The benefits and pitfalls of buying a new build home
New build homes can be an excellent option for first-time buyers as well as empty nesters ‘right-sizing’ once they no longer require a family home. Buying a new build has many benefits, but there are a few pitfalls to look out for as well. In this article, we consider some of the new homes FAQs we are regularly asked.
It is also important that the contract has a "snagging" clause that enables you to go back to the developer to finish off any small bits and pieces. We recommend buyers to have a snagging survey carried out before completion so that they can identify any issues and get them sorted out before they move in.
What are the benefits of buying a new build home?
The obvious one is that you will be the first people to live in the property, and everything will be brand new. This means you won't have to do any repair works or redecoration in the immediate future. You will also have the benefit of a new build warranty or guarantee so you can buy with peace of mind that most defects will be covered if anything goes wrong (see more on this below). Plus, if the property has been properly built, your running costs and energy bills should be relatively low.
What does it mean to buy off-plan?
Most new builds are sold off-plan, which means you are committing to buy the property before it has been built.
This begs the question, what will the finished product look like? This will be set out in the plans and specifications supplied by the developer. You want these to be as detailed as possible in terms of measurements, build quality, design and materials used so that the developer has as little wriggle room as possible. It is easy to be taken in by a flashy brochure or show home, but the devil is in the detail, and you will need to go through this with a fine toothcomb.
It is also important that the contract has a "snagging" clause that enables you to go back to the developer to finish off any small bits and pieces such as cracks to plaster finishes, ill-fitting windows, or fittings that aren't working properly such as taps or toilets. We recommend buyers to have a snagging survey carried out before completion so that they can identify any issues and get them sorted out before they move in.
When will completion take place?
Most contracts state that completion will take place a set number of days after the developer gives notice that the build has been completed. This is usually quite a short period, such as five to 10 working days after the notice is given.
The contract should include a 'long stop' date by which the property must be completed. If the developer fails to complete by this date (unless the delay is outside the developer's control), you should have the right to compensation or to withdraw from the purchase and have the deposit returned to you.
How do I arrange my mortgage if the completion date is open-ended?
We recommend you obtain your mortgage offer before you exchange contracts and keep an eye on its expiry date (usually six months) so that you can renew it if completion is unlikely to take place before this date. You won't have long to arrange things once the developer serves the completion notice, so your mortgage offer must be in place.
Usually, the developer will keep you informed about the likely completion date, so it shouldn't come completely out of the blue.
How are incentives paid?
It is not unusual for developers to offer buyers incentives such as paying the buyer's stamp duty or legal fees or contributing to the cost of furnishing the property. You should be aware that these will not be paid to you in cash by the developer but will be deducted from the balance of the purchase price payable on completion.
Are there any additional costs involved with buying a new property?
It is important to check with your solicitor whether there are any additional costs involved in purchasing the property. Typically, additional costs include:
- Higher legal fees as the work involved tends to be more time consuming than for a property that is 10 or more years old.
- Developer administration costs. This is a cost the developer passes on to buyers for preparing the documents needed to register you as owners. This fee is normally around £150 plus VAT.
- Energy services. It is becoming increasingly common for leasehold flats in larger developments to be sold with an obligation to enter into a contract for heating and/or electricity from a single energy provider. This does not necessarily involve an additional expense but can restrict a flat owner's ability to seek out more competitive energy supply prices.
What warranties or guarantees should I expect to get on completion, and how do they work?
Your new home should come with some form of structural defects warranty, such as NHBC Buildmark cover. There are a number of warranty providers, but not all are approved by mortgage lenders so should ask your solicitor to check if the warranty is acceptable to your lender and to explain what the warranty covers so that you are aware of what's in the small print.
All warranties tend to offer similar cover. In brief, NHBC Buildmark (probably the most common warranty) works as follows:
- You are provided with insurance protection for your deposit (up to £100,000) if the developer becomes insolvent between exchange and completion.
- Years 0 to 2. This is the builder warranty period during which the builder agrees to repair any defects that are not general wear and tear or maintenance issues. NHBC provides an independent resolution service and guarantee if the builder does not do this.
- Years 3 to 10. During this period the cover provides insurance protection if there is damage to your home because the builder failed to build certain parts of your home to NHBC requirements or if the land is contaminated. Some policies also cover the failure to comply with building regulations.
The above is a summary of some of the questions that arise when you buy a new home. If you are thinking of buying a new home and have any other queries, please do not hesitate to contact us.