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What are the pros and cons of buying off-plan?

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My partner and I are trying to buy our first home together. The market is red hot and we are facing fierce competition for properties in our area.

In the past six months we have lost out on one property after we were outbid, and on another one after the seller’s onward purchase collapsed.

With property prices rising, we are starting to worry that we will never get on the property ladder if we leave it much longer.

We recently came across a new development being advertised online which looks perfect – and is within our budget. The big problem is that it’s still being built, and it won’t be completed for more than a year.

We are prepared to continue renting until it finishes, but we would like to know whether buying off-plan is a good idea, and whether there are any potential issues we should be aware of.

Instead of a viewing, off-plan buyers will sit down with an agent or developer and look at plans, CGIs, a specification list and a development model to decide whether a home is for them

Instead of a viewing, off-plan buyers will sit down with an agent or developer and look at plans, CGIs, a specification list and a development model to decide whether a home is for them

Ed Magnus of This is Money replies: The UK property market is in the middle of a boom, which means competition is rife.

Read the news headlines and you’ll see ‘soaring house prices’, ‘bidding wars’, ‘property frenzy’, and ‘race for space,’ – it’s enough to make any aspiring homeowner panic that they’re being left behind.

There are more than 700,000 homes currently going through the conveyancing process, according to Rightmove – the biggest sales pipeline in a decade.

On average it is taking four months for a property to go from being under offer to sold, thanks in part to a ‘conveyancing logjam.’

As you have unfortunately discovered, many transactions are being delayed or thwarted by the fact there is a long chain of buyers and sellers all relying on one another to complete on their own purchase.

If any transaction in the chain collapses, everyone is impacted.

Most new builds come with a 10-year warranty that guarantees against structural defects

Most new builds come with a 10-year warranty that guarantees against structural defects

For first-time buyers, one way to avoid the insecurity and anxiety that comes from being stuck in a chain is to buy a new-build property.

But those searching for brand-new homes will find that many of the online property portals are advertising homes that are not even built yet.

The prospect of a blank canvas can be tantalising, which is why some buyers will consider a property that is yet to be completed – and in some cases before construction has even begun.

This is known as buying off-plan, because often buyers will choose their home based on looking at architect’s plans rather than the real thing. 

To explain the pros and cons, we spoke to Rob Bence, founder and chief executive of the forum Property Hub; Paula Higgins, founder and chief executive of the HomeOwners Alliance;  Jonathan Enticknap, director of London residential development at estate agent Hamptons; and David Jubb, director at JLL Residential.

Should a first-time buyer consider buying off-plan?

Jonathan Enticknap replies: For first time buyers who have some flexibility on when they can complete on a purchase, buying off-plan can be a fantastic opportunity. 

This is because of the potential for capital growth – i.e the home increasing in value – throughout the build process.

There is a preconception that buying off-plan is only for the wealthy, or international investors. 

But if the right property, in the right location, at the right price becomes available, why wouldn’t you consider it?

One advantage of buying off-plan is that you might be able to personalise some aspects of your home - but the major drawback is you don't have control over when it will be ready

One advantage of buying off-plan is that you might be able to personalise some aspects of your home – but the major drawback is you don’t have control over when it will be ready 

Rob Bence replies: Most new-build developers now start the sales process before the foundations go in, and it’s not uncommon for first time buyers to opt for a new build property that’s off-plan. 

As with any project though, sometimes timescales can slip. So if you’re a first-time buyer in a hurry to move, it’s worth considering what your options would be, were the build to get delayed for one reason or another.

What are the major risks?

Paula Higgins replies: You can’t be sure what the finished property will look like, so there will always be an element of risk.

If the site is being completed in stages you may find in the short-term you could be living on a building site with no neighbours, lots of noise and dust.

Also, if the build is delayed, you could have to re-apply for your mortgage as most mortgage offers only last for six months.

Rob Bence replies: The developer could go bust before the building is finished and that could mean your deposit is at risk if it is not protected.  

The other major risk is that the property market could also fall during the construction period, meaning you could end up with a lower valuation at completion than the price you agreed and paid a deposit on at the outset.

You could also run into mortgage issues, which might result in you being unable to complete and therefore, forfeiting the deposit you paid when you exchanged contracts.

What are the biggest advantages?

Paula Higgins replies: It might be possible to personalise your home by having a say on the internal layout, fixtures and fittings, as well as where is sits within the development.

Your home will also come with a new-build warranty which can give you greater peace of mind than if you were purchasing an older property.

Once the property is built, the warranty is split into two periods: the defects insurance period, which covers the first two years, and the structural insurance period which covers years three to 10.

Typically, during your first two years in the home, if there are issues with the work the builder has done, such as the heating not working because the pipes are faulty, the developer is obliged to come and fix them.

During the structural insurance period, the developer is typically only responsible for major problems with the structure of the property.

Rob Bence replies: First and foremost, there is no chain, so you won’t need to worry about having your purchase scuppered by somebody else’s transaction falling through.

You can also often negotiate discounts off the purchase price, and negotiate on extra upgrades like flooring, appliances and kitchens.

And once your offer is accepted, you get to lock in at the agreed price.

This means if you purchase a property that’s 12 months off-plan in a rising market and prices go up five per cent, you’ve made a gain without lifting a finger – and with only having put a small deposit down. 

How does an off-plan purchase work?

Rob Bence replies: The process is not too dissimilar to buying a completed property, barring the fact that you can’t physically view it before making your offer.

You’ll be required to pay a reservation fee to secure the property, which is often deducted from the deposit you’ll pay later in the process.

As an off-plan buyer, you will often get to choose some of the materials used in your home

As an off-plan buyer, you will often get to choose some of the materials used in your home

You’ll then instruct a solicitor to go through the usual conveyancing process which includes searches and the checking of contracts.

Once your solicitor is happy, they’ll usually ask you to pay the deposit and exchange contracts. Once the contracts are exchanged, you’re legally committed to purchasing the property.

If the purchase doesn’t go through after this, you’ll lose your deposit – so that’s something to bear in mind.

As the build progresses, you’ll need to arrange your mortgage towards the end of construction, so you have everything ready in time for completion of the property, unless of course you’re a cash buyer.

Once the build is finished, the developer will serve a ‘notice to complete’ which will give you a certain amount of time to complete the purchase – either paying the remainder of the cash or finalising the mortgage.

How can buyers make sure their money is safe?

Jonathan Enticknap replies: If you are buying a property more than 12 months from completion, look for a developer with a strong reputation and track record.

Speak to a mortgage advisor to understand what you can afford before reserving, and do not forget to apply for your mortgage offer six months prior to completion.

Also, don’t forget to factor in stamp duty to any financial calculations you make.

Rob Bence replies: Make sure your deposit is protected ‘in escrow’ or by warranty in case the developer goes bust – your solicitor can review the documentation if you’re not sure.

Warranty providers rarely guarantee a deposit above 10 per cent, so putting down more than this puts you at risk if the developer goes bust.

Research the developer: If they go bust during construction, you could lose your deposit

Research the developer: If they go bust during construction, you could lose your deposit

It’s not uncommon to see developers asking buyers to pay their deposits in stages,  eventually totalling more than 50 per cent of the purchase price. 

Here, the developer is effectively using your money to fund the build, which puts you at significant risk if the scheme is never completed.  

Finally, factor in the potential for delays – if you’re in a rush to move into your new home, you may need a back-up plan.

Paula Higgins replies: It’s so important to do your research and make sure you are going with a quality developer – new build homes are not all the same, so look up previous projects built by the developer. 

If it is a leasehold property, make sure you go through the lease with your conveyancer as soon as possible, paying particular attention to the length of the lease, ground rents and service charges as well as any restrictions.

Finally, at the point of completion, make sure you have a snagging survey done. This will identify defects or problems which need fixing before you move in.

The survey should spot minor issues, from a door that’s misaligned and catching on the carpet, to something more serious that could affect the structure of your home.

What about if purchasing Help to Buy?

David Jubb replies: With Help to Buy you benefit from an interest free equity loan for the first five years but from the start of the sixth year there is an interest charge of 1.75 per annum on your loan, which you will need to pay per month unless you repay.

For those using Help to Buy, you’re allowed to exchange a maximum of nine-months before completion, so if you’re keen on a particular development or purchase, I’d advise trying to buy as close to that limit as possible.

Also, when buying in advance of the building being completed, many developers are now offering incentives with Help to Buy, such as stamp duty paid, so ensure you ask these questions before reserving to ensure you make your purchase more affordable. 

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Zappone turns down invitation to appear before committee to discuss envoy role

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Former minister Katherine Zappone has turned down an invitation to appear before an Oireachtas committee to explain the circumstances surrounding her now-scrapped appointment as a special envoy.

The chair of the Oireachtas Committee on Foreign Affairs Charlie Flanagan confirmed on Monday that Ms Zappone had declined an invitation to attend to discuss the matter.

The committee, which met last Wednesday in private session, agreed to write to the former minister and invite her to appear before it.

It is understood the decision was taken at a private meeting after it was proposed by Sinn Féin spokesman on foreign affairs John Brady and his Social Democrats counterpart Gary Gannon.

The committee is also to invite Martin Fraser, the secretary general of the Department of the Taoiseach and the State’s highest-ranking civil servant, to address the issue of precisely when Ms Zappone’s name was communicated to the Department of the Taoiseach.

Controversy erupted over an attempt by Minister of Foreign Affairs Simon Coveney to appoint Ms Zappone as a special envoy for freedom of expression and LGBTQ+ rights.

Mr Coveney – who is attending UN meetings this week in New York – last week faced down a motion of no confidence as a result of his handling of the matter.

Earlier this month, Mr Coveney told the Oireachtas Committee Ms Zappone was mistaken in her belief she had been offered the job last March.

Mr Coveney also rejected claims that Ms Zappone lobbied for the position or that he breached Freedom of Information legislation by deleting texts between himself and Tánaiste Leo Varadkar.

However, Mr Coveney apologised for “sloppiness”, and for making mistakes in the past few weeks.

Records released by the Department of Foreign Affairs show Ms Zappone texted Mr Coveney to thank him on March 4th “so, so much for offering me this incredible opportunity”.

In mid-July she sent another message of thanks but Mr Coveney has insisted nothing had been formally agreed until it came to Cabinet on July 27th.

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Lori Loughlin and fashion designer husband drop $13M on Palm Desert vacation home

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Former Full House actress, Lori Loughlin, and her husband, Mossimo Giannulli, have dropped $13million on a gated Palm Desert, California, oasis, following their release from prison for their involvement in the college-admissions scandal.  

Loughlin, who was released from prison in December, with her husband following in April, appear to be celebrating their newfound freedom with the purchase of their vacation getaway in the La Quinta community.

The five-bedroom, 5.5 bathroom home, situated in the guard-gated exclusive Madison Club, comes lavished with several amenities, including a wine cellar, movie theater, two pools, two spas, a wet bar and an outdoor projector-theater.  

Former Full House actress, Lori Loughlin, and her husband, Mossimo Giannulli, have dropped $13million on a gated Palm Desert, California, oasis, following their release from prison for their involvement in the college-admissions scandal.

Former Full House actress, Lori Loughlin, and her husband, Mossimo Giannulli, have dropped $13million on a gated Palm Desert, California, oasis, following their release from prison for their involvement in the college-admissions scandal.

The open dining and living room area is perfect for watching L.A sunsets

The open dining and living room area is perfect for watching L.A sunsets 

The home comes equipped with several outdoor fireplaces, perfect for entertaining guests on chilly evenings

The home comes equipped with several outdoor fireplaces, perfect for entertaining guests on chilly evenings 

Opulent swimming pools encompass the outdoor area, in addition to an outdoor projector for watching films

Opulent swimming pools encompass the outdoor area, in addition to an outdoor projector for watching films 

The home comes lavished with several amenities, including a wine cellar, movie theater, two pools, outdoor fireplaces, two spas, a wet bar and an outdoor projector-theater

The home comes lavished with several amenities, including a wine cellar, movie theater, two pools, outdoor fireplaces, two spas, a wet bar and an outdoor projector-theater 

Former 'Full House' actress, Lori Loughlin, (right) and her husband, Mossimo Giannulli, (left) have dropped $13 million on a gated Palm Desert, California, oasis

Former ‘Full House’ actress, Lori Loughlin, (right) and her husband, Mossimo Giannulli, (left) have dropped $13 million on a gated Palm Desert, California, oasis

Built in 2019, the home was formally owned by Assurance co-founder Michael Rowell and his wife, Alexis, who purchased it for only $9.5 million. 

A few of their neighbors include Kris Jenner, Kourtney Kardashian, Nike’s Phil Knight, Cindy Crawford and Scooter Braun. 

The purchase comes a year after Loughlin and Giannulli bought a $9.5 million modern farmhouse in the Hidden Hills area of Los Angeles.      

A federal judge in Boston recently granted Loughlin ‘expedited’ permission to travel to Canada to possibly rekindle her career. The request was necessary as she remains on probation.

The five-bedroom, 5.5 bathroom home is situated in the guard-gated exclusive Madison Club in the La Quinta community

The five-bedroom, 5.5 bathroom home is situated in the guard-gated exclusive Madison Club in the La Quinta community

Built in 2019, the home was formally owned by Assurance co-founder Michael Rowell and his wife, Alexis, who purchased it for only $9.5 million

Built in 2019, the home was formally owned by Assurance co-founder Michael Rowell and his wife, Alexis, who purchased it for only $9.5 million

An large dining area opens out onto the terrace, as an intricate chandelier hangs from the ceiling

An large dining area opens out onto the terrace, as an intricate chandelier hangs from the ceiling

Also featured in the amenities is a chic, oversized wine cellar

Also featured in the amenities is a chic, oversized wine cellar 

Loughlin was unable to travel due to her prison sentence and ensuing community service commitments stemming from her involvement in the ‘Operation Varsity Blues’ scheme, which involved wealthy parents paying large sums of money to get their kids into elite universities.    

‘Ms. Loughlin anticipates she will be traveling for about one week’ and is ‘being offered a filming production project’ if granted permission, her initial request sent by a probation official stated.   

It emerged in 2019 that Lori and Giannulli bribed their daughters Olivia and Isabella’s way into University Of Southern California.

Lori and her fashion designer husband paid $500,000 to falsely pass the girls off as potential college rowers on USC’s rowing team.

Although they initially claimed to be innocent, Mossimo pled guilty last May to conspiracy to commit wire and mail fraud and honest services and mail fraud, while Lori pled guilty to conspiracy to commit wire and mail fraud.  

Giannulli was sentenced to five months, while Loughlin served two months behind bars.

It emerged in 2019 that Lori and Giannulli bribed their daughters Olivia and Isabella's way into University Of Southern California

It emerged in 2019 that Lori and Giannulli bribed their daughters Olivia and Isabella’s way into University Of Southern California

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Tenor fails to rent home as work in Covid-hit sector deemed precarious

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An Irish tenor, who has performed for presidents and emperors and been shortlisted for a Grammy award, is struggling to rent a home in Dublin because of a perception that working in the Covid-19-hit entertainment industry makes him a risk.

Paul Byrom said he was “knocked for six” last week after a potential landlord refused to even meet him on the grounds that the pandemic had made his profession singularly unsuitable for the rental market.

Byrom has earned his living as a musician for more than 20 years and has performed for Emperor Akihito of Japan, former Irish presidents Mary McAleese and Mary Robinson and former US president Barack Obama.

He was one of the original soloists in the Celtic Thunder show that toured the world and had number one albums on the World Billboard Chart. A solo album, This is the Moment, debuted at number one on the same chart and was shortlisted for a Grammy nomination.

Byrom has continued to work online during the pandemic and is looking forward to restarting his live career soon. “I am no Bono, but I am not starting out in the game,” he said.

However, none of his achievements appear to have been good enough for one Dublin landlord. Byrom said he and his girlfriend were keen to move to a bigger home and found a two-bedroom house in south county Dublin advertised at a rent of €2,000 a month.

‘Exemplary tenant’

It was being let by the estate agent which manages the property the couple currently live in and he was assured that, as an “exemplary tenant” for more than three years, his application would most likely be considered favourably.

“The estate agents said that while it was looking after the letting, it wouldn’t be the management company and the guy who owned it would be the point of contact,” Byrom said. “I was told that the landlord would want to meet me and I had no problem with any of that – I thought that made sense.”

He and his girlfriend assembled all the paperwork including her payslips and details of his earnings from his accountant. “I had moved in in my head but then I got a phone call saying the application had been rejected,” he said.

His mother joked that he had been turned down “because the landlord didn’t want you practising your Ave Maria’s at 10 in the morning.”

But that was not the reason. It emerged that the “landlord thought that because Covid had hit my industry hard he would be too nervous to take me on. He simply didn’t want anyone from the entertainment industry,” Byrom said.

Mortgage

He said struggling to rent or get a mortgage were not the only issues entertainers encounter.

“Try and look for car insurance as a singer and the companies don’t want to know. So I can’t drive a car or rent a home or even take advantage of the bike to work tax scheme because I am self employed.

“And this is a country that claims to be the land of the bards and the poets. The amount of roadblocks put in an entertainer’s way are just crazy, but then they will say get out there and sing Danny Boy and represent the country. You’d have to wonder if Ireland wants artists to be here at all.”


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