For many purchasers buying a new build home can seem like the dream scenario with them often getting the option to help design the property and pick the fixtures and fittings. It also can seem like an easier option as purchasers know what the price is and don’t have to get in to a bidding war with other buyers. Purchasing a new build home is however slightly different from buying a property on the Open market and below we explain the differences and main differences to look out for.
With new builds the Builders solicitor will issue an Offer to Sell to the buyer’s solicitor rather than an Offer being made to purchase the property. All builders have standard Offers to Sell which contain very similar conditions and generally are to be accepted by the buyer and cannot be negotiated on. The Offer to Sell is the start of the missives process (the contract) and the Builder will want the buyer to accept the conditions in the Offer to Sell within a set timeframe normally known as the Reservation period. Once you have accepted the Offer to Sell the missives are legally binding.
The purchase price that you are paying for the property is paid to the builder in three stages:
Reservation Fee – To secure a new build property the Builder will want the buyer to pay a reservation fee in order for them to reserve the property. The reservation fee can range from a few hundred pounds to a couple of thousand pounds and depends on the builder. Normally if you then don’t proceed to buy the property you will lose the reservation fee.
Deposit – Once you are happy to accept the conditions in the Offer to Sell the Builder will want you to pay a deposit, this is sometimes paid when the acceptance is issued or you are given a set period in which to pay it. The deposit is normally a percentage of the price and will be paid via they buyer’s solicitor.
Final balance – The final balance of the purchase price will be paid on the day that you get the keys and will be your purchase price less the reservation fee and deposit. There are often additional costs on top such as a factor’s float and the cost of reports that are required to be obtained.
Date of Entry
When you reserve the property the builder will provide you with an indication of a date of entry which will be when you get the keys. Often this date can be months sometimes even a year or more away and is only an estimated timescale as to when the property will be ready. The date of entry will only be confirmed a couple of weeks prior to you getting the keys when the property is completed and has been inspected by the regulatory bodies.
Often one of the most attractive features of buying a new build is that the builder offers incentives. Incentives can range from payments towards Land and Buildings Transaction Tax (LBTT) or solicitor’s fees to additional items being included such as flooring or higher spec fixtures and fittings. Where the incentive is monetary i.e. payment of LBTT the builder won’t actually send this money to you or your solicitor but shall deduct it form the final balance that you are due.
A big perk for buying a new build is that you often get to choose your kitchen/ bathroom/ flooring and other fixtures and fittings if you reserve the property when it is at the early stages of being built. Often you will be offered to choose additional items, i.e. extras, which are above the standard spec for the property. These items will need to be purchased by you at an additional cost on top of the price. Some builders will let you pay for these items on the date of entry however most will want these items paid for upfront and before the date of entry.