Reservation from Plan
On many New Build developments, you can reserve a house from plan during the construction period for a reservation fee. This can be an effective way to secure the property you want in a preferred position on the development.
While the actual process can vary from development to development, in general terms it goes through the following stages:
- Plots are made available at what is known as ‘released prices’ and there will be a projected date for completion based on the planned build programme.
- Once you, as the buyer, have decided on a particular property and are comfortable with the property price and specifications, you pay a reservation fee. The property will then be held for you at the agreed price for a specified reservation period.
- At the end of the specified reservation period, you will need to conclude the contract to buy the property to secure it. Your Solicitor will deal with these matters and advise you on the terms and conditions applying. At this stage, it is likely you will also need to pay a deposit. The deposit and the reservation fee are usually considered as part payment of the agreed purchase price.
- You will usually pay the balance due on the date of entry or completion date.
Reservation fees and deposit
The level of fees and deposits will be different between developments, but the following gives an example of how it could work:
- The property is price released at £150,000.
- You complete the reservation form and pay a reservation fee of, say, £500 to hold the property for a defined reservation period.
- The contract is concluded, which involves you making a deposit payment of a further, say, £1000, which means that the property is formally secured by you.
- You pay the balance due when the property is completed, in this case £148,500.
Advantages of reserving from plan
You have secured the property at a fixed price, which may reflect the pending market prices and conditions. As developments progress, particularly in an improving market, you may see prices rise for similar houses whilst your purchase remains at the initial reservation price. However, it is only fair to say that prices could reduce in different circumstances.
If the reservation is made early in the build process, another potential advantage is that you may also be able to choose certain elements of the build and for extras to be incorporated, as a consequence most builders may require upfront payment for any additional costs likely to be incurred as part of changes or extras that are more than the developers initial budget.
Issues to consider
As with all property purchases, it is essential that you plan ahead and ensure that the finances are in place and that you have considered any other factors which will influence the transaction. If you have a property to sell, require a mortgage or need to consider schemes to assist with the house purchase, you should take advice on these matters before making any commitment.
Also, you may prefer to wait until a view home or show home is available or indeed the house of your choice is nearer completion before making a decision about reserving. It is important to consider what best suits your requirements and circumstances, and take appropriate advice.Read more
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