How do new build reservation fees work?

shorty1988m

So, I was having a break from house hunting after the last one fell through at the last moment so I've been caught off guard by the release of properties on the new build estate that I had been waiting for, for years!
I have an appointment for Thursday when the office opens (even though its at another site because it is so early)

They have mentioned I can reserve a plot which I am keen to do and will have no problem sorting a mortgage or getting my deposit together. It should be as simple as simple is.
But, looking online, the reservation fees only seem to last 28 days but we all know things do not happen that fast and I would not be able to get a full mortgage offer within that time (took about 6 weeks last time) so how do these things work?

I can't imagine every person buying a new build is ready to go from reserving to fully exchanging in 28 days so surely there is wiggle room on here/

I want to get in early as there are only 2 properties on this whole development that I want, one is going to be the showhome and the other is next door.

BellaBlondykeTheThird

The showhomw may well be the last property to sell unless it's a big development and they move the showhome round as they go. So it's 1 plot really unless you want to wait til the end.

RelievedSheff

We reserved ours, part exchanged our old house against it and moved into the new build within 3.5 weeks. So yes things can move that quick. But ours was a completed plot and ready to go. Doesn't sound like yours is started yet.

So long as they see some progress being made with your application and legal side of the work then they won't necessarily hold you to the 28 days to exchange timeline, especially with you being so early with your reservation. Just talk it through with the sales team. They do this every day. 

UnderOffer

Also factor in that your mortgage offer might only be valid for 6 months, so you need to check that the completion date of the build is before that expiry. Like others have said, as long as builders see you are progressing well, they will be satisfied, however they may still insist you exchange months before the house is ready. 

Olinda99

I am sure you have thought of this but just in case you haven't - before you commit yourself try and find out what annual fees the developer will make you pay for things like maintaining grass verges playgrounds etc all the usual stuff and also if the local authority are planning to adopt the roads as these fees can get out of hand quite quickly with annual rises ((commonly known as fleecehold)

RAS

And do check out social media for the groups dealing with dreadful building standards on new homes. Your builder is almost certain to have one or more, some are generic, some concentrate on an individual estate.

eddddy

shorty1988m said:

I can't imagine every person buying a new build is ready to go from reserving to fully exchanging in 28 days so surely there is wiggle room on here/

It's just a pure business transaction to the developer.  They want as many contracts exchanged as soon as possible, because that helps their financial position.

• If you say you expect to be able to exchange contracts in 4 weeks - and you can show a mortgage AIP and bank statements with a deposit to back it up - they'll probably accept your reservation.

• Then keep them up to date with progress during the 4 weeks.

• At the end of the 4 weeks, they'll make a decision - "Will it be faster to stick with you? Or will it be faster to find another buyer and start again from scratch?".

• If you've been working hard and making progress over the 4 weeks, and it looks like you only need another 2 or 3 weeks - they'll probably stick with you

• If they think you've been sitting around doing nothing for 4 weeks - they might decide it would be faster to find another buyer

kingstreet

We routinely obtain mortgage offers for our applicants within 28 days. It's the legal work that usually takes the time. Provided you are proceeding quickly enough the builder should be flexible on the timescale unless you are rapidly approaching a quarter, half or year end when bonuses are at stake.

Postik

They generally work like this:

1. You pay the reservation fee on the understanding that you must exchange contracts within 28 days, which is nearly always impossible.

2. The developer puts pressure on you to use their mortgage advisor and solicitor "because it will be quicker".  You can be sure this way that many details of interest to you will be glossed over.

3. The developer puts pressure on you to pay for all your extras (potentially thousands of pounds) early on because the materials need to be ordered.

4. No surprise you miss the 28 day deadline.  In many cases because of the developer's solicitor.

5. If the stars are aligned, you keep the developer informed and exchange several weeks/months later and all goes to plan.

6. If the stars are not aligned, the developer cancels everything, refunds your reservation fee if they are feeling generous, keeps the thousands of pounds you paid for the extras, re-markets the house at a higher price and sells it to someone else, complete with all of your extras.

Good luck!

Albermarle

When you exchange contracts, normally you fix a completion date at the same time. That must be difficult with a property that is not built yet, with all the potential delays etc.?
Plus normally if you are in a chain, everybody exchanges on the same day which can take months to organise.

Also it does not always work in the way outlined above. My SIL reserved a yet to be built property, but was not required to exchange until the property was nearly complete. In fact the developers dragged their heels as for some finance reason they preferred to have the money at a later date.

kingstreet

Albermarle said:

When you exchange contracts, normally you fix a completion date at the same time. That must be difficult with a property that is not built yet, with all the potential delays etc.?
Plus normally if you are in a chain, everybody exchanges on the same day which can take months to organise.

Also it does not always work in the way outlined above. My SIL reserved a yet to be built property, but was not required to exchange until the property was nearly complete. In fact the developers dragged their heels as for some finance reason they preferred to have the money at a later date.

Completion is "on notice" for exchange of contracts on a newbuild.