Can you tell me about the process of buying a new build?

[UserNameNameNameUser]

We have seen a house that we really like. It’s a new build and isn’t going to be ready until next summer (which is actually perfect for us).

However, to reserve it they want us to be able to “prove funding” now. The sales person explained that this usually meant putting our house on the market and getting a firm offer.

Is this how it normally works though? Surely if we put our house on the market now, a buyer is unlikely to want to wait until the summer to move. Does everyone who moves into a new build move into rental first? (Sales person said it was very common.)

This is in Scotland, in case it makes a difference.

If you had asked me this a couple of years ago I would have been as surprised as you but as someone who has now done it (moved in last Feb) I can confirm that what you have been told is broadly true.

We bought off-plan and reserved almost 12-months before the house would be ready. Had to exchange within 42-days (did stretch a bit longer) and then sit and wait for 9-months 'til completion. Of course, in reality it meant moving into temp accommodation but the sales staff told us this at the very beginning (it was this that surprised us the most).

We were lucky in as much as we agreed with our buyer a gap of 4-months between E&C and we then moved into my (late) parents house where we lived (rent free) for some 5-months.
Our new neighbours tell us stories of living with family, renting houses for 12 (and even 18) months or AB&B.

I’m glad it worked out for you @Dougieowner

I might be a bit stuck if that’s the way it’s normally done. DS is in an important exam year, and I can’t see him coping with a move into temporary accommodation in the middle of studying and exams.

Naively I thought that a new build would be an easier process! I think I expected a hefty non-refundable deposit or something similar.

Does your developer offer PX?
My SIL had this a while back and it worked out very well for them.
Our developer doesn't offer it.

We were told that we needed to be in a position to exchange after 8 weeks of reserving the house we wanted.
We knew that the minimum rental contract was 6 months so we decided to sell our house and rent until the new house was ready.
We sold fairly quickly and moved into the rental in the May, at this point the new house was only half built and not released for reservation.
They released them in the October and we finally moved in the following April, so almost a year .
Finding a suitable rental was one of the most stressful aspects of the process as we needed a decent sized house and had a cat. We couldn’t sign a tenancy agreement until we exchanged contracts and lost a few houses as our buyers were slow at various stages.
Also, we hadn’t actually been in the new house at all until a couple of months after we reserved it so it was a gamble. They only built one of our style of house and we were worried that someone else would get it before us , we visited the show house a lot and spoke to them frequently so they knew we were definitely interested.
it was stressful but worth it as we love our house!
good luck!

They do offer PX, but only as an incentive on certain properties which are basically finished but not yet sold i.e ones where they expect to have someone in them in the next couple of months. I guess we could just hold out to March/April time and see if it’s still available. (There is only one house of this type on the development)

@Pinkybike that sounds stressful!

The one we want is available for reservation now, but won’t be ready for 7-8 months.

It’s very tricky as you don’t know how long it will take to sell your house, our buyers initially said we could stay in the house and rent it from them ( they were living with family) but when they heard how long it was likely to take they were not willing to wait that long!
i think most people seem to go into rented or stay with family 😒

Houses are selling pretty quickly here. I guess our best bet is to hold out to spring and put it on the market then. However worst case scenario is that we sell but then don’t get the house we want.

Be very careful in the current market.....

We part exchanged. Couldnt ever get involved in waiting for a house to be built whilst we worried ourselves to death about renting. Have you seen the rises in rental properties.... We got a value for our house which was at most £10k below what we could get on the market at the time. We agreed to their price and signed whatever was needed. It took them a good 9 months to build the house. Guess what, in that time the new house prices rose by £30k but as we had part exchanged ours wasnt effected. I presume the paperwork for part exchange doesnt allow for the house builder to change the goalposts like it does for simply reserving a plot. We also only had the purchasing conveyancing costs. More money saved. We had the new purchasers of our house repeatedly asking when we would be moving out. We smiled and pointed them towards the house builder. We didnt care how long it took as we were still in our home. The housebuilder had the extra incentive to sort two sales out as well. In the end we reckon it cost £5k to part exchange but saved ourselves loads of money on purchase of new house increase in value.

Which brings me on to reserving houses. Our house builder now has a clause that the price you reserve at is not necessarily the price you pay. I have seen examples of £10k, £20k and even £50k rises in the price the house was reserved at and the one the house builder then puts in when it comes to exchange. You are basically risking your own home that you live in now as chances are it will be sold and then find out the new house is out of budget when they finally come to release the plot.

I have no answers but if it came down to a choice of perfect plot with above risks and a not so perfect plot that was ready i think i would go with the certainty myself.

Thanks @Tessasanderson Sounds like you were lucky! We would do that in a heartbeat if it weren’t for the fact that they are not offering part exchange in the plot we want. We’d figured we would have happily taken a £30-50k hit just for the certainty of moving straight out of this one and onto the new one.

Thanks for the heads up about price increases. I would have assumed the reservation price would be the price paid. We’ll watch out for that!

Have you actually asked the developer if they will allow you to part exchange for the plot you'd like?

Yes. They said not until much nearer the time that the house will be ready.

Paraphrasing, but they will hold out for a cash offer and only part exchange if time has otherwise run out on getting a buyer.