Are you thinking about buying a new build property? Buying ‘off-plan’ is a unique process, as the property has not actually been built yet. Find out what to expect with our step-by-step guide to buying a new build property.
What are the stages of buying a new build house?
Every property transaction is a little different, especially if you are purchasing through government-backed schemes such as First Buy Scheme, Own New or Shared Ownership. However, all new build purchases roughly follow the same 10 steps:
1. Get a mortgage agreed in principle
Firstly, you need to get a mortgage agreed in principle. This determines your budget. It also ensures that you have the finances in place to act quickly, should you get an offer accepted. Otherwise, you could find yourself in a situation where you have paid the reservation fee, but you cannot secure a mortgage. If so, you cannot continue with the purchase and you will lose your money.
Remember that not all lenders have products designed for new builds, or for government-backed schemes such as First Buy. Be sure to find a mortgage that matches your needs.
2. Make an offer
Once your mortgage has been agreed in principle, it’s time to start house hunting. If you are buying off-plan, then you may be able to visit the site. However, most of the information is going to come from property brochures and computer-generated images. If you find a property you like, you should make an offer. You can negotiate on the price, even if you are buying a new build.
3. Pay the reservation fee
When you have an offer accepted on a new build property, you will be asked to pay a reservation fee. This might not be something you have encountered before, as it generally only applies to new builds. The amount is decided by the developer and can be anything between £500 and £2,000 or more.
The reservation fee holds your interest in the property for a short period – usually 28 days. The developer will expect to exchange contracts by the end of the 28 day period.
The reservation fee is typically deducted from the final purchase price. However, if you do not exchange contracts by the deadline, or you decide not to proceed with the purchase, then it will not be refunded.
4. Instruct a conveyancing solicitor
When you have paid the reservation fee, you should waste no time in instructing a residential property solicitor to handle the conveyancing process for you. Time really is of the essence, as you usually only have four weeks to exchange contracts.
Our residential conveyancing solicitors specialise in new build purchases, including those being bought through the First Buy, Own New and shared ownership schemes. We work on a fixed fee basis.
5. Complete conveyancing checks
A conveyancing solicitor will then carry out all the legal work needed to get you to the exchange of contracts. This includes conducting property searches, reviewing the contract and cross-referencing the building with planning regulations.
This work is essential, as it ensures that you know exactly what you are buying. It also protects your position, as your solicitor can identify any potential problems. This may dissuade you from the purchase, or may prompt your solicitor to negotiate certain terms with the developer. For example, you might want to include a snagging provision in the contract. This forces the developer to rectify any snagging issues that crop up after completion.
6. Exchange contracts/pay the deposit
It is then time to exchange contracts, which is also when you pay the deposit. This is usually 10% of the purchase price, but it may be more or less depending on the terms. Exchange of contract is when both parties are legally obliged to go through with the transaction. If you change your mind after exchange, you will lose your deposit and the reservation fee.
7. Wait for the development to be built
You then have to wait for the development to finish. There is no telling how long this will take – it very much depends on how far advanced the development is when you make your offer. The developers will give you an anticipated completion date, although they are not legally bound to meet this deadline. However, you will also be given a long-stop completion date. If the build is not finished by then, you are allowed to cancel the contract and get your money back.
8. Receive notice to complete
When the property is ready, it must be signed off by building control and the warranty provider. Then, you will get a notice to complete from the developer. This is a notice informing you that completion will take place on a certain date – usually in 10 days’ time. Your solicitor will set about making the arrangements for completion.
9. Get a snagging survey
Meanwhile, you might want to get a snagging survey done. This involves looking around your new home and making a list of any issues that have not been completed properly. New builds are often associated with snagging issues, be it defects with decoration, appliances not working or things that are simply unfinished. You can then report these problems to the developer, asking them to be fixed as soon as possible.
10. Complete
On completion day, your solicitor will finalise the transaction. This involves drawing down your mortgage, transferring the remaining balance to the developers and paying stamp duty land tax (if applicable). Your ownership of the property is then registered with HM Land Registry. You get the keys and are free to move in whenever you like.
Looking for a new build solicitor?
We deal with a lot of new build conveyancing transactions. If you’re buying a new build and you’re looking for an experienced solicitor, please contact us for a fixed fee quote. We are based in Sunderland but act for clients across England and Wales.
Call us on 0191 567 7244. If you would rather contact us online, email us on info@cooklaw.co.uk and one of our team will be in touch with you shortly.