If you think that buying a new build property is more straightforward than buying a ‘second hand’ property, you may be surprised to hear that’s not always the case.
There are a number of differences between missives for a ‘second hand’ property and missives for a new build which it is worth being aware of at the outset. Here are three to consider.
1. The “offer to sell”
Once you find the new build property you want to buy, you will need to pay a Reservation Fee to hold that plot for a limited period of time. You will also need to provide your solicitor’s details to the builder and then their solicitor will issue an “offer to sell”.
This is a different process to buying a ‘second hand’ property where it would be your solicitor who submits an offer to purchase.
Your solicitor must review the document with you and explain the implications of the various clauses.
2. The date of entry – have a contingency plan
Unless the property has reached completion stage the builder will not be pinned down to a date of entry. They will have given you “an anticipated completion date” when you paid your Reservation Fee but be aware - this is only an indicative date. It could slip back by several months (or very occasionally be brought forward). The date is usually linked to a period of time, perhaps 14 days after your reserved plot has been passed by the local authority inspector as fit for habitation and the NHBC Covernote (or equivalent) issued.
If you are selling a ‘second hand’ house you will have a fixed date of entry for the new owners in the terms of the missives. This date may not tie in with that of your new build. Therefore, if your existing property sale is to finance the purchase of the new build purchase and the builder will not agree to a fixed date of entry, you may want to think about a contingency plan for alternative accommodation to bridge any gap between the dates.
Even a first-time buyer moving out of rented accommodation could be affected by this potentially moveable date of entry as they will have to decide when to give notice to their landlord. Again, worth planning some contingency living arrangements.
3. Mortgage offer validity
Solicitors acting for a purchaser will advise against concluding missives until the mortgage offer has been received. Some (not all) mortgage offers are only valid for three months. This means it could expire if your anticipated date of entry for your new build is six months down the line. Then the additional complication arises of whether the lender will grant an extension or issue a new offer? You should discuss this with your mortgage advisor in the first instance as well as with your solicitor.
Sometimes, despite the builder’s solicitors generally stating that they will not accept any qualifications to their pro forma “offer to sell”, your solicitor may decide that certain qualifications are essential to protect your position and the position of your lender (if you are obtaining a mortgage). That is a matter for negotiation but be aware that the extent of qualifications that will be accepted is limited.
4. Benefits of purchasing a new build
These differences should not put you off buying a new build as issues can arise in any type of property purchase. It may be your preference to take advantage of some of the benefits of a new build, such as a modern-design home to your specifications with energy cost savings.
Your solicitor will be able to explain the details involved in your particular transaction but it is worth bearing the above points in mind.