Reserving a new build ?
Discussion
We have seen a property that we’d like to reserve but the developer has said they can’t reserve it unless we have a buyer for our current property or we are cash buyers. We are neither. We are ready to put our house up for sale but appreciate that finding a buyers may take some weeks (even in the current hot environment) and we risk losing out on a reservation. We currently have about 40% LTV but enough cash savings to pay off the remaining debt if required. We would then need a new mortgage to cover the difference (property is circa £300k more than our existing one).
I’ve heard of bridging loans but the interest rates look very high. Is there another way round this? I’m going to speak with the developer to see whether they’d accept a small cash deposit but I suspect this won’t be accepted.
Thanks
I’ve heard of bridging loans but the interest rates look very high. Is there another way round this? I’m going to speak with the developer to see whether they’d accept a small cash deposit but I suspect this won’t be accepted.
Thanks
Maybe just tell them you are going to rent out your current property. We missed a few houses because we were in a similar position to you …. then, as soon as we decided to keep our flat and rent it out, everyone was happy to take an offer/reservation. Depends on your timescales however, we reserved in April, but house wont be built until December.
Normally exchange is 30 days from reservation.
So, in order for this to happen you normally need to be a cash buyer or already in a chain which is beyond exchange.
This makes the buying process for new build difficult for anyone who is already in a property - frankly.
The 30 days exchange often drags out to 90 days - but they expect the wheels to be turning beyond just "your word". IYSWIM. Solicitors talking, paperwork flying back and forth, lenders in touch etc. But at some point they will want to exchange and at that point you have to pony up.
A friend of mine is in this exact situation - he is waiting for exchange on his next week - its been rumbling on for the last 4 months. Only then will the builder take his £250 deposit and start the process.
He has rented now. As completion is expected in 3 weeks. Then he will have to stay in rented for 6 months till his new place is ready.
This is assuming that plot is still around...
If you have the chance to buy as "second home" then this is a possibility - it will make things a lot easier. You can claim back the extra SDLT so long as your prim res is disposed of within 36 months of completion on the second house. Developer will want proof though your word is worth exactly nothing to them so expect to have to provide mortgage offer within a few days.
Thats the route I would take. Speak to Sarnie. He can sort you out with a let to buy mortgage or something else thats better bla.
Good luck.
So, in order for this to happen you normally need to be a cash buyer or already in a chain which is beyond exchange.
This makes the buying process for new build difficult for anyone who is already in a property - frankly.
The 30 days exchange often drags out to 90 days - but they expect the wheels to be turning beyond just "your word". IYSWIM. Solicitors talking, paperwork flying back and forth, lenders in touch etc. But at some point they will want to exchange and at that point you have to pony up.
A friend of mine is in this exact situation - he is waiting for exchange on his next week - its been rumbling on for the last 4 months. Only then will the builder take his £250 deposit and start the process.
He has rented now. As completion is expected in 3 weeks. Then he will have to stay in rented for 6 months till his new place is ready.
This is assuming that plot is still around...
If you have the chance to buy as "second home" then this is a possibility - it will make things a lot easier. You can claim back the extra SDLT so long as your prim res is disposed of within 36 months of completion on the second house. Developer will want proof though your word is worth exactly nothing to them so expect to have to provide mortgage offer within a few days.
Thats the route I would take. Speak to Sarnie. He can sort you out with a let to buy mortgage or something else thats better bla.
Good luck.
I too wondered how this sort of thing is supposed to work.
Small new development near us (West Cheshire) 3 bed detached at £430K (certainly not first time buyer level around here):
"Please note, in order to purchase this property you need to be in a position to proceed. Therefore you will either be a first time buyer, have sold subject to contract or be in a non-dependant position.
This property is still under construction. No viewings are available. Construction will be complete approx. spring / summer 2022."
The price is noted as "fixed" which I took to mean "don't even bother trying to negotiate" but it could be stated like to assure people it won't go up before Exchange. And you surely can't Exchange until the place is built, can you? So what ties people in?
https://www.rightmove.co.uk/properties/108076772?u...
Small new development near us (West Cheshire) 3 bed detached at £430K (certainly not first time buyer level around here):
"Please note, in order to purchase this property you need to be in a position to proceed. Therefore you will either be a first time buyer, have sold subject to contract or be in a non-dependant position.
This property is still under construction. No viewings are available. Construction will be complete approx. spring / summer 2022."
The price is noted as "fixed" which I took to mean "don't even bother trying to negotiate" but it could be stated like to assure people it won't go up before Exchange. And you surely can't Exchange until the place is built, can you? So what ties people in?
https://www.rightmove.co.uk/properties/108076772?u...
Sheepshanks said:
I too wondered how this sort of thing is supposed to work.
Small new development near us (West Cheshire) 3 bed detached at £430K (certainly not first time buyer level around here):
"Please note, in order to purchase this property you need to be in a position to proceed. Therefore you will either be a first time buyer, have sold subject to contract or be in a non-dependant position.
This property is still under construction. No viewings are available. Construction will be complete approx. spring / summer 2022."
The price is noted as "fixed" which I took to mean "don't even bother trying to negotiate" but it could be stated like to assure people it won't go up before Exchange. And you surely can't Exchange until the place is built, can you? So what ties people in?
https://www.rightmove.co.uk/properties/108076772?u...
You can (and will be asked to) exchange long before it is built.Small new development near us (West Cheshire) 3 bed detached at £430K (certainly not first time buyer level around here):
"Please note, in order to purchase this property you need to be in a position to proceed. Therefore you will either be a first time buyer, have sold subject to contract or be in a non-dependant position.
This property is still under construction. No viewings are available. Construction will be complete approx. spring / summer 2022."
The price is noted as "fixed" which I took to mean "don't even bother trying to negotiate" but it could be stated like to assure people it won't go up before Exchange. And you surely can't Exchange until the place is built, can you? So what ties people in?
https://www.rightmove.co.uk/properties/108076772?u...
I’m going though the same, visited the office and asked about part ex, the sales woman said no as they are selling well (plot has been up since March and it’s now late may) so I was like ah well never mind.
3 days later it’s on part exchange extra, so we reserved it, now they’ve got it on the open market for 8 weeks and if we don’t get a sale they buy it for a guaranteed price which we agreed after a EA valuation and RICS survey.
This is a typical first time buyer house but due to it being in a nice part of wales it’s over the £250k help to buy threshold, couple that to that it won’t be ready before the stamp duty holiday ends and the fact very few lenders will do 90% on a new build now means we managed to get the plot.
Last time I was looking as a FTB, plots where released Friday and all sold 5/6 at a time by the Sunday at the latest
They aren’t as in demand now as they have been especially bigger ones
It must be why the big ones hang around so long, very few people are going to be FTB or in rented with a massive deposit just sitting around to be able to afford a 300k or more house.
They are more than likely shooting themselves in the foot
3 days later it’s on part exchange extra, so we reserved it, now they’ve got it on the open market for 8 weeks and if we don’t get a sale they buy it for a guaranteed price which we agreed after a EA valuation and RICS survey.
This is a typical first time buyer house but due to it being in a nice part of wales it’s over the £250k help to buy threshold, couple that to that it won’t be ready before the stamp duty holiday ends and the fact very few lenders will do 90% on a new build now means we managed to get the plot.
Last time I was looking as a FTB, plots where released Friday and all sold 5/6 at a time by the Sunday at the latest
They aren’t as in demand now as they have been especially bigger ones
It must be why the big ones hang around so long, very few people are going to be FTB or in rented with a massive deposit just sitting around to be able to afford a 300k or more house.
They are more than likely shooting themselves in the foot
Sheepshanks said:
22s said:
You can (and will be asked to) exchange long before it is built.
Oh. Didn't know that. Would the ususal 10% deposit be expected? That strikes me as somewhat risky.As long as it's a reputable builder you will generally be okay, but you need a good solicitor to review all the terms first and report to you.
One of the biggest risks is that you lose your job between exchange and completion and can no longer get the mortgage product you need once completion rolls around.
22s said:
Sheepshanks said:
22s said:
You can (and will be asked to) exchange long before it is built.
Oh. Didn't know that. Would the ususal 10% deposit be expected? That strikes me as somewhat risky.As long as it's a reputable builder you will generally be okay, but you need a good solicitor to review all the terms first and report to you.
One of the biggest risks is that you lose your job between exchange and completion and can no longer get the mortgage product you need once completion rolls around.
Reserved a month ago, due to complete Dec ish. Should be built August ish.
Not heard about early exchange yet, but I’d assume until all surveys and searches have taken place then a solicitor can’t provide a contract to exchange.
Ie, if house isn’t even finished to be liveable then are they going to let you complete or even put down a non refundable deposit?
I assume it’s a well trodden path but also well structured to avoid builders taking the pee, changing spec etc once you’ve paid, but before building?
Interestingly the developer for ours wants to finish the whole site (inc block paved road/pavement that’ll be adopted) before any completions... but that’s pushes all cash flow till the end.
I’d assumed they’d release as they went but being a small development maybe not.
Builders will expect you to exchange contracts well in advance of the property being completed, most will insist on it being within 42 days of reserving the property even if the property isn't going to be completed till next year.
The issue is that most mortgage offers are only valid for six months, so you are expected to exchange contracts with an offer that will expire before your completion happens......you then apply for an extension of the offer and if your application is fully re-underwritten and change in your circumstances or the lenders criteria could leave you without a mortgage offer and formally and legally committed to an impending new build purchase......
The issue is that most mortgage offers are only valid for six months, so you are expected to exchange contracts with an offer that will expire before your completion happens......you then apply for an extension of the offer and if your application is fully re-underwritten and change in your circumstances or the lenders criteria could leave you without a mortgage offer and formally and legally committed to an impending new build purchase......
With Redrow, we had 42 days to exchange after reservation.
Our mortgage is approved, but searches are delaying that happening - nothing we can do about it so its just a waiting game at the moment.
As Sarnie says above, i didnt want to be in a position where after we'd exchanged, our offer ran out and for whatever reason we couldnt get an extension, because well, we'd be legally obliged to buy the house lol ... so instead of using Nationwide (who we are with atm), we've gone with Skipton instead - they are about £50 a month more over the 5 years, but they offer for 9 months instead of 6.
Being that our house wont be finished for another 6-7 months, that seemed like the most sensible option to take.
Our mortgage is approved, but searches are delaying that happening - nothing we can do about it so its just a waiting game at the moment.
As Sarnie says above, i didnt want to be in a position where after we'd exchanged, our offer ran out and for whatever reason we couldnt get an extension, because well, we'd be legally obliged to buy the house lol ... so instead of using Nationwide (who we are with atm), we've gone with Skipton instead - they are about £50 a month more over the 5 years, but they offer for 9 months instead of 6.
Being that our house wont be finished for another 6-7 months, that seemed like the most sensible option to take.
Interesting.
The developer of the one we reserved on 17th April hasn’t said anything.
Our solicitors haven’t said anything either, so can only assume they’re happy to just wait.
Smaller developer so maybe quite different to the bigger ones.
Also we’re cash buyers so no worries on mortgages.
Unless all my money gets bailed in and fscs fails I should be ok.
I’m still curious how they can get a final price/contract when you don’t even know what the final spec will be.
I suppose on bigger sites/developers they have this stuff settled on much earlier.
10% down on a house that could then turn out to be a lemon, yikes.
I suppose with 10% down and exchanged there is no way the developer can’t let your professional snaggers and surveyors in and have them get it right before you complete!
The developer of the one we reserved on 17th April hasn’t said anything.
Our solicitors haven’t said anything either, so can only assume they’re happy to just wait.
Smaller developer so maybe quite different to the bigger ones.
Also we’re cash buyers so no worries on mortgages.
Unless all my money gets bailed in and fscs fails I should be ok.
I’m still curious how they can get a final price/contract when you don’t even know what the final spec will be.
I suppose on bigger sites/developers they have this stuff settled on much earlier.
10% down on a house that could then turn out to be a lemon, yikes.
I suppose with 10% down and exchanged there is no way the developer can’t let your professional snaggers and surveyors in and have them get it right before you complete!
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