23 Dec 2014
Fiona Wildgoose, Conveyancing Partner, looks at the advantages of buying a new build property.
We are fortunate in the North East of Scotland to be benefitting from a relatively buoyant housing market once again, and with rising second hand house prices, more and more people are seeing the benefits of purchasing a new build property directly from a developer. There is currently a significant amount of new development in and around the North East, leading to a great selection of new build properties available to prospective purchasers.
Whilst houses on the open market are usually marketed at an ‘offers over’ price, new properties are marketed at a set list price, subject to any direct negotiation for discounts or extras you can agree with the developer. Any uncertainty over prices, or what uplift over valuation you will require to offer to secure a property on the open market is therefore extinguished immediately. The process for purchasing a new build property is generally perceived to be more straightforward than running the gauntlet of the second hand housing market.
When an agreement is reached, the developer will ask you to complete a reservation form and pay a reservation fee. The reservation fee is usually non-refundable should you decide not to proceed with the purchase. You will be asked to complete your solicitor’s details on the reservation form, along with your own personal details. If any extra incentives are being offered to you, you should ensure these are detailed on the form and that a copy of the completed form is passed to you. The property is then effectively ‘held’ for you for a period of at least 14 days to allow time for a contract to be put in place.
The developer will then instruct their solicitor to issue a formal Offer to sell the property to you. Unlike standard purchase transactions, where the terms of any offer are negotiable between seller and purchaser, a developer’s Offer will be in standard terms and will not normally be open to significant amendment. Such Offers are framed on a ‘take it or leave it’ basis, and will normally be sent directly to your solicitor for discussion with you. The developers look for these Offers to be formally accepted and the missives, or contract, concluded within 14 or 21 days of the date of reservation. If not, they reserve the right to re-market the property and retain the reservation fee.
New Properties do not require to have a Home Report so you will need to pay for a surveyor to provide a valuation of the property. If you are obtaining a mortgage, your mortgage lender may prefer to instruct this valuation themselves. It is alwaysadvisable to have the survey carried out prior to concluding missives with the developer. The surveyors valuation is based upon the finished specification of the house, as invariably there will not be a finished product to inspect at the time the initial valuation is carried out. A re-inspection will usually be required by the surveyor once the house is complete before mortgage funds can be released.
Once the developer’s Offer is formally accepted by your solicitor on your behalf, a binding legal contract is in place between you and the developer. There is normally a further Deposit to be paid to the developer within 7 days of the missives being concluded. This Deposit can vary depending upon the price of the property and the requirements of the particular developer. Both the Reservation Fee and the Deposit will be deducted off the final balance due to be paid to the developer on the date of entry.
One point to be aware of when purchasing a new property is that the date of entry is not guaranteed unless the house is complete at the time of reservation. As events can happen outwith a developer’s control and construction work can be delayed, the developers will supply an estimated completion date but this date may be pushed back, or indeed brought forward, depending on when the house is actually completed and passed by the Local Authority. This is the main difference from an open market house purchase where a contract is normally concluded based upon a fixed date of entry.
Our experienced property lawyers located throughout our branch network will provide comprehensive and straightforward advice on purchasing a new build property or any aspect of the purchase or sale process. You can get in touch with us by clicking here.