Buying property off plan is not for the faint hearted
As demand continues to outweigh supply in the property market, many buyers are going off-plan to buy their own home. Head of Property, Lynne McCaffrey, considers the pros and cons of buying a property which isn’t even built yet and the legal ramifications it can lead to:
“Many homeowners dream of building their own home, of having everything just as they want it from day one. Buying off plan is a step in the same direction; whilst you are obviously restricted to the plans of the developers, you do often get to pick your own fixtures and fittings and put your own stamp on the place. That way it feels like home from the moment you move in. However a lot can happen before that time comes.”
Conveyancing Catch 22
“Buying off plan can often cause the proverbial ‘Catch 22’ scenario; you need to secure a mortgage offer before you sign the contract with the developer but mortgage offers typically have a lifespan of six months and a new build will usually take in excess of this to construct. This means the lenders could withdraw the offer and leave you up a creek without a mortgage.
“Time can also have an impact on the property’s value – we’ve all seen how property prices can fluctuate. I mean over the past ten or so years property prices have been up and down more than… I’ll let you insert your own pun here!
“If you’re buying off plan and property prices go up, great – you’re already walking into an investment. However what happens if they go the other way? Well not only have you lost money before you even step inside, your lender could reconsider how much they are willing to let you borrow. You, having already agreed a price with the lender and signed a contract, are then left with the potentially difficult task of raising the additional funds.
“If you are unable to cover the extra cost and need to pull out of the purchase, you will not only lose your deposit, you could be sued by the developer and, if they resell for a lower price, be liable for the difference.”
They don’t build houses like they used to
“A phrase loved by the older generation but it does have some truth to it. There is a lot that can go wrong with a new build; in fact a new build can have as many as 80 small defects.
“On a more positive note though, 80% of new builds come with a 10-year warranty and developers often run a ‘meet the builder’ scheme so buyers can keep up to date with its progress and ensure things are being done as you had agreed. It’s also important that you get a snagging survey done before you move in. This checks a newly built property for any minor faults, allowing the builder to put right before you start living there.
“As with all property purchases the key is to go in with your eyes open. Yes it is (and so it should be) an exciting time but it is also a serious commitment. Things can go wrong – with old builds as well as new builds – you just need to be prepared if they do.”