Is buying “off-plan” a good plan? 

Buying a new build ‘off-plan’ broadly comes down to one big question: does the benefit of the discount outweigh the risk of delays? 

The answer to that will depend on your own circumstances, but we can have a look at the benefits and the risks here, to help you make a decision. 

Possibility of significant discounts 

Typically, the earlier you commit to buying a new build property, the greater the discounts available. That’s because the developer will want to secure buyers to pay off their finance, and have the peace of mind that the properties are sold. 

So if you commit early, and buy off-plan, then the purchase price is likely to be lower than if you leave it longer. A huge benefit! 

Protection against additional costs for 10 years 

When you move into a second-hand home, everything is your responsibility. You have to pay for any essential maintenance, which can be costly if you need to replace the boiler, or fix the roof, or re-render the house.  

But with a new-build, you get a 10-year warranty, which protects you against structural defects. In the first two years, you can ask the developer to fix little snags like scratches on the paint, or draughty windows. For the next 8 years, you’re covered for the costs of fixing structural issues like the roof or the walls.  

Taken together with the initial discount you got on buying the home, this can save you a lot of money in comparison to buying a home in the ‘normal’ way.  

Another big win for the off-plan property. 

Getting a mortgage can be tricky 

But the first snag is that if you’re not a cash-buyer, then you’ll need a mortgage on your home and it can be problematic to get mortgages for off-plan properties. 

Some lenders will not offer mortgages for off-plan properties at all, which means that your options are more limited. In turn, that could result in a slightly higher interest rate on your mortgage. 

The other problem that often crops up is the impact of delays. You’ll get a mortgage in principle from the lender so that you know how much you’re able to borrow. But that offer is only valid for six months. If your development is delayed for more than six months, then you’ll have to submit another application. 

The next mortgage offer may be higher or lower than the first one, if the market conditions have changed. So there’s a bit of uncertainty in the process if delays are ongoing. 

Try to secure early ‘get outs’ in the contract 

Once you’ve reviewed the plan and brochures and you’ve decided to buy the property off-plan, you’ll be asked to put down a reservation fee (usually around £1,000). After that, things move very quickly on the legal side. 

You’ll usually be asked to exchange contracts within 28 days of paying your reservation fee. Once you exchange contracts then the purchase is legally binding. That means that you could be sued if you change your mind on buying the property. 

In a typical conveyancing process you exchange contracts right at the end of the process, and move in about a week later. But when you buy off-plan, you’re tied into the decision at a very early stage, and it could be months or even years before you actually move in. 

That’s why it’s important to have an experienced conveyancer on board from the start. In those 28 days before you exchange, your solicitor will review the contract very carefully. They might be able to include some early get out clauses, to protect you from being sued for the full price of the house if you change your mind. 

Delays are stressful 

The developer should be able to give you a detailed timetable for construction. But these timetables often slip.  

We’ve mentioned that delay can impact your mortgage offer, and you could be facing practical inconveniences too. Perhaps you’re renting at the moment and the landlord won’t give you a rolling contract. Or if you’re selling your current home then you might be under pressure to complete within a certain timeframe.  

You could end up in limbo, having to move in with parents or friends for a while, and incurring the costs of storage. 

You could be living in a building site 

Remember that your off-plan new build is one of several to be built on the development.  

If your home is one of the first to be completed, you may have to put up with a lot of building and construction work when you first move in.  

Weighing it up 

Those are a few things to consider when you’re making your decision. The possibility of getting a brand new home at a discounted price is very attractive, and often that will be the deciding factor. 

But make sure that you’re prepared for possible delays, and the impact that will have on the process, and on your living arrangements practically.  

If you’d like any help with the conveyancing process, we have experience in purchasing new builds and we can help you get the best protection in your contract.  

Your developer will probably recommend a conveyancer, and while they will act in your best interests, they also rely on a steady stream of work from the developer. If you want somebody who is separate from that arrangement, we’re happy to help.