Guide To Buying A Home Off-PlanBrand new homes are appealing and buying a newbuild off-plan can be an exciting way to purchase a forever home or investment property or second home. More and more of us are choosing to buy off-plan – and often, choosing to buy before it has even been built and therefore without seeing the completed property. It’s important that, whatever your reason for buying off-plan, you consider all the factors and potential risks first.
What Is Buying Off-Plan?Buying off-plan is when you buy a property you haven’t seen, normally before it has been built. Sometimes, the developer of the off-plan homes will have finished some of the properties in the scheme, including a show home which you can view to give you a better idea of what your house will be like when completed. However, there are times when your new home only exists on paper, in the plans, and the completion date will be set for a time far in the future.
Pros Of Buying Off-PlanBuying off-plan is a popular way to buy property as it can be a cheaper option. Purchasing in this way means the price is fixed and cannot rise – depending on what the market does, this can save you a lot of money. When you commit to buy off-plan, you pay the price of the property’s value at the time of committing and not at the time of completion. If the market rises greatly during the time it takes to build your house, you will save as your price will reflect the lower value from when you agreed to buy. However, the opposite is true and if property prices fall in the time between committing to buy and completion, you can pay over the odds for your house. To offset this risk if the market isn’t rising, developers will often offer a discount on the final price. As a guide, the main benefits of buying off-plan include:
- You have more control over the finish of the property than you do with a traditional property purchase given your house is likely to still be in the build phase or yet to be built phase when you exchange. Normally, with off-plan you can choose how the house will look in terms of décor and fixings.
- New builds are often created in interesting locations and sometimes with a theme, such as for retirees or for second homeowners, which helps to forge a sense of community.
- The nature of the house buy means the process is normally chain free.
- The property itself is usually built to a high standard and with good levels of energy efficiency, which should mean it’s cost efficient to live in.
Cons Of Buying Off-PlanAs a guide, the main disadvantages of buying off-plan include:
- Lack of certainty over what you’re buying. If you’ve only seen plans and marketing brochures, there is a risk that the house that is built for you doesn’t live up to your expectations.
- Not all housing development schemes are completed due to developers going bust or funding shortfalls.
- A landscape change depending on the size of development your newbuild is part of. It may be that the number of off-plan homes built means the look of the area changes or you experience ongoing construction noises after moving in, while other houses are built.
- The gap between exchange and completion is longer than for a traditional property purchase and can take months or years to complete. This can cause difficulties for funding the build or securing a mortgage.
How To Reduce Your Risks Of Buying Off-PlanThere are steps you can take to minimise your risks of buying off-plan – and these include the following:
- Make sure your chosen developer has a good track-record and you can trust them to complete the property scheme to a high standard.
- Find the right solicitor for legal protection – your solicitor will draft a contract that details exactly what the developer must deliver and outlines your expectations and what happens if these aren’t met. This includes having an end date for completion that means if the property isn’t built by this date, you can cancel the agreement and get your deposit back.
- Get insurance to cover you for any time delays or shortfalls with the build.
- Keep your property build deposit to under 10% if you can.
- Consider having alternative funds in place if needed. Most mortgages only last six months and the gap between exchange and completion could be longer than this, which could potentially mean having to reapply to your bank and experiencing a shortfall in advanced funds if the property is valued at a lower price than originally.
- Plan ahead and speak to a financial adviser if you need a mortgage. There are some specialist mortgages available for off-plan properties.