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New build purchase - confused!

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  • New build purchase - confused!

    A local development has just re-started which at first appeared great news as I've had my eye on a particular plot for some time. In the space of a week I've gone from upbeat to utterly confused about the whole purchase process.

    The builder has stated that we need to sign a contract with them which states that we wish to purchase the property. £500 down, plus tell us the name of your solicitor. This initial "contract" is apparently designed to kick start the searches, HIP, etc on the new property. My understanding is that it in no way states that I need to find a new mortgage (yet, though something we I do not foresee as being a problem).

    Having spoken to a solicitor today (which wasn't the most pleasant experience), they advised against signing anything unless I had a buyer from my property. In addition the advisor started spouting numerous charges they would also make in the process

    As I'm in the middle of some re-decoration I'm not in a position to put mine on the market.

    Questions I have really are, what are others experience of such a contract with the builder? If I don't manage to sell mine before the property is complete (eta Jan '10) then should I consider renting existing property?

    The whole thing has opened a can of worms and I am right royally confused . Advice please?!?!?

  • #2
    Originally posted by mxb2008 View Post
    The builder has stated that we need to sign a contract with them which states that we wish to purchase the property. £500 down,
    This sounds very much like placing a deposit on a plot with a promise to buy the completed building.

    I would be extremely cautious about signing such a document, unless you are perfectly happy to buy up front.

    Also, don;t forget to haggle - new builds are especially suffering, and most developers we've covered in the news here are open to negotiation.


    • #3
      I would agree with the above post, I am one of the new homes sales people and personally I wouldn't even accept an offer from someone who has not sold their property, even for a future plot.

      The big risk you take is that to get a new mortgage chances are you will need to sell to get equity unless you have 15% of the purchase in the bank and are willing to have it tied up in a house that isn't built, and in this market you can't guarantee a quick buyer.

      The news homes company will generally want you to exchange contracts on notice in 28 days from the reservation (£500 down) and once this happens you must buy the property whenever the new homes company build it - ready to move or not. Default and you loose the exchange deposit (10% of the purchase price).

      However if this is the house for you may be worth asking about either part exchange or an assisted sale program, then you can still put a marker down on the property before you find a buyer.

      Hope that helps and good luck.


      • #4
        If you're feeling brave, then I would say take all that back to the builder. it sounds from the terms that they're a national large builder, which means that they still have a large back pocket for incentives to ease the way.

        When I bought our new build I had to sell a grade B listed 4 bed 18th century house, in a special conservation area. We decided literally overnight that we wanted to move so hadn't even started marketing etc. I told the builder that realistically, due to the historical planning consents, the listing, the conservation area, the petrol tanks, and the split commercial/residential nature that I anticipated that it could well take up to a year to complete the sale of it.

        So, they gave me £12k towards my mortgage....... (12 months interest at prevailing base rate).


        • #5
          What was the outcome?

          My partner and I are in a similar position to yours. What did you decide to do? we have reserved a redrow new build house that is not going to be completed until March 2010.

          We have paid £350 reservation fee, we now have to pay 10% deposit (25K) and exchange contracts in 2 weeks. We have a house that has just been put on the market. We have the deposit ready without selling our house.

          We need a mortgage offer that is valid for 12 months with 20% deposit to satisfy Redrow. Our financial advisor told us to apply for a halifax mortgage with this criteria but it has a high interest rate. For the additional 25K needed for the mortgage deposit he has stated on our application that if we have not sold our house by then we will put a buy to let mortgage on it and let it out (our current house has no mortgage).

          The FA as insisting that it is easy to swap the mortgage before completion. Legally are we tied into accepting this mortgage for the exchange of contracts? We're getting really concerned about this and wondering what to do! We do really want the house!

          Any advice would be gratefully received!!


          • #6
            A reservation fee of £200/£300 secures the property/plot for you and then their is usually a projected completion date of next year. When you start signing documents you are agreeing to exchange and sometimes even complete by a deadline. The best thing to do is already have your property on the market when you start looking as this gives you a good indication of the interest in your property. If you can't do this then get your property on the market asap. If you haven't sold your property by the time you have to complete on your new property but you have a buyer for your property you can sometimes get a bridging loan (which is a temporary loan based on the fact that you have a definite buyer for your own house.

            I think it would help you to have a better understanding of the process, I recently went on a property course as I wanted to become a [property investment and needed the knowledge to not make mistakes and buy in the right area etc. I learnt a lot from the property course and have used my knowledge and the experiences from the people I met and kept in contact with to my advantage.

            I have included the link at the bottom if you are interested or want any other information let me know.