Before you buy
Step 1: Find a house that’s right for you
Not all housebuilders work the same way, and one developer’s offerings can be hugely different to another’s. Reports such as the New Homes Review catalogue wide-ranging opinions (not all good!) from hundreds of homebuyers, while other surveys have found that even the major housing developers sometimes underperform when it comes to building new properties.
Your first task when buying a new-build should be to research the developer.
- The company’s track record should tell you whether there were issues with any of its previous developments. You might want to visit these estates and speak to the residents.
- Go online, where you may be able to read news stories about the company, and message-board posts detailing other buyers’ experiences.
- Take the time to investigate the surrounding area, its amenities, schools, transport links and any other facilities you might need nearby. You want to be certain that everything is right before you commit to a purchase.
This kind of preparation work is even more important if you’re buying off-plan (that is, buying a house that hasn’t yet been built).
Obviously, this is riskier than buying an existing property as you’re basing your decision on a show home and/or some images in a brochure. You’re trusting the developer to deliver on its promises.
But buying off-plan has its advantages too. Not only might you be able to secure a sought-after plot on an attractive estate at a discounted price, your new home could increase in value before you’ve even moved in.
So, what can you do to make sure your off-plan purchase goes smoothly? Here are some tips:
1. Know exactly what you’re buying
The developer’s salespeople will present you with lots of marketing materials and encourage you to view the show homes. But these are only representations of the final product, and ideal ones at that. Your home might be in another part of the estate, where the levels of light and noise, or the outlooks from the windows, are quite different.
Ensuring that the finished home has been made to the standard you expect is a crucial part of the buying process. You should ask to see a detailed specification listing the materials, fixtures and fittings that have been used throughout the property. With this information, you can check that the developer has met the necessary standards of quality set out in its warranty.
2. Know what’s included in the price
Some developers like to attract customers with money-saving incentives, such as:
- free car parking
- the option to choose fittings and appliances at no extra charge
- stamp duty land tax (SDLT) included in the property price
Being aware of what has and hasn’t been included in the total cost of the home means there are no surprises later. Some financial incentives—where the developer pays your SDLT or legal fees, for example—may influence how much your mortgage company decides to lend you.
This is a good opportunity for negotiation, not only on the price but if there are any particular fixtures or fittings you’d like thrown in for no additional cost.
3. Know the developer’s schedule
Unfortunately, housebuilding can be fraught with delays, so you should check with the developer to make sure your home will be built on time. There are usually two dates to keep in mind:
- Short-stop date—the date by which the developers expect to have finished building your home.
- Long-stop date—the date by which the developers must have finished the work. If it goes beyond this date, the developer will need to pay you compensation.
If your home is one of the first properties to be erected on the development, find out to what extent you will be disrupted while the other homes are being built.
Delays with new-builds also impact your financial situation, as explained in step 2 below.
Step 2: Speak to a mortgage adviser and agree a mortgage in principle
A solicitor wouldn’t recommend that you exchange contracts unless you have finance in place, so it’s vital that you ensure your mortgage offer is valid.
If you’re buying off-plan and your home isn’t built during that time, your mortgage lender may reassess your circumstances and decide to withdraw its offer. By that point, you’d be committed to the purchase without having the finances to pay for it. And in cases where homebuyers have failed to complete due to lack of funds, developers have been known to take legal action.
This is why it’s always worth consulting a mortgage adviser about your circumstances. They have an in-depth knowledge of the market and will lay out your options. They will also be able to tell you about government schemes such as Help to Buy, a type of loan intended to help homebuyers purchase a new-build property.
Before you move on to the next stage in the process, you should have agreed a mortgage in principle.
Step 3: Reserve your property
Once you’ve found a home you’re happy with and sorted out your finances, you can secure the property by paying the developer a reservation fee.
This fee can range from £500 to £2,000 and will reserve the home for a 28-day period. During this time, the developer will expect to exchange contracts. Once the purchase completes, the developer will deduct the reservation fee from the final price.
Failing to exchange contracts in those 28 days, or the purchase falling through completely, means you will forfeit your reservation fee. So, it’s vital to have your mortgage agreed in principle before you pay to reserve your home.
The Consumer Code for Homebuilders, a code of conduct for housebuilders and developers, says buyers should, after paying a reservation fee, receive a written agreement that sets out:
- the amount of the fee
- the purchase price of the home (including how long this remains valid)
- exactly what they are buying (for example, does the home come with parking?)
- when the reservation agreement will end
- any service charges or management fees the buyer will need to pay
- terms and conditions that will apply if the buyer fails to go through with the purchase during the reservation period
If your developer doesn’t give you a written reservation agreement, make sure you ask for one.
During the buying process
Step 4: Appoint a conveyancing solicitor
As with any house purchase, there are legal points that only a qualified expert such as a conveyancing solicitor should handle, to ensure that the contracts aren’t working against you in any way.
Your conveyancing solicitor will do a number of things to make sure you’re protected and the purchase can go ahead without any problems. Read more on the conveyancing process here.
The developer may encourage you to use its solicitor, but don’t feel obliged. You’re always free to choose your own if you prefer.
Step 5: Secure your mortgage
You’ve agreed a mortgage in principle—now is the time to finalise the arrangements and get a formal offer of finance. Your mortgage lender will arrange for a surveyor to carry out a valuation survey. If you’re buying off-plan, the valuation will be based on the plans and specification the developer has provided.
Step 6: Pay the deposit
No matter how much money you’re putting into the property purchase yourself, the deposit will be 10% of the total property price. You will pay the funds to your conveyancing solicitor, who will transfer them to the developer’s solicitor on your behalf.
If the developer is registered with a warranty provider such as NHBC Buildmark or Premier Guarantee, your deposit will be protected up to a maximum of 10% of the purchase price. Not only does this cover you if the developer goes bust, but it allows you to withdraw from the purchase and claim a full refund without penalty if there are unreasonable delays in the construction process (i.e. if you still haven’t moved in six months after the long-stop date).
Step 7: Exchange contracts
As mentioned in step 3, you will have 28 days to exchange contracts. Your conveyancing solicitor will:
- the terms of the contract and draft transfer/lease
- the title to the property
- the planning documents
- any other relevant documentation
- clarify information with the developer’s solicitor, if necessary
- ask you to sign the paperwork
Step 8: Make a snagging list
Making a snagging list means walking round your new home and identifying issues that you feel haven’t been completed to a satisfactory standard, such as defects with decoration or fixtures and fittings.
The ideal time to make your snagging list is between exchange and completion. This means the developer can fix any problems during that time. Otherwise, it might try to argue that any faults are due to wear and tear caused by you moving in.
The developer has a duty to repair all defects within the first two years of you buying the home. After that, your warranty covers you for another eight years for damage to certain parts of the property. It doesn’t, however, cover you for wear and tear, or anything caused by you not having the appropriate maintenance work carried out.
The warranty is attached to the property, so if you sell within the first 10 years the entitlement to claim against the guarantee will pass to the next owner.