The number of homes being built in England continues to rise and due to government interventions only being available on new build properties, like the Help to Buy equity loan and a new minimum of a 5% deposit, they’re a great way for first-time buyers to get on the property ladder.
There are many things you need to consider when purchasing any kind of home. If you’re a first-time buyer or you want to swap your old home for a modern, up-to-date property, we’ve written this guide to help you make the best choices when buying a new build home.
What is a new build home?
A new build is a newly constructed property that’s never been lived in before. New build homes are fresh and modern developments that are an extremely popular choice for buyers across the UK.
You may see some fairly new homes listed as ‘new builds’, but if they’ve already been owned and lived in, then you won’t get some of the benefits associated with an actual new build. We will be covering everything you need to know about new builds that haven’t been lived in.
The benefits of buying a new build property
There are many reasons why new build homes are so popular and why they may appeal to all kinds of home buyers. Here are some of the benefits of opting for a new build property:
– Many new builds come with a warranty, which will cover repairs. Houses registered with the National House Building Council (NHBC) will have a 10-year structural warranty and a 2-5 year warranty for defects, like snags or electrical issues.
- – You’ll be the first person to live in the property which will truly make it your own.
- – For the first few years, repairs and decoration costs should be low due to it being new.
- – Buying schemes are often available on new builds and include:
- Shared ownership – Where you purchase a 25% to 75% share of a home until you can afford to borrow enough to buy it outright.
- Help to Buy loan – An equity loan offered to first-time buyers where the government covers 5-20% of the deposit, which will need to be paid back in monthly payments or when you sell your home.
- Deposit unlock – Enables first-time buyers and existing homeowners to purchase a new build property with a 5% deposit.
- – Buyers can have a say in the final appearance of their home by selecting fittings and fixtures for the property.
- – When built to the right standard, running costs and energy bills should be low.
The advantages of buying a new build property can benefit both first-time buyers and existing property owners. If you think a new build may be the best route for you, here are some steps you should take to help you make the right choices.
Questions to ask when buying a new build house
Leasehold vs. Freehold
If you’re purchasing a flat, then it will most likely be sold to you on a leasehold basis. This means that you own the dwelling but you don’t own the land that it was built on. This will be in place for a limited number of years before it goes back to the freeholder (the landowner). If you purchase a freehold property, then you own the property and the land it’s been built on.
When you own a leasehold property, you’ll be subject to pay ground rent to the freeholder. If you live in a flat, a service charge will also be added to your outgoings to cover the cost of maintenance in the communal areas and the grounds.
Recently, more and more houses are being sold on a leasehold basis, but in June 2019, the government placed a ban on new builds being sold as leaseholds. However, legislation is still waiting to be passed before it becomes a law. If you live in a leasehold house, you have to get permission to make any changes to the land and you also have to ask permission for pets.
What’s included
One of the best parts about buying a new build home is all of the extras that are included. You can select a variety of finishes such as:
- Wall paint – you can select the base colour of the walls
- Flooring – choose whether you want wood, tiles, or linoleum in each room
- Bathroom style – the type and style of units
- Kitchen type – material and colour of the units and kitchen tops
Every developer will have different options to choose from and some will offer more or less personalisation. Some finishes will come as standard, whereas premium features will come with a charge, which is usually added to the overall price of your property.
Can you part-exchange?
Some developers run part-exchange (PX) schemes, which allow their buyers to purchase a newly built property while putting their current home towards the payment. While this removes the hassle of the traditional home selling process and speeds up the move-in process, there can be disadvantages to PX schemes.
For example, to make money, most developers will offer less than the market value for your home. Before you agree to a part-exchange, you should get your home valued by an estate agent to see how much your property is worth. This will make it easier for you to see whether the price you’ll get through part-exchanging will be lower than the market price.
The eligibility criteria also tends to be quite strict. For example, in some cases, the part-exchange will only be able to fund up to 70% of your new home purchase.
Other things to do before making an offer
Even though the property market is steadily rising, you’re unlikely to get your money back after buying a new build if you sell it within a year or two. As the first buyer, you’ll be able to reap the rewards of buying a new build, but these will depreciate as soon as you’ve moved into the property. To avoid this, here are some things to do before making an offer:
Compare
Look at older properties in the area that are similar to your new build to see their current selling or rental value. Compare the price per square foot with the resale market, so you can gain a better understanding of the premium you’ll be paying.
Shop around
Every developer offers different incentives to help them stand out from their competitors. This can include car parking, free furnishings, or offering to pay your stamp duty – a tax you pay when purchasing a property. Find out what will save you the most money. It’s worth noting that incentives over 5% could impact your mortgage.
Personal plans
Make sure you go for a property that will fit alongside your personal plans over the next few years to save you stress and fuss. Being somewhere where you don’t feel like you need to rush to leave means you can wait to sell when your property has increased in value.
Add value
Before you buy a new build, try to identify if there’s anything you can do to it when you have more money in the future to add value. For example, converting the loft into an extra room, adding an extension, or landscaping the garden.
The step-by-step process of buying a new build
Just like purchasing any home, there is a step-by-step process you need to follow when buying a new build home. Understanding the following steps and planning ahead will make it easier to buy a property and could speed up your buying process.
1. Sort out your finances
Seeking guidance and advice from an experienced and qualified mortgage advisor from MyLocalMortgage is important when you’re trying to get an idea of how much money you can borrow. By talking to a professional, you’ll know exactly what you’ll be able to afford before you start viewing properties that aren’t in your budget.
Having a mortgage agreement in principle (AIP) is recommended before you start viewing new homes, especially if you’re a first-time buyer. This document from a mortgage lender will confirm that you’ll be qualified for a certain amount of money ‘in principle,’ which can be shown to the developer to prove that you can afford the property.
2. Find the property you want
Once your finances are in order, the next step is to find the property you want by looking at different developments. Make sure you research the local amenities, the developer’s track record for delivering good quality homes on time, and information about the surrounding area. If you’re planning to use a buying scheme, you’ll need to check if the development is participating.
Once you know your budget and price range, you’ll have to start viewing the new builds. If the property in question hasn’t been built yet, then you’ll be taken around a show home which will be the same or closely replicate the house you’re interested in. If the show home hasn’t been built yet, then you’ll go to the marketing suite.
3. Make an offer and pay a fee
If you feel like you’ve found the perfect home and you’re confident that you can afford the mortgage repayments, then it’s time to make an offer. As mentioned above, this doesn’t have to be the asking price and can be negotiated.
If your offer is accepted, you’ll be expected to pay a reservation fee which is usually deducted from the price of the home once you complete it. Please note that this fee will be non-refundable if you choose to opt-out in the future.
4. Begin the legal and financial work
Once your offer has been accepted, you will need to appoint a solicitor or conveyancer to sort out the legal side of your house purchase. Finding one that’s had experience with new builds is recommended, as they will check that the developer has been given planning permission and all the right services, like sewers and roads, are accessible to the estate.
They will also be responsible for managing the funds that are being used to buy the property and the day you pick up your key. At the same time, you will need to begin the process of applying for a mortgage and wait for the lender of your property to be independently valued. The amount of time this all takes will vary between buyers.
5. Wait for your move-in date
With new builds, you’ll most likely exchange contracts a few months before you move in. At this point, you’ll be expected to pay your deposit via your solicitor or conveyancer. You might come across some terms you’re unfamiliar with during this process, such as:
- Short-stop date – When the developer expects to finish the building
- Long-stop date – Designed to protect you from losing your mortgage offer
This is where having a great legal representative is crucial, as they’ll keep you and your mortgage lender up to date throughout the buying and building process. Before you move in, make sure you conduct a snagging survey so any issues can be fixed as soon as possible.
Top tips when buying a new build home
1. Research a variety of developers
Getting to know the developers in the area where you’re planning to buy is important. You can do so by researching them online and looking out for their name in any local forums. Seeing what people have to say about developers and their properties will help you create a realistic image of what to expect. Things to look out for include:
- – Reviews from previous buyers and developments online.
- – People’s experiences and opinions on the quality of the homes as well as service.
- – Information on the sales agents — this may give you the opportunity to visit sites and discuss properties.
- – Understand what’s included in the sale — a choice on flooring and worktops, a guarantee or warranty, kitchen appliances like a fridge, dishwasher, etc.
However, everyone will have their own opinions on what they expect from a developer, so it’s best to take their comments with a pinch of salt. Use this information to form your own questions when you go for a viewing in person.
2. Get an independent inspection
It’s not a legal requirement to have a new build inspected by a professional, but if you have the funds, it’s highly recommended for long-term quality and money-saving purposes. Even the best builders make mistakes. With tight schedules and budgets, things can be rushed or missed.
You should book a professional independent home inspector during the early phases of construction, as this is when the house is most visible. They will conduct a snagging survey to find and fix any issues that arise in a new build home.
Snagging surveys should be conducted during the period between the work being completed and your legal completion date. This will give the developer time to fix any snags before you move in.
Areas that will be covered during a snagging report include:
- – The front boundary, usually the front footpath.
- – Other footpaths, driveways, and garden areas.
- – Each external elevation. This includes the main roof and low-level roofs.
- – The internal and external components of the garage.
- – All of the boundary fences.
- – All of the internal areas of your home, starting at the front door.
- – Roof coverings, insulation, and any service connections — e.g. fan ducts, durgo valves, and soil pipe connections.
When looking for an independent home inspector, make sure you find yourself one whose main focus is to represent your best interests. Doing so will increase the longevity of your home and save you money in the long run.
Please note that snagging inspectors will be recommended by the building company you’re buying from. However, it’s important to remember that these inspectors will be trying to re-sell this property to you and may not put your best interests first.
3. Be prepared to negotiate
Buying any house is expensive and just because these properties are new, doesn’t mean that you can’t negotiate the asking price and save yourself some money. It’s up to the developers whether or not they wish to accept or decline a lower offer, but it’s always worth asking.
When it comes to negotiating the price of a new build, timing is key and waiting for the right moment will increase your chances of getting a great deal. Some properties will be easier to negotiate than others. These include:
- Last few plots – If there aren’t many properties left to sell, the developer will be keen to move all their resources to their next project and get off-site, which means it could be easier to get this property at a bargain price as you’ll be taking it off their hands.
- Off-plan – Financing is often required to pay for building properties, so some deals will be done off-plan (before a property is constructed). Opting for this route means you can secure your property at today’s price rather than the value of it once it’s complete. This can be beneficial if the market changes during the course of construction and your property price increases.
- Year-end – This is a period when housebuilders will be under a lot of pressure to meet their sales targets, so it’ll be easier to knock some money off the asking price. The year-end is usually in December, April, or June. You can find out more about year-end using Companies House.
For negotiations to work, you need to have the funds in place to go ahead with the sale and complete things fast. Check out our guide on how to save for a mortgage to help you put away the money you need. You also need to have the knowledge and confidence to negotiate hard.
4. Make your property futureproof
When you purchase a new-build property before construction is complete, you’ll have a say on the final fixtures and fittings. You can negotiate a higher quality finish by choosing the right flooring and kitchen units at the start.
Asking for these earlier on in the process and including it when you’re negotiating on the price of the property means you can get it agreed upon in writing, in your contract and specification. Choosing quality and modern fixtures and fittings will future-proof your property, this is where there is less risk of paying for faults and reduces the need to redecorate.
5. Be prepared for delays
It’s common to experience delays when purchasing any kind of property, but they’re even more common when it comes to new builds, especially if you’re buying off-plan. While you should be prepared for delays, you should also get the builder to agree to a ‘long stop’ completion date. This means that they will be liable to pay you compensation if the work isn’t finished by this date.
It’s also important to note that some of the delays will be due to issues on your end, such as getting a mortgage if you’re not a cash buyer.
