FAQs - Buying a new build home
There are many benefits to buying a new build home, including energy efficiency, low maintenance and a fast, straightforward buying process, with no chain.
You may need to wait for your new home to actually be built if buying ‘off-plan’! But choosing a plot and watching a building grow week by week can be very exciting.
Many people like the idea of being the first to live in a property, that you may be able to choose the plot or unit that best suits you, and selecting fixtures and fittings. There will be minimal costs for redecorating and no repairs, and new properties usually come with guarantees.
In this blog, we’ve highlighted a number of important things to consider when buying your new build property.
How well are new properties built?
All new developments must comply with stringent modern building standards and regulations for quality, energy efficiency and sound insulation. They most likely include a comprehensive insurance warranty, covering major faults in design, materials or workmanship, giving you peace of mind that your new home has been built to the highest standards and will be covered for any problems. There may be an NHBC’s 10-year warranty, other companies provide warranties and insurance such as BLP’s housing warranty insurance.
Can new builds be viewed?
As with any property you need to take a good look for yourself, don’t just rely on the marketing materials, depending on the build stage there will be a show suite or actual show home, have a good look around and ask any questions that come to mind.
We always advise our buyers to take a good look around the neighbourhood to get a feel for what it may be like to live there too. Try different times of the day and week. Consider local amenities and travel links. If it’s a large site you may be able to talk to new homeowners and ask how they are enjoying their new homes, explain you’re thinking of buying one.
What if it's not actually built yet?
Yes, you may be purchasing “off-plan” – effectively buying it before it’s been built. This is not as daunting as it may seem and with guidance from the salesperson you should soon be able to visualise how your new home will look, even if a show home or opportunity to visit the site is not available at the time of reservation. Ensure you take time to study the site plan, consider exterior factors such as the aspect, location of parking spaces or site amenities such as communal gardens or children’s play areas and parks. And if you are paying extra for a balcony or a larger garden which direction is it facing?
What about site visits?
There will be opportunities for you to view the progress of the development, they will be arranged via your sales contact but it is worth noting that it will only be when the site manager advises it is safe to do so, and will typically be when your property is near completion.
Is it a complicated buying process?
The process for buying a new build home is similar to buying an older property; however, it is more structured and subject to defined deadlines to exchange contracts (usually 28 days), and of course, there’s the benefit of no chain. Ensure you understand the requirements, from paying a deposit, exactly what’s included in the purchase price, to completion dates. But in many respects, it is simpler.
Can you negotiate the price in the same way as older properties?
As with buying a resell property, there may be an opportunity to negotiate. Find out what other properties on the site have been sold for if possible.
Shop around for good deals. Many developers offer incentives to differentiate them from other local developments, such as free furnishings, a parking space, or paying your legal fees. If you can’t negotiate money off the price, the common offer to pay your stamp duty is probably the best deal to negotiate.
How is the mortgage application affected when buying a new build property?
You will need to liaise with your financial advisor as to when is best to apply for your mortgage.
It shouldn’t present any problems as High Street lenders are familiar with the process and potential timeframes. There may however be an issue around how long your mortgage offer is valid, most are only valid for six months. If the build is delayed due to unforeseen circumstances like the great British weather and it isn’t going to be ready within that time you may be able to get the lender to extend the offer. But in most cases, your mortgage application will need to be re-assessed by starting your application all over again. A good financial advisor should be able to assist in all matters.
Recognising that new build projects can be subject to delays, some lenders have special new build mortgages, with a longer validity period that can be up to three months longer than their usual deadlines. Check with your mortgage broker as they will know the products which will remain valid for longer and how the interest rates and fees may differ.
What about the legal work?
Appointing a solicitor to take care of all the legal paperwork - 'conveyancing', should be done within 2 working days of reservation to ensure a quick and smooth purchase process. Be sure to advise your chosen conveyancer you are purchasing a 'new build' on instruction as there are legal implications for new properties to be taken into account when quoting fees and confirming timeframe requirements. To learn more about conveyancing click here
Will it be a 'Freehold'? If you own the freehold, it means that you own the building and the land it stands on outright, in perpetuity. It is your name in the land registry as “freeholder”, owning the “title absolute”.
Or a 'Leasehold'? Unlike a freeholder, as a leaseholder you own the property but not the land on which it is built – that is owned by the freeholder. Ownership of your property is also for a set period, which can be a number of years, decades or centuries, depending on the length of your lease. If your lease expires, ownership of your property technically passes to the freeholder.
Leaseholders will likely have to pay maintenance fees, annual service charges* and their share of the building’s insurance. Leaseholders normally pay an annual ground rent** to the freeholder.
Leaseholders will have to obtain permission for any majors works done to the property and may face other restrictions, such as not owning pets or subletting.All of which will be studied and discussed with you by your conveyancer, leasehold purchases do therefore require more work and this is likely reflected in the conveyancing costs.
Some other things you need to know
Notice of completion
After you sign and exchange contracts with the developer, your solicitor will receive a Notice to Complete, which will give you the date that you must complete the purchase by, typically 10 working days. If you’re buying your new home “off-plan” and the building is yet to be completed, the time between exchange and notice to complete being issued may be significant. It is important to be aware of the timescales and plan your accommodation to allow for this. In particular, we advise that you do not give notice on rented accommodation until you are certain of a completion date for your new home, and you have liaised with your solicitor.
Insuring your property
Your insurance requirements will be different depending on whether you intend to live in the property or let it. You must ensure that your insurance provides sufficient cover for your new property as part of your mortgage agreement. If you’re letting your property you will require specialist landlord insurance.
Help to Buy
Help to Buy is a Government scheme designed to help people who may not have a large deposit buy a new home or move up the property ladder. It is only available to those that are purchasing a property for themselves to live in as their only property. There are several 'Help to Buy' Schemes, for more information click here
Many properties within the South West are leasehold, this is most commonly found with apartments. Ground rent is the money that you pay as a leaseholder to the Landlord or Freeholder for effectively renting the land that the leasehold property sits on. This is usually a fixed sum that is paid annually. Your solicitor will confirm details of this during the conveyancing process.
With leasehold properties, there is commonly a service charge payment. This is usually for services that you as a leaseholder will use but not be specifically responsible for (i.e. maintenance of communal areas within a building such as shared hallways, lifts, fire alarms and so on). This is often collected through a management company on behalf of the Landlord or Freeholder. Under the terms of the lease, you will be responsible for paying these amounts.
Buying a new build home glossary: in plain English...
We try to use plain English and avoid jargon wherever possible, but there are a few terms you may not be familiar with or that need a bit more clarification.
Completion of the legal transaction with all monies and documents having been distributed. This is also when the developer’s solicitor will instruct the estate agent to release the keys. There is usually a “long stop” date by which they must have completed all works.
The agreement sets out the main terms that have been agreed – for example, price, address and names. Two copies are drawn up, and each party signs one in readiness for the exchange of contracts.
The part of the purchase price which the buyer pays on an exchange of contracts. Usually 10% on standard purchases and 5% on Help to Buy purchases.
Energy Performance Certificate; this contains information on energy use, energy performance, carbon dioxide emissions, and fuel bills.
Exchange of Contracts
The swapping of signed contracts by the solicitors (together with the buyer’s deposit). After this, the contract is legally binding, from which neither party can withdraw without financial penalties.
The annual fee which a leaseholder pays to the freeholder.
Independent Financial Advisor.
The Government department that records who owns what land, and under what conditions.
To be given ownership of a property, but not the land it is built on. This normally requires payment of ground rent to the landlord. A leasehold can be offered for various numbers of years for example 125, 250 or 999 years.
A longstop date is the date works should be completed. If a developer fails to finish the property by this date, you may be entitled to withdraw your offer to buy the property without penalty.
A charge is made towards the upkeep of a freehold or leasehold property.
Memorandum of Sale/Sales Letters
This document records the fact that both the buyer and developer have agreed to the transaction. It can also be called a Notification of Sale. It usually records the details of the price being paid, the details of the developer and buyer and their respective lawyers. If there are any conditions to the sale (e.g. exchange by a specific date) then this will form part of the Memorandum of Sale.
A formal written offer made by a bank or building society to lend an approved amount to purchase a property.
Independent professional bodies who investigate complaints on behalf of customers against estate agents, solicitors and insurance companies.
Property Information Form/Fixtures, Fittings and Contents Form
Standard forms about the property that the developer answers for their solicitor (for example: what will be left behind, details of guarantees, etc.)
Your monthly repayment includes part interest and part capital repayment. So long as you meet all of the payments required by the lender on time, your mortgage will gradually reduce until it is repaid in full at the end of the mortgage term.
Requisition on Title
An enquiry relating to the completion agreements.
Reservation Deposit/Reservation Fee
Deposit paid when reserving your property off-plan.
Checks of local authorities and utility provider records for planning applications, restrictions and issues. Click here to find out more.
Seller’s (Developer’s) Pack
This comprises a Property Information Form, a Fixtures, Fittings and Contents Form, a copy of the title deeds and the draft contract.
A tax, paid by the buyer, that is calculated on the percentage rate applicable to each portion of the sale price. Click here for our handy Stamp Duty calculator.
Subject to Contract
Words used to indicate that an agreement is not yet legally binding.
An inspection made by a qualified surveyor. There are three main types of survey: Valuation Report (for mortgage purposes), Homebuyers Report (also comments on general condition) and Full Structural Survey (examines structural detail). The two latter surveys are not necessarily required on new build properties. These are carried out at the buyer’s discretion.
Legal documents that prove ownership of land/buildings, and the terms on which they are owned.
Transfer of Title
The document passes the ownership from the developer to the buyer.
The legal name is sometimes used to describe the seller (developer) of the property.
Tue 04 Jan 2022