Questions to ask before making an offer (New Builds)
In an earlier post, I wrote about the questions that we asked before making an offer on a property. We had some additional questions for new builds so I have shared our list of questions here in a separate post.
Please do bear in mind that a lot of the flats that we viewed were leasehold, so some questions may not be relevant (or may need rewording) for freehold houses. This is a great article from Foxtons on the difference between freehold and leasehold.
I have put an asterisk on the questions if it has already been discussed in the previous post.
Questions that we asked for new builds:
1. How long is the lease?*
2. How much is the ground rent per year and how often does it increase?*
3. How much is the service charge per year?*
4. Is there a sinking/reserve fund in the service charge estimations?
5. How much is the council tax?*
6. Who is the developer?*
7. What is the building warranty and what does it include?
8. Which Consumer Code does the developer abide by?
9. Are there any major works planned nearby?
10. What is included (e.g. white goods, fixtures and fittings)? Please share a copy of the specification.
11. If there is cladding, has it been tested and is there a document (EWS form) which confirms that it meets the latest government guidance?
12. How long is the defect period?
13. How many plots have sold in the development?
14. Do you have recommended solicitors/conveyancers and is there a discount if we use them? How many plots has this solicitor/conveyancer worked on in this development?
15. Do you accept offers on the property or is there a discount/incentive?
16. Please provide a copy of the reservation form for us to review.
17. What is the exchange timeline?
18. For the properties that have sold, has the mortgage valuation met the agreed purchase price?
If the new build isn’t yet ready to move into, we had the following queries:
19. When will the property be ready to move in to?
20. What happens if there are delays, will I get compensation and can I pull out without losing my reservation fee/incurring any costs?
21. When can we arrange for a snagging inspection?
22. As this is offplan, and if we have exchanged and house prices fall (Brexit hadn’t happened when we were looking), what happens then?
I have explained why we asked the questions below:
4. Is there a sinking/reserve fund in the service charge estimations?
We wanted to check there would be a fund for major works.
7. What is the building warranty and what does it include?
We wanted to ensure that the building warranty was from one of the main providers and checked what it includes. For more information on building warranties, I found this article quite useful as an overview.
8. Which Consumer Code does the developer abide by?
As there is more than one code, it is important to ask which one they comply with so that you can read through the code before you make an offer. It is important to know your consumer rights when making such an expensive purchase! We learnt why the code is so useful when we couldn’t get our reservation fee back after a previous flat purchase which fell through. See our post here.
For the property we purchased, our developer is registered with NHBC. NHBC provides warranty and insurance for new homes. Home builders who are registered with NHBC must abide by the Consumer Code for Home Builders. This code aims to protect buyers of new homes, so that they are fully informed and treated fairly.
9. Are there any major works planned nearby?
We found it useful to ask the estate agent if they knew of any plans for new developments, changes to roads or new railway lines near the property.
10. What is included (e.g. white goods, fixtures and fittings)? Please share a copy of the specification.
Conveniently for us, the property we purchased was ready to move into when we made the offer so we could see what was included. However, we made sure that we had a copy of the specification so that we could check if anything was missing from the marketing materials.
11. If there is cladding, has it been tested and is there a document (EWS form) which confirms that it meets the latest government guidance?
Our previous property purchase fell through because of cladding which is why I suggest asking about it before making an offer. We didn’t know what cladding was until our mortgage lender had concerns over the cladding documentation. See post for more details.
12. How long is the defect period?
I recommend getting this in writing so you can refer back to it later on in the conveyancing process. For one developer, on the website it had mentioned a two year defect period but this was not reflected in the lease.
For the current property, we were unable to obtain written details regarding the defect period during the conveyancing process which was frustrating. It wasn’t until we had purchased the property and were reporting the defects that we were informed that it is two years but they don’t fix cosmetic defects in the second year.
13. How many plots have sold in the development?
This gave us an idea of how well the development has sold and also to see if there was room for negotiation on the price. A colleague once told me that he was able to get a discount on the property because it was the last property to be sold.
If the development had launched for a while but not many plots had sold, we would need to ask further questions on why the sales were slow moving.
14. Do you have recommended solicitors/conveyancer and is there a discount if we use them? How many plots has this solicitor/conveyancer worked on in this development?
For the purchase which fell through, we used the solicitors who had worked on a third of the plots in the development because they were already familiar with the development so we felt the conveyancing process would be quicker and smoother. This was indeed the case as the Report on Title was shared with us 10 working days from when we received the Client Care letter and Instruction Form.
Also, the estate agent was able to negotiate a lower legal fee for us. I also found it useful that I could ask solicitor for more information such as, whether they had any issues with the other property transactions in the development and if there was anything we needed to know about the development.
15. Do you accept offers on the property? Is there a discount or incentive?
It is always worth asking the estate agent whether the price is negotiable! In the transaction that sadly fell through, we had made the first offer which was rejected but then our second offer was accepted. Our second offer was 6% lower than the list price! To be fair, our first offer was a 9% discount so I’m not surprised it was rejected. However, the estate agent was able to give us an idea of what the developer would accept and when the first one was rejected, he gave us an indication of what offer he would be needed to secure the deal. Just to add that it does depends on the property market and when we made the offer, there was Brexit uncertainty in the market so definitely keep informed on property market news!
For us, we focused on getting a reduction in the price rather than look into incentives (e.g. where stamp duty is paid) because a lower property price meant we would borrow less and have a lower LTV which in turn would mean we could get a lower interest rate. Of course, this is just our experience based on our situation and is not financial advice for others. If you would like advice, please speak with a mortgage advisor.
16. Please provide a copy of the reservation form for us to review.
This is useful so you can review the form and make sure it is in line with the Consumer Code. We had issues previously because on the reservation form it did not explicitly say how and when the Reservation agreement will end and specifically how much the deductions would be to our reservation fee if the reservation is cancelled. I wish we had known about the Code back then so we could have had these queries clarified before making an offer.
17. What is the exchange timeline?
It is important to know this from the outset, to have it in writing and to have clarity over when this period starts. For example, is it from receipt of the contracts or the memorandum of sale. If it is a tight turnaround, it is important to let the conveyancer or solicitor know early on.
18. For the properties that have sold, has the mortgage valuation met the agreed purchase price?
This was an important question for us as a family member had previously bought a new build property and when the mortgage valuation came through, it was lower than the purchase price so the lender did not lend the amount which was expected and the family member had to increase the deposit.
19. When will the property be ready to move in to?
It is helpful to have this in writing because if there are delays, you have documentation to refer back to.
20. What happens if there are delays, will I get compensation and can I pull out without losing my reservation fee/incurring any costs?
A colleague was buying a new build property and was informed it would be month X that the property would be ready and then this date was moved back multiple times. In the end, it was over six months delayed and so she pulled out of the transaction and was able to receive some compensation.
21. As this is off plan, if we have exchanged and house prices fall (there was Brexit uncertainty when we were looking), what happens then?
This is an important question to ask as mortgage offers have a validity period. For example, ours was valid for six months. If the property will take longer than six months to build, this would mean the offer will expire before you complete and you will need to obtain an extension or reapply. However, there is risk because if the property market goes down, the property value might become lower than what you have legally agreed on as the purchase price (if you have exchanged by this point). If your mortgage offer expires, when you re-apply, the lender may decide not to lend you the same amount as previously if the market value of the property has reduced which means you would have a difference between the price agreed and the amount you can borrow plus your deposit.
When we asked the estate agent what the implications were, he was initially vague about it and after asking multiple times, he said if this were the case, potentially the developer may agree to reduce the purchase price or we would have to make up the difference.
It is important to note that once you have exchanged contracts, you are legally bound to complete the transaction or risk losing the deposit so it isn’t just the reservation fee that you could lose. Read more here.
Be aware that while estate agents can be helpful, not everything they say may be accurate. When they said the developer may potentially agree to reduce the purchase price, unless it is confirmed in writing by the developer, I wouldn’t place too much reliance on it.
Previously the estate agent had said we would get our reservation fee back but when our transaction fell through the developer had refused to return the £3k deposit. It took two months of discussion before we were able to get just half the money back.
Another example was at a pre-launch evening for a new development, where an estate agent had said the property market was booming. Given that this was after the referendum and before Brexit happened, there was a lot of uncertainty and we were aware buyers were making offers below the property asking price, I didn’t feel this statement was accurate. It’s always helpful to be informed so do keep an eye on UK property market news when looking to buy a property!
22. When can we arrange for a snagging inspection?
This is useful to know as you can start researching what you need to check or research the company to use for a snagging inspector. For our purchase, we were informed that the developer would perform the snagging inspection.
Useful links:
Hope this was useful!
Jess
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