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Buying a New Build Property

Published on May 22nd, 2020

Amanda Hall
Solicitor & Director

Buying a new build home certainly has its advantages. As you’ll be the first owner you will not have a chain of buyers above you which certainly eases some of the stress of buying a home. You may also have the opportunity to choose fittings and perhaps even the layout depending on the developer and the stage of construction. It can be a really exciting time, especially for first time buyers, but it is important to have an idea of what is involved before you start browsing show homes.

1. Make sure you budget and that you can afford a new home

It is worth having a good idea of what you can afford before you go looking. Staff on the sales site will most likely ask you what your budget is and if you are not sure they are less likely to take you seriously in negotiations. I would always recommend that you  get an idea of the amount you may be able to borrow from an online mortgage calculator. That way you are one step ahead of the game and will be well prepared to obtain an agreement in principle when the time comes.

If you have to sell your property it may be an idea to speak to some local estate agents for a market appraisal to see what your home is likely to sell for. Make sure that the figure that they provide to you is an estimated sale price and not an asking price and make sure that you ask for comparable sales to back up the market appraisal. A good estate agent should always be able to provide you with comparable evidence unless your property is extremely unique. It would also be a good idea to request a redemption statement from your existing mortgage lender (if any) and find out whether you have to pay an early redemption charge on completion. This should give you a good idea of the equity that is available from your sale.

If you are a first-time buyer you should also consider whether you are eligible for the Government’s Help to Buy Scheme. Under the scheme buyers are only required to raise 5% of the property value as a deposit. The government will provide you with a further loan of up to 20% through the Homes and Communities Agency. With a combined deposit of up to 25%, you will then have access to a lot more  attractive mortgage rates from lenders participating in the scheme. The government's 20% slice of the loan that's really competitively priced. For the first five years, it’s interest-free. In year six, you will be charged 1.75% which will climb at a rate of 1% of that figure plus any increase in inflation (as measured by the Retail Prices Index (RPI)), every year thereafter.

Home Builders will often set a strict 28-day exchange deadline so the more work you can do before making an offer the better. There is nothing worse than going to the show home and imagining where you are going to put your furniture and later be disappointed by the transaction falling through.

2. Find out exactly what is included before you agree to buy

Remember that what is in the show home is not necessarily what you will receive. Find out what would be included in your new home. Are the wardrobes, carpets and white goods included? Ask to see the full specifications for the property as well as landscape drawings and electrical plans. It is worth visiting completed developments from the same developer (especially if you are buying off plan) to make sure you’re happy that their estates meet your expectations.

Some developers will cover your stamp duty as an incentive to make the sale so make sure you ask because if you don’t ask you don’t get.

Once you know exactly what it included it is much easier to make up your mind as to whether or not you want to proceed or even to negotiate non-included items into the price when you get nearer to decision making before closing the deal.

3. Put emotion aside and be practical

Home builders are usually experts in sales. Show homes are meticulously prepared by the developer’s interior designer to sell you, not only the bricks and mortar, but the lifestyle that goes with the property. It is important to remember that whilst this could be your new home it is a building. Try not to be pulled in by the perfectly laid table in the dining room or the perfectly sculpted ‘man cave’ at the back of the property. When buying second-hand properties, we are commonly reminded by the estate agent to look beyond what we see and imagine the potential. With new build properties you need to do the same but in reverse!  

Will you be having the same matching furniture as they are showing? Is the double bed in the bedroom actually a double bed or a four-foot bed to make the bedroom look bigger? Do you need a bigger dining room table than the one that is in there because you are a family of four? Is there enough storage and if not, is there enough room to house your wardrobes if you can’t afford to have their fitted wardrobe option (which is normally an extra).

4. Do not use the developer’s panel lawyer without doing your homework

I have never known a developer not to have a preferred panel lawyer for buyers to use. Developer’s love buyers using their panels lawyers as they will usually receive a referral fee from the company undertaking the conveyancing which means that in the end you pay more. You may be told at the point of sale that using their recommended solicitor will simplify the transaction and make it quicker however make sure you do your research before instructing a panel firm.

Request an estimate of costs from the panel firm and ask them whether or not they will be receiving a referral fee from the panel lawyer. Make sure you shop around for new build conveyancing quotes so you receive the service and price that suits you. Speak to family and friends and ask them if they are able to make recommendations. This is usually a great indicator of a good firm and the majority of our instructions are from word-of-mouth and personal recommendations.

The conveyancing process for buying a new build home is not quite the same but as long as you specify that you are buying a new build, the property lawyer should be able to provide you with an accurate estimate of costs prior to instructing them.

5. The Reservation

Once you have decided on the plot a reservation fee is commonly paid to ‘reserve’ the property for a set period of time. The reservation fee is then credited towards the final sale price on completion but this is usually not refundable if you cannot exchange for whatever reason or need to withdraw from the transaction. This is another reason to make sure that you budget accordingly and pick the law firm that is right for you.

6. What protection will I receive for the new build?

Whilst your lawyer should advise you on the warranty that is being offered and the terms it is worth checking with the builder at an early stage what warranty is in place. For example, if the builder becomes insolvent what cover is in place if there is a structural defect with the property?  

7. The Snagging List

A snag is a small defect or issue that remains in your property after the building work has been completed. It is typically something that is damaged or broken; not fitted properly or looks unfinished – such as a scratch on a window or a missing hinge on a door. Many snags are cosmetic.

A good lawyer will make sure that there is a clause in the contract regarding ‘snagging’. This is very important as you will usually exchange contracts before structural completion of the property. The clause will usually provide that a list of ‘snags’ is provided to the developer with a contractual undertaking that they will make good the snags within an agreed timeframe.

Buying a new build property can be both an exciting but difficult time and having the right lawyer by your side is important. At Houldsworths our property team has years of experience working with both large national homebuilders and smaller local developers for clients both locally and across the country. What that means for you is that wherever you or your development is based you can rest assured that you will have a specialist conveyancer working with you on your purchase.

IMPORTANT NOTICE: The information provided in our articles reflects only a narrative of some elements to consider on the topic. The articles do not contain considered legal advice and should not be relied upon as advice. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.