GET IT RIGHT FIRST TIME: Sarah is here to help first time buyers get to grips with the conveyancing process. This month, she discusses the pros and cons of buying a new build…
My girlfriend and I are buying our first home together. We’re thinking of reserving a new build property, but is this a good idea?
When you set out on the property ladder, buying direct from a developer needs to be weighed up against the prospect of taking on an older home.
For many, being expected to commit without viewing the house first is a big negative. That said, there is often a show home you can look around to get a feel for the finished product.
Buying ‘off plan’ as it is known, means you will be given a drawing of the property and a specification, upon which you will be expected to exchange contracts. Clearly, if you buy an older house, you can view it and have a full survey carried out before committing to the purchase.
A big plus for buyers is that all of the fixtures and fittings will be brand new and in most cases, you can have some input into the selection of wall tiles, etc. This tends to include domestic appliances and floor coverings, which really helps if you are starting from scratch. You need to be careful, however, as some developers look to upsell additional items that can be obtained cheaper elsewhere.
I’ve been told you pay a premium for new build homes. Is this correct?
You can find the price of a new home is slightly higher than the equivalent existing property, but you may be able to negotiate a discount, depending how sales on the site are progressing.
Developers sometimes offer incentives that will reduce the overall cost of the purchase, for example, to cover stamp duty, or they may throw in extras that don’t come as standard. Clearly, these are not usually available on second hand homes.
There are also financial schemes available to assist first time buyers wishing to live in new homes. You will be eligible for a loan under the Help to Buy mortgage equity scheme, which is offered by the government and has an initial five-year interest free period.
The new build property I like is being offered for sale on a leasehold basis. Should I look elsewhere?
Once you have committed to buy a new build, your solicitor will review the paperwork forwarded by the developer’s solicitor.
There has been a lot of bad press recently about whether it is acceptable to sell new build leasehold properties and my advice would always be to see if you can buy the freehold at the point of purchase, so you own everything outright. Obviously, apartments have to be leasehold for you to proceed.
It may be the case that the developer cannot sell the title, as he only owns a lease on the land himself. In these circumstances, your solicitor will check the legal documentation and advise you accordingly. If you wish to proceed with the purchase, you would need to ensure the lease is long enough to satisfy your mortgage lender and future owners. You would also need reassurance that the ground rent and any estate charge in respect of communal areas is reasonable and will not cause a problem.
Are there any others issues I need to consider?
On the plus side, all new homes come with some form of building guarantee, for example, the NHBC offers a ten-year policy against structural issues. Any outstanding minor works, known in the profession as snagging, may not be finished before you complete, but in most cases, they can be settled very quickly.
If you buy at the beginning of a large development, you need to be aware that you will be living on a building site for some time. However, you should be reassured your property adheres to all of the latest energy efficiency, safety and security regulations, which cannot be said of older homes.
Finally, completion can be problematic. If you exchange contracts with ‘completion on notice’ it means you will not have a fixed date and will be reliant on the builder to say your property is ready. Therefore, any dates you are given will not be guaranteed until the notification is served. As long as you bear this in mind, you will avoid disappointment.
If you are a first-time buyer with a question about moving home, our residential property expert, Sarah Gaunt, would love to hear from you. Email: email@example.com