Considering buying a new build? You may be offered the option of buying a house off-plan. This is a popular choice for first-time buyers, thanks to the various help to buy schemes granting the power of possibility. It’s an exciting process as with these purchases, you can usually add some customisation into the build. However, as with any house purchase, it comes with challenges, and therefore you should gain a full understanding of the pros and cons to off-plan purchases, before committing. Read on to find more information about buying a new build off-plan, as well as how the conveyancing process works.
What does buying off-plan mean?
Buying a new build off-plan means purchasing a property before construction is complete and, in some cases, even before building work has started. It’s buying based purely on plans, which can sound risky, but there are perks too.
As well as options for personalisation, no onward chain and less work to do when you move in, financial support options for off-plan homes can be attractive.
While you obviously can’t view the final property, most big developers should be able to give you an idea of what to expect. Many will offer viewings at show homes that are very similar to any you’re interested in, so you can get a feel for the space and even some décor inspiration. At the very least, they should provide a pack of computer-generated visuals and detailed floor plans to give you a clear understanding of what you’re buying.
How do I buy off-plan?
There’s no rigid process to follow when buying off-plan. However, to help things run as smoothly as possible, make sure you check off the below:
Step 1: Explore suitable developments
Research and arrange visits to developments in your desired area. If you plan on using a help to buy scheme, check that these are eligible.
Step 2: Speak to a mortgage advisor
Speak to a mortgage advisor and discuss your options. You may wish to go one step further and get a mortgage agreement in principle. This confirms an amount that a mortgage provider is intending to lend to you, and will strengthen your standing with developers.
Step 3: Make an offer
Once you’re set on a property, make your offer. If it’s accepted, you’ll usually be asked to place a reservation fee to hold the property while you get your mortgage in place – this could be as much as £1,000 and is usually non-refundable.
Step 4: Appoint a conveyancing solicitor
A conveyancer or solicitor will carry out the legal work involved in your property purchase, checking everything’s in order with the development and your specific plot. The developer will usually impose a deadline when it comes to exchanging contracts off-plan, meaning you’ll have to exchange within 28 days of agreeing the purchase.
It helps to be as prepared as possible and read up on new-build conveyancing and the conveyancing process in general.
Step 5: Sort your mortgage
Once the legal work is in process, agree your mortgage with a provider. The lender will then arrange for a valuation, based on your property’s plans and specification.
How do mortgages work for off-plan properties?
When you get a mortgage offer, it’ll likely be valid for six months. If you haven’t completed in that time, you could experience mortgage challenges (more on this below). Keep in regular contact with your mortgage provider and, if it looks like your offer may expire due to late delivery of the property, discuss an offer extension. While they’re not obliged to, many lenders will agree to this for a limited amount of time.
Step 6: Do the paperwork
You’ll need to complete any paperwork, with the help of your conveyancer, by the deadline set by the developer. They’ll then facilitate the exchange of contracts and deposit.
Step 7: Plan your move in
There will be two dates to bear in mind. The first – the ‘build completion date’ – is when the developer expects the work to be completed and for you to be able to move in (this will only ever be a best guess). The second is the ‘long-stop date’, and is the latest date the developer expects to have the property completed by.
Is buying an off-plan property worth it?
Weigh up whether buying off-plan could work for you with these pros and cons:
What are the advantages of buying a house off-plan?
- Personalisation. When you buy off-plan, you’ll often be able to specify fixtures and fittings, so your home will be exactly as you want it when you move in – no refurbs needed! Get in early on a development and you’ll even be able to pick the plot you like best.
- Guarantees. New-build homes should come with a 10-year warranty covering structural defects, and any fixtures and fittings included will come with manufacturer warranties of their own.
- No onward chain. When you buy straight from a developer in this way, there’s no upward chain of buyers and sellers to hold up completion.
- Potential increase in value. Depending on the market, your home could be worth much more than you paid for it by the time you move in. Of course, the opposite could also happen.
What are the disadvantages of buying a house off-plan?
- Mortgage challenges. If there are delays and you can’t complete before your mortgage offer expires, you’ll have to re-apply, possibly ending up with a less favourable product.
- Deposit vulnerability. If you can’t get a further mortgage agreement in place after this and can’t pay the balance yourself, you could lose your deposit and have to find a new property. In this scenario, you could even be sued by the developer for the difference in price, if they later go on to sell the home for a lower amount.
- Potential decrease in value. This could cause big issues, not least because if prices dip, mortgage lenders may not see your off-plan property as a viable investment when it comes to applying or re-applying. As above, this could lead to you losing your deposit and even being sued if you don’t raise the remaining balance yourself. Similarly, you may find yourself paying a ‘premium’ for a new property, and therefore the resale value could decline steeply in the first few years.
- Delays. Setbacks in the homebuilding process are common. This brings lots of uncertainty, impacting your living arrangements and could lead to your mortgage offer expiring.
- Teething issues, snagging and disruption. When you first move in, you can expect a few headaches – from things not working correctly to trouble getting post delivered. It’s also worth considering that, if your plot is one of the first completed, you may face disruption from construction on the rest of the development.
Top tip: Arrange a snagging survey. In the days before final completion, have a surveyor inspect your property for problems. Catching them now means you can demand your developer put them right before you move in.
- Unwelcome surprises. No matter how many times you view the show home, nothing can give you a 100% accurate feel for how your finished property will be. You may find that you’re more overlooked by neighbours than you expected, for example, or that a different orientation means your property is darker than you’d imagined.
Are off-plan properties cheaper?
They can work out cheaper thanks to the developer discounts of up to 5%.
Can you negotiate the price of an off-plan property?
Yes, as with any other property purchase, it’s possible to negotiate.
Do I have to pay stamp duty when buying off-plan?
There’s no difference to how much stamp duty you pay, whether you buy off-plan or otherwise.
Questions to ask when buying a property off-plan
What’s the developer’s reputation like?
Before moving on an off-plan property, investigate the developer’s history and reputation. Do they have a habit of delivering projects late? Is their work of a high-standard, or are they notorious for cutting corners? If you can, speak to residents of their previous developments in web forums.
When can I see the property before completion?
As mentioned above, check you’ll be able to get in and have a look before you complete, mainly to spot any snags that the developer should fix. It’ll also be exciting to see your new home coming together!
Will there be any ongoing disruption?
If your property will complete before others in the scheme, get your developer timetable and work out how long any disruption is likely to last.
Interested in an off-plan property? You’ll need a conveyancer to help you complete the legal work, get your conveyancing quote today.
Disclaimer: The article above is only a rough guide to give you some idea of what’s involved in buying a new-build property off-plan.
