Buying Off Plan

dora37

When buying 'Off Plan', what commitment is necessary - a reservation fee or full deposit?

Do different builders have different procedures or is it industry standard?

A little guidance would be appreciated!

lush_walrus

As far as I know they all have different requirements, but the reason I am really replying is to warn you to be very careful that you have checked and understood the whole developments plans.

Just as a warning for you, developers are very careful at trying to conceal the whole story on a new development. In an area I know, they described what the locals knew to be a monster of a warehouse (the largest in Europe infact) as a single storey building, which technically it is but one very very high floor.

As long as you stay aware then Im sure you will be fine.

dora37

Thanks for the warning, however there is no way I would buy unseen or without some homework on the development.

I am just at the initial stages of research and wanted to know the financial commitment that was necessary - and basically whether I could afford it before traipsing round the sites!

Lil_Dee_2

Hi Dora. I can't give you a complete synopsis - but I can tell you how my builder is working (although, I made enquiries at several 'new build' sites, and they all seemed to work a similar way). Basically, they don't want anyone who hasn't already sold their property. It saves on their admin fees. Generally, the builder will give you four weeks before you are required to exchange. So, unless you've got a buyer for your property that is willing to exchange within four-six weeks, that your EA is willing to confirm to the builder, you might find you're unable to do reserve immediately.

To reserve the plot, I paid £250, and then at exchange, I was required to pay a 10% deposit. Non-refundable. Which is the scary part I guess, but hell, nothing ventured...

This is a win-win for the builder. People can only reserve their property if they are 'free' of mortgage, which means they are far less likely to pull out. If you haven't sold your current property, but have cash for the deposit, they may allow you to reserve, but only if your financial situation would provide for both properties if you find yourself unable to sell your existing home (i.e. if you need the money that's invested in house 1 to buy house 2, they won't allow you to reserve)

Currently, the demand in my area for new builds is very high. I know for a fact that the houses on my development had a price increase of 2% within 3hours of being released for sale!!! With this sort of demand, the builders (in the right area) can basically demand it their way, or no way, at the moment.

I found this quite stressful, as on several occasions, the sales advisor has told me quite abruptly (sp?) that I wasn't able to reserve due to my current house not being sold yet. They basically wrote me off before they knew anything about me (actually, I had cash deposit, and can - on paper at least - support both properties should the worst case scenario happen)

To be honest, I took that to mean I wasn't meant to have that house. I am one of 'those' that believes if it's to be, it will be. And it has. I found a very nice sales advisor, selling the house that my partner and I would have given our eyeteeth for, and never thought we would be able to afford. As it happens, our builder needed a deposit (as above) and the exchange happened some months later, due to the builder taking their time asking for it (more interest in the bank for me). This gave me enough time to find a buyer for mine, so all is now going well

What I would suggest is take your time initially. Check out where new developments are scheduled to be built in the area you are looking. Get yourself on their mailing lists, even if you don't like the house/apartments they're building in one place, doesn't mean that they haven't bought a plot of land around the corner, that might...and being on their mailing list means you'd hear about it.

Go and see sites that are maybe outside your chosen area, built by builders due to construct in your area. This will give you a feel for their quality (my brothers new home was something of a shambles, so I know I wouldn't buy from at least one builder near me) and of course, talk to the sales advisors. Ask them about other sites that they have worked on, maybe take a drive round them?

Most of all, have at the very least a mortgage offer and a 10% deposit ready. Oh, and don't be afraid to bid slightly lower than the asking price. I did, and saved a substantial amount on my previous house. Ask for extras...the worst that can happen is that they say no !! And ALWAYS treat the sales advisors nicely. Theirs is a thankless job sometimes. A smile and a pleasant manner can be quite beneficial, as well as giving them a break from the sometimes far-from-realistic house buying public !! And no, I'm not a Sales Advisor. My mother brought me up well.

*Well, that was a hell of a first post !!*

eurows

Currently, the demand in my area for new builds is very high. I know for a fact that the houses on my development had a price increase of 2% within 3hours of being released for sale!!! With this sort of demand, the builders (in the right area) can basically demand it their way, or no way, at the moment.

I find this statement amazing. With all the builders reporting a drop in sales this statement is just not true. I suggest you have been taken in by the builders hype.

I wonder just how many people are now buying off plan given that the next 12 months may see those that have held of buying making more savings than those who jumped in quickly.

The last few years have seen many making money buying off plan but in a changing market it may be folly to assume this will continue. Unless the purpose for buying off plan is just to secure best position and is not associated with financial gain.

The saying is 'Todays discount is tomorrows market value'

Lil_Dee_2

Eurows, what part of "demand in my area for new builds is very high" do you find so amazing ? I would not like to get off on the wrong foot here, but the development that I have bought on has been very popular since day one. Even with the price hikes (and I have a copy of the original sales sheet, with the original prices on it, and it makes very interesting reading compared to the current prices on offer)

Please don't assume that I have been taken in by the 'hype'. Everyone that I speak to (that knows the area) has commented on how well priced the houses are on the development as a whole. They are not much more than the 18 year old houses opposite. In fact, having an integrated garage, downstairs W.C., utility room, and en-suite to master bedroom represents quite a substantially better home than the 18 year old one...yet they are only £10k more...??? Of course, that is my opinion.

The fact that I spent some 8-9 months checking local developments, including a very similar one not more than a mile away from said development gave me some insight into whether I was getting a good deal. I think I did. But then, as I say, this house is something both myself and my partner had searched for.

lush_walrus

Lil Dee,

I have to say I would be likely to agree with Eurows on the general principal that new builds are generally higher priced than other houses of simular size in the area. It may well be different in your particular case, but generally developers will price new builds at a very high premium for a number of reasons, firstly the house is generally guaranteed for 10 years, and if there are any defects then they have to return to fix them can be an expensive service, developers also often advertise out of the area to ensure that they attract people who don't know local prices. New builds are generally smaller than anything more than 10 years old, new planning guidlines have enabled room sizes to be smaller through adjusting their minimum sizes.

The reason that off plan is generally cheaper than later in the development is simple, the developers want to release x amount of money to move onto the next development and its better value for them to sell cheaper at that stage than borrow money or only start a new development when the other is finished.

With regards to selling your house in a set amount of time, quite a few developers will part exchange your house, of course for a lower price than you would get on the open market but could be worth considering to prevent loosing deposits etc if your house sale falls through.

terrierlady

The reservation fee can be any amount from £250.00 up to £1,000 depending on house type/price etc this is just reservation fee stage I
28 days to exchange contracts with at least 10% deposit and agreed funding,yes we do like proceed able purchasers we qualify people to find out if they will be buying by mortgage or cash, oh CASH that is the tricky one.
Cash maybe when iv sold my own house!
When I have sold my shares (which maybe worth not as much as they think there worth)!
When iv got a mortgage agreed.
When my inheritance (late granddad's estate ) is sorted.
I love mortgage or p/ex a least I know the money is likely to appear in the given time.
When my funds come off deposit , oh i forgot there tied into a fund for 6 months as i wanted more interest
No I don't write everyone off who does have a property to sell ,I keep in touch as houses sell everyday and who knows yours could sell tomorrow or may take 6 months.I try the part exchange route as sometimes it can be easier to move straight from one to another without renting, plus its an assured sale for both of us.
Look hard at the plans decide do you want a garden fence or brick wall south facing garden or not, cul de sac position if you have children/pets.
visit other developments the builder has built, knock on a few doors there and ask how the after sales snagging is going. is the site clean and tidy?
Make a friend of the sales negotiator as yes its a thankless task but very enjoyable seeing a development sell so well, and yes new home sales are still selling well in the south west.

dora37

Thanks for your replies, however, I wasn't posting for the why's and wherefore's of new builds - just some background information on what financial commitment is necessary for buying off plan, so if anybody has any experience of this, any information would be much appreciated!

Conrad

Lil_Dee wrote:

Eurows, what part of "demand in my area for new builds is very high" do you find so amazing ? I would not like to get off on the wrong foot here, but the development that I have bought on has been very popular since day one. .

I own a busy mortage brokers and I can tell you that I have many clients that echo your sentiments. All end up being wrong when it comes to actually selling (not just going up for sale) in this market.

The UK market matured in Spring 2004, end of. Its downhill for a good while yet.

New build homes have suffered the worst. Thousands appartments in hither - to HIGHLY SOUGHT AFTER DEVELOPMENTS arent achieving 60% of the Spring 2004 price tag.

The whole market is inter - connected. People who think thier little areas is somehow isolated really tickle me.

terrierlady

sorry, thought we were all helping!!!!!!!!!!!!!