Reservation from Plan
On New Build developments it is common for reservations to be made during the construction period, from plan. For those whose circumstances allow this can be an effective way to secure the property style suited to your requirements in a preferred position on the development.
The actual process and the level of reservation fee can vary from development to development. In general terms it is common for plots to be made available at released prices. There will be a projected date for completion based on the planned build programme.
A reservation fee is taken when the buyer has decided on a particular property and is comfortable with the price and the specifications for the property. The property may then be held for the buyer at the price agreed for a specified reservation period.
At the end of the specified reservation period it would be anticipated that the buyer would require to conclude the contract to buy the property to secure it. Your solicitor would deal with these matters and provide guidance to you on the terms and conditions applying. It is common for a further sum to be paid at this stage by way of a deposit. Normally the reservation fee and the deposit are considered as part payment of the price agreed. The balance is usually payable on the date of entry/completion date.
It should be noted that the procedures and level of fees and deposits will vary between various developments. The following is intended to show a basic process which commonly applies.
Property Price Released at £150,000.
Reservation form completed and reservation fee payable to hold property for a defined reservation period. Reservation fee paid at, say, £500.
Contract issued to buyers solicitor confirming terms and conditions. The timescales for acting on these will be defined.
Conclusion of the contract involves a deposit payment of a further, say, £1000.
The property is thereafter formally secured by the buyer and the balance of price will be due when the property is completed - £148,500.
Particularly where reservation is made early in the build process there may be the opportunity for choices and extras to be incorporated.
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 house styles going forward whilst your purchase remains at the initial reservation price. However, it is only fair to say that prices could reduce in different circumstances.
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 purchase, you should take advice on these matters before making any commitment.
There are those who prefer to wait until a view home or show home is established or indeed the house of their choice is nearer completion before reserving. If that is your preference and your circumstances are better served to do so, you may be more inclined to wait.
In any event you need to consider what best suits your requirements and take appropriate advice.