Buying Off-Plan Properties: Key Steps To Take

Shilpa Mathuradas

Considerations and steps to take when buying an off-plan property

Buying off-plan properties can be an attractive option, as many people are impressed by the glossy photos, brochures and videos presented by developers in respect of off-plan purchases. Nevertheless, this option comes with its own set of risks and challenges.

BBC News has reported a case, which many people won’t find surprising, regarding a couple of first-time homebuyers who unfortunately lost their £21.000 deposit during their off-plan.

In my previous article I discuss the risks of buying off-plan, while here I will set out steps you should take if you are considering buying off-plan.

Check how much you can borrow

Before buying any property, whether it is a new build or not, you should contact potential lenders and determine how much you can borrow. Keep in mind that lenders often offer smaller loans for new builds and some don’t lend at all, therefore it is a good idea to speak to a specialist new build broker.

Considerations to make when buying off-plan

When buying off-plan you will have important factors to consider. First, research the developer thoroughly, as you are purchasing a property before seeing the final product. If the construction is partially completed, talk to any neighbors who have already moved in to learn about their experiences with the buying process.

Get your mortgage offer in principle

When you have chosen your preferred lender, get a mortgage offer in principle. This is a document which sets out how much the lender is prepared to lend you.

Find the right property

Once you have a mortgage offer in principle, you can then find the right property for you and your family and negotiate the price. Remember, it is good for developers to be seen as selling properties and therefore there may be a bargain to be done.

Get the right conveyancer

Make sure you get the right legal help to assist you in buying the property and ideally from someone experienced in buying off-plan properties as these present different challenges compared to the average purchase. Also, get this legal help as early as possible, and remember that you don’t have to proceed with the firm of lawyers that the developer or the agent suggests. Don’t feel pressured into hiring someone.

Reserve an off-plan property

You will be required to reserve an off-plan property and usually pay a reservation fee of up to £3,000. This fee is usually non refundable, therefore it’s essential to get clear plans and specifications so you understand exactly what you are reserving.

Mortgage for an off-plan purchase

When buying off-plan, you typically have 28 days to exchange contracts. Those who have applied for mortgages before will know this is a short timeframe for the lender to assess all requirements and complete the necessary valuation. This is why it’s crucial to work with a specialist mortgage broker who can secure the right product for you. Mortgage offers often expire within six months and if you are unable to get the offer extended, then it is likely you will lose your deposit. It is therefore important that your conveyancer negotiates a long stop date which expires before your mortgage does and allows you to walk away without losing your deposit.

Completion of the purchase

Completion usually takes place on notice. This means that once the property is finished the developer will notify the buyer to complete the purchase, typically within 10 working days. The conveyancer will immediately have to arrange the drawdown of funds. Once completed there are often snagging items which you are required to notify the developer of within a specified period. Make sure you are aware of this period and notify the developer accordingly.

How Can We Help?

If you are planning to purchase an off-buy property and you need legal advice, please feel free to contact our property solicitors by:

• Filling in our online enquiry form; or
• Calling us on 020 7485 8811