attractive. I always think "hmmm that would be the one no one else wanted").

You will get (potentially) a second bite at the cherry when the lender does a valuation. I'd hold fire until then. If the survey valuation is (say) £20k lower you've got a good reason to ask for a reduction, if its the same as asking price presumably you'll be a happy bunny?

BTW, paragraphs make posts more readable.

mj2014

Hey AnotherJoe,

Thanks for the reply! I didn’t realise we could negotiate come survey time. That’s good to know. Presumably that happens once the house is actually completely built? The house won’t be finished for at least 6 months (which we were okay with, because next year is actually an easier time for us to move). Maybe by that time some of the other properties’ purchase price will be listed on Rightmove which could make me feel better or worse depending on what they are!

If the house is valued say 20k less, is it customary to offer what the survey valuation is or is it more common to try and just meet them somewhere in the middle? What happens if we’ve picked out kitchen fittings and things, and then for whatever reason in 5-6 months don’t want to go through with it? I know we’d lose the deposit but do we owe them money then for the time the house was off the market or special things we’d asked for in the kitchen?

I don’t feel too much buyers remorse yet, though I was prepared to with any property we got because I still mull over life decisions I made 10 years ago! We only put the deposit down today, which is something we could afford to lose if things changed.

Thanks for any advice!

middleclassbutpoor

The valuation will confirm whether the surveyor, in their professional opinion, feels the price you are paying is reasonable for the security it offers for the money being lent to you.

If the value doesn't offer reasonable security, they will state what value would represent that to the lender - again in their professional opinion.

If they down value, then you will have 2 choices - either renegotiate and hope the builder agrees, or put up the difference as cash. Clearly the latter would be questionable because who pays for a house which isn't worth what it is being sold for?

The surveyor will never value above what you are paying as the purpose of the survey isn't to tell you what the value is but that it represents suitable security for what is being lent.

jennhg88

I don't think you have anything to worry about personally, it's natural to overthink your first house purchase but it sounds like you're getting a good deal and you haven't had to fight for it?

davidmcn

mj2014 wrote: »

I didn’t realise we could negotiate come survey time. That’s good to know. Presumably that happens once the house is actually completely built?

No, the surveyor will value it "off-plan".

AdrianC

mj2014 wrote: »

My partner and I are FTBs and have been looking for a house for about 3 months now
...

But it is scary spending this much money

Well, yes, but "spending this much money" is kinda essential if you're going to move from being FTB-wannabes to actually being home owners.

and I am worried we will later find out everyone else paid like 240 or less or something...

Do you think the house you're offering on is good value for the price you're paying? Yes? Then it doesn't matter what others may or may not be paying for theirs, especially if yours is not absolutely 100% identical in every way.
No? Then it still doesn't matter what others may or may not be paying...

Is it common for smaller development new builds to sell before they are complete and is this a good measure that the house is probably worth what they've asked?

Look at other developments, look at non-new-build ("used") houses. Decide from that on whether you think it's good value on paper.
Look at the quality of this developer's other sites. Decide from that on whether you think the property itself will live up to the paper promises.

eddddy

How does the developer want you to proceed with the purchase?

Often with off-plan/new builds, developers expect this:

1. You reserve the property and pay a reservation fee (maybe £500)
2. You have 28 days to arrange a firm mortgage offer, etc (i.e. bank does a valuation etc)
3. After 28 days you exchange contracts
4. The developer tells you when the property is ready (i.e. gives you 10 days notice of completion)
5. The money is handed over to the developer on completion day

So...

• You cannot change your offer after point 3 (exchange of contracts).
• If you try to change your offer during point 2 (e.g. because of the bank's valuation), and you end up walking away - you might lose some/all of your reservation fee.

OR... is this an 'off-plan' investment scheme, where you pay a big chunk of money to the developer up-front? If so, there are some much bigger risks.

mj2014

I’m not sure exactly how it’s all meant to proceed. We just paid a £1000 deposit (they called it a deposit, but perhaps it is more accurately called a reservation fee). The estate agent took the house off the market the same day. She said she’d need contact details of our solicitor but that it wasn’t pressing as the house hasn’t even been started.

The developer was a very nice, quite casual guy when we met him. But he was straightforward and gave us the names of some of his other developments to look at. We looked at them online and they look quite nice, although we didn’t go see them in person.

The whole thing seems a bit less formal than I was expecting. I transferred my deposit to the developer at the instruction of the estate agent, but never got anything in writing (perhaps naively?).

It seems like good value for money to us, based on what else is available in the area. I think we are probably just being paranoid. Maybe they really were going to list it at 10k more... I’ve just become naturally suspicious of estate agents and was worried she only said that to get me to offer full asking price..,

I suppose if we find out everyone paid a few grand less, I’ll be mildly annoyed with myself. But we plan to stay in the house at least 5 years, so perhaps the difference won’t matter then anyway!

Thanks for the help and advice. If we didn’t go for this house I think we would have been permanent prospective buyers with my indecision!

eddddy

mj2014 wrote: »

I’m not sure exactly how it’s all meant to proceed. We just paid a £1000 deposit (they called it a deposit, but perhaps it is more accurately called a reservation fee).

You really should have a written Reservation Agreement (a contract) that explains what the £1000 is for, before you hand it over.

Here's an example of what a Reservation Agreement should look like:
http://www.consumercode.co.uk/wp-content/uploads/2017/03/Consumer-Code-Sample-Reservation-Agreement-March-2017.pdf


Your post makes it sound a bit like you've handed a stranger £1000 because they told you to - without knowing what you get in return.

mj2014

Yes, it does feel like we’ve just transferred money to a stranger. I’ve emailef the estate agent to ask for a reservation agreement (perhaps too late now). At least they’ve taken the house off the market I suppose.

It’s difficult to figure out what order to do things in.., on the sample reservation agreement it has spaces for our solicitor details. We don’t have one yet as we thought we’d find a house we wanted first. We have an agreement in principle but not the firm mortgage offer yet. My bank offers their solicitors with no fees for taking out a first mortgage with them so we just planned on using them. So in order to do that we have to make an appointment with the mortgage lender again, and he’s only available near us a few times a month, plus I can’t take off work, and arranging it all just seems like it’d take a few weeks at which point the property may have not been available again....