What to look out for when buying off-plan
The theory is simple: reserve a property that’s still in the planning stages, agreeing a price based on current values and paying a 10% deposit. By the time the property is completed, the property will be worth more. The earlier in the building stage that you buy, often the greater the potential for profit.
That’s the theory anyway; there is, of course, there is also the potential for prices to go down, risking your investment, so you do need to go in with your eyes open and research the local market thoroughly – as well as the developer’s credentials – before proceeding. This is especially the case if you will need a mortgage to follow through on the purchase. Since the credit crunch though, some developers may not sell off-plan to you unless you have cash, so if you need a mortgage or even have a property to sell, you may not be eligible under their rules.
You can find new build property sites using online property portals, estate agents and through the homebuilders themselves. Don’t just look at the locations and site layouts; find out more about the developers behind the projects. If there are no completed properties on site yet, take a look at developers’ other sites in the area to check out their workmanship and, if possible, find out if residents are happy with the company. Visit on a sunny day at the weekend and you’re more likely to bump into people to talk to.
When visiting show homes, pay attention to the furniture. Take a tape measure with you and check it is of a normal size as some developers try to make rooms appear larger by using smaller furniture. Confirm that a standard car will fit in the garage, too. Also check with the developer for any limitations on the property; some, for example, won’t allow you to let out the property so if that’s your intention, or if it may become an option in the future, you’ll need to look elsewhere.
Be prepared for every eventuality. Find out if the price is locked at exchange, and, if not, what happens if prices rise or fall before you complete on the sale. And, no matter how big and reputable the developer, ask what happens to your money if they go bust after you’ve exchange contracts, it should be protected in a client money protection account.
When you’ve narrowed down your choices, it’s time to find a legal company which specialises in off-plan purchases. It’s not always a good idea to use the legal company recommended by the developer as the contract is more likely to have been drawn up in their favour. For example, if they finish early you may have to complete earlier than planned – and if that’s near Christmas it may not be helpful to you.
If you need a mortgage, talk to a mortgage broker who knows lenders that will support your off-plan purchase. Bear in mind most mortgage offers expire after six months, which may be before the property is completed. If your circumstances change in the meantime, the lender may not be keen to extend the offer, leaving you with a commitment to purchase a property and a new mortgage to find. Some lenders may have special deals for new builds, with longer completion deadlines, so always ask.
One advantage of buying off-plan is that you should get a greater say in the specification of your chosen property. Talk to the developer if you wish to specify any particular details, such as kitchen or bathroom finish, flooring or garden landscaping. Find out if these will incur any additional costs and if these are negotiable for an early deal.
Don’t feel you can skip the survey just because the home is brand new; the average new build in the past has had more than 80 faults, so don’t complete without a specialist snagging survey which checks the property has been finished properly.
And finally, make a nuisance of yourself! Become a regular visitor to the site – at least fortnightly – to check on progress, take photos of the build and review building regulations certificates.
For more help about buying off plan and essential snagging surveys, visit www.propertychecklists.co.uk