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Buying off-plan: Your comprehensive guide

By Daisy Mason

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Although buying a home that isn’t built yet might not be an option for some homebuyers, there are many purchasers that act quickly to secure an off-plan property who are happy to wait for their perfect home to be constructed. But what are the benefits of buying a property off-plan and how does the process differ to buying an existing home? Today we’ll talk you through buying an off-plan property in our comprehensive guide.

Who buys off-plan properties?

Buying off-plan is ideal for homebuyers that aren’t looking to move in the immediate future – investors, retirees, parents buying for children and first-time buyers are just some of the types of people we sell off-plan properties to. In fact, in the past year, 45% of our customers buying an off-plan property were doing so with the assistance of the government’s Help to Buy scheme.

Benefits of buying an off-plan property

One of the best things about buying an off-plan property is that the specification and finish of the property is likely to be high. Homebuyer standards are rising, which means developers are forced to meet and exceed these demands with every development they build.

So, in today’s off-plan developments, purchasers are likely to find a range of additional facilities such as gyms and a concierge, as well as a lift – which you won’t get in an older property. Newly built homes are often more energy efficient and eco-friendly than older properties too, which should help to keep running costs down.

In some developments, homebuyers may even be able to choose the finishings in the property to reflect their own personal tastes and you also have the peace of mind that you’re moving into a property where everything is brand new, including the appliances and the boiler.

THE PROCESS OF BUYING AN OFF-PLAN PROPERTY

Finding a mortgage lender

Just like when purchasing an existing property, the first step of the off-plan buying process starts by finding out what you can borrow and arranging a mortgage in principal. However, as mortgage lenders only guarantee what they will lend for usually up to 6 months, this is a bit tricky when you’re buying a property that may not even have foundations.

The time you have to wait from exchange to the property being signed off by the developer depends on which development you are buying in. But you could be expected to wait anywhere from 6 months to 2+ years for your property to be finished. This means that your initial mortgage agreement is likely to have expired by the time it comes to completing, which means you may have to resubmit your mortgage application.

Because of this, it’s important to consider whether your personal and financial situation is likely to change in the time period between exchanging on an off-plan property and it being constructed. If anything changes during this time that may negatively affect your mortgage application, then you’ll be running the risk of the lender changing their mind.

Reserving the property

The great thing about buying a property that hasn’t been built yet, is that you’re likely to be presented with a choice of properties at the point of reservation. You may want a south-facing living room or prefer a ground floor apartment with a terrace, so there’s greater flexibility when it comes to finding the ideal home for you – which is budget dependent, of course.

Once you have chosen the off-plan property you want to buy, you will need to fill in a form and pay a reservation fee to the developer, which usually ranges from £1,000-2,000. At this point, the developer may also carry out feasibility checks, looking at your income and your ability to afford the property you want to purchase.

When buying a new build property in the UK, most homebuyers will be supported by The Consumer Code for Home Builders, which ensures developers give buyers all the necessary information regarding their purchase. Part of the Code covers the reservation fee and sets out that buyers are entitled to a refund if they decide to pull out of the purchase. The amount you receive back will depend on how far along the process you are and if any admin fees have been incurred during this time frame.

Exchanging contracts

Once you have paid your reservation fee and the property you want to purchase has been guaranteed to you, the next stage of the process is exchanging contracts, which must be done so within 28 days.

For this you will need to appoint a solicitor to draw up a contract. It is likely the developer will recommend one or more solicitors, or you can choose your own. However, the benefit of using the recommended solicitor is that they’ve probably been working on many contracts for the same development, which means their service is likely to be quicker and more efficient than your own solicitor who may know nothing about the development.

At this point you will also need to pay your deposit, which is usually 10% of the agreed purchase price.

The great thing about buying an off-plan home is that you’re fixing the price of the property in advance and safeguarding the amount you are willing to pay and can afford. Imagine that in two years’ time, properties in that area rise in value so much so that you are forced to pay more for the same property or you are priced out of the area.

Conditional exchange

How long you have to wait for your property to reach conditional exchange will depend on how long it’s taken to build. But at the point of conditional exchange, the build quality and standard of your property will be signed off by the appropriate warranty provider and they will confirm that the property is safe to live in.

Unconditional exchange

After it is confirmed that your newly built home meets the correct building regulations, the utility companies are then allowed to connect the property to the grid. Once this has been done, the property has reached the point of unconditional exchange and you can proceed to the completion stage, or if you back out of the sale, then you will lose your deposit.

Completion

Because the house construction process and timescales can be unpredictable, developers are likely to only give you a rough estimate of when your property will be finished.

From agreeing to purchase the property to the point of completion can be a period of months or even years, but developers are likely to only give you 2-4 weeks’ notice before the completion date. This means that you must have everything in order to be able to react quickly to their notice and your mortgage must be in place for this moment.

Property handover

Once you have successfully completed on the property purchase, your new home will be handed over to the completions team, who are in charge of showing you around the property and the development and who will go through the property with you, carefully taking note of any problems.

If there are only minor issues with the property, then you will usually be able to move into your new home the next day and any issues will be addressed within a time period set out by the developer. Further down the line you are also likely to be visited again once your property has ‘settled’ and any additional construction problems will be taken care of by the developer.

Warranties give you peace of mind

One of the great things about buying a new build property is that its construction will be covered by a warranty, which is usually effective for up to 10 years. This warranty may also include the safeguarding of your deposit if the property isn’t finished for some reason and any appliances in the property may be covered too.

One of the largest warranty providers is the NHBC, who will check the build quality of a new development at every stage of construction. They ensure that the developers are doing everything by the book and that the home you are purchasing is built to the best possible standard. This gives homebuyers peace of mind that everything in their new home will work correctly, which is especially important for overseas investors who may never even visit the property.

To talk to someone about buying an off-plan property, or if you want to know which off-plan properties we have available to purchase, please contact our New Homes team.

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