Struggling to find a home that suits you? Thinking of building your own home instead? But what do you do once you have found a suitable building plot? Here are some tips on the best way to get finance ready and the contracts for your new project signed.
It’s taken months of searching property portals, estate agents, land auctions, and potential knock down and rebuilds but you have finally found the building plot that is right for you. So here is what you need to know when your ready to put an offer in.
Don’t make a bad decision!
Good viable plots can be hard to find and even harder to keep hold of before they are snapped away by another interested party, but don’t let this pressure make you lose your head. You don’t want to end up paying too much for a site just to seal the deal, this will not only put pressure on your budget for the building phase, but potentially also take away from any value gained at the end. When purchasing a plot one of your first steps should be to commission a professional to do an independent, as well as a soil test if possible. Having a detailed inspection and soil test can reveal areas you need to know about before buying, such as tree/plant growth, access issues, and/or potential ground contamination. If there is already a house on the plot this could help give an indication of ground stability, however remember you need to also factor the removal of the property and it’s foundations into your building budget.
Is there planning in place?
Having valid planning permission in place on a building plot is key to it’s value. Certain people involved in your purchase, such as your lender, will want this planning to be transparent and absolute. Plans with less then 6 months left, or expired plans are a risk, and if you are replacing an existing dwelling it must be habitable to retain its planning status. Most planning approvals tend to come with conditions so it is worth checking what these are and the potential implications of these before you go ahead with your purchase. If planning has expired or is vague it may be worth seeing if the vendor will agree that you will buy the land at a set price subject to obtaining fresh planning approval. Who pays for this expense can be decided in the negotiations.
Financing your purchase!
Borrowing the money to finance a land purchase is not that straightforward because the value that is placed on it while it has planning permission is only temporary. This only becomes fixed once all conditions have been sorted and a start has been made on the site, such as laying the foundations. A lender may be willing to loan you up to 80% of the plots value, but they will probably want repayment before the consent expires, or a guarantee that the build will start by a certain date, or seek to charge against another asset, or for you to have a guarantor. It is recommended to get a mortgage broker who can navigate the market and direct you to the most appropriate product, as well as help prepare you for the application process.
Requirements for a self build mortgage application:
The lender will expect you to provide detailed information about the build, so they can see that you have thought through all the costs. You will need:
Drawings of the planned build
Build route – will you be managing the build yourself or will it be down to a contractor?
Cashflow models showing what money will be required and when
Answers to any statutory requirements which might arise
Evidence of affordability such as income and expenditure sheets
Agreeing a purchase price!
The land will normally have been valued by subtracting indicative design and build costs from an anticipated market value, the figure left is the maximum anyone should really pay for the plot. Make sure you do your due diligence before deciding what your maximum offer is going to be and then if possible start of lower then this. Once an offer has been put forward to a vendor negotiations can take anything from a few days to a few months, depending on issues such as competition for the plot, or been reliant on a mortgage. If new planning permission is needed this could delay the process as well and the vendor may ask for a non-refundable deposit in return for the time you need. If there is a lot of competition for the plot the vendor may decide to go down the route of a sealed bid. This is when all interested parties get the chance to put one offer in by a certain date, the vendor will then compare all the offers and choose their preferred bidder based on the best price and purchaser profile.
After your offer is accepted!
Once your offer has been accepted you will need to employ the services of a recommended solicitor. They will treat a land purchase just the same as any other property transaction, following the conveyancing guidelines, and if you have a mortgage they will be acting on your behalf as well as the lenders. Your solicitor will commission searches on your behalf including the drainage, an environmental assessment, and potentially a physical site inspection. These searches are carried out by pulling information from the databases of utility companies and other companies such as the environment agency.
Most land should be registered with the land registry and on the title plan of the land it should show the plots boundary positions and dimensions with a red line. These plans are generally on a scale of 1:2500 or 1:1250 for the location plan, together with a site plan of 1:500. It is important to always check the plans match the planning consent. The deed narrative is meant to tell the story of who sold to who and when, as well as who may be the beneficiary of any legal convenants. Your solicitor will advise you of any problems they come across. Once both parties are ready contracts will be exchanged and completed.
Your the proud new owners of a building plot, so whats next? We recommend firstly securing your site by using gates, fencing, and locks where they are needed. Secondly,you need to disconnect any mains services until they are needed again. Thirdly, take out some insurance for the site including public liability just in case someone should injure themselves on your land. Finally, get prepared for some up’s, down’s and hard work, but remember it will all be worth it in the end!
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Struggling to find a home that suits you? Thinking of building your own home instead? But what do you do once you have found a suitable building plot? Here are some tips on the best way to get finance ready and the contracts for your new project signed. It’s taken months of searching property portals, […]
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Michelle Gaffaney - Architectural Director
With a wealth of experience working on a range of projects, Michelle Gaffaney has a passion for design and strong relationships with her clients. Connect with Michelle on LinkedIn