How Much Can You Negotiate Off a New Build House?
You can negotiate a lower offer on a new build, with many buyers offering around 15% under the asking price. This is because new builds are sold with an included premium, making them more expensive than existing properties.
Those buying a new build property need to make sure that they can provide a justifiable argument when submitting a lower offer. Therefore, knowing how much you can negotiate and how to do it is crucial to having an offer accepted.
In this guide, we’ve gathered everything you need to know about how much you can negotiate off a new build and how to do it.
Do New Build Houses Cost More than Others?
New build homes cost more due to the premium that is added to the sale price. The average cost of a new build including the premium is £425,047 in England, excluding London. The price is substantially higher than the average cost of £277,000 for existing properties. This makes new builds 53% more expensive than older properties on average.
You will have to pay a premium because new builds are brand-new houses that have not been lived in. Developers may also offer a guarantee or New Home Warranty for a set period of time to ensure the property is worth the investment.
Another factor that drives the price up for new builds is making the properties more energy efficient. While the upfront cost may be higher, eco-friendly solutions such as solar panels can incur lower bills. The low maintenance costs can save you money in the long run.
Cost of New Build vs Existing Property
The average upfront cost of buying an existing property is £33,070. This cost includes a 10% deposit, solicitor fees, mortgage broker fees, disbursements, snagging survey, and stamp duty.
On the other hand, buying a new build property costs an average of £75,618 upfront. This cost includes a 15% deposit, solicitor fees, mortgage broker fees, disbursements, snagging survey, and stamp duty.
Most mortgage lenders do not offer 90% mortgages on new build properties. This is because new build properties are viewed as a higher risk due to the premiums and extra costs involved.
Here is a breakdown of the upfront costs*:
| Service | New Build Cost (£) | Existing Property Cost (£) |
|---|---|---|
| Deposit | £63,757 (15% of house price) | £27,700 (10% of house price) |
| Legal Fees | £1,490 | £1,320 |
| Mortgage Broker | £500-£600 | £500-£600 |
| Disbursements | £619 | £619 |
| Surveying | £450 | £250 |
| Stamp Duty | £8,752 | £1,350 |
*This is based on a £425,047 new build and £277,000 existing property
Use our Conveyancing Calculator to see how much you owe
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Can I Still Negotiate On the Offer?
You can submit a negotiation to the new build developers. The guide price tends to be an over-inflated price to account for the brand-new furnishings, materials, and labour involved. Regardless, you need to ensure that your initial offer is not too low. This may cause the developer to negotiate with other parties and refuse further enquiries.
Equally, you want to make sure that you are not paying more than you should. If you exceed your maximum budget, or find that your house does not maintain its value, you could fall into negative equity. This can cause major financial issues such as negatively impacting your credit score.
It is common for potential buyers to submit a cheeky offer. This is defined as an offer that is between 10% and 25% below the asking price. Any offer that is even lower than this is unlikely to be successful. However, cheeky offers are often the basis of negotiations between the potential buyer and the developers.
Offers that are below 25% of the asking price are known as lowball offers. These are often perceived as disrespectful by sellers and developers. If you plan on submitting a lowball offer, it’s crucial that you have good reasoning for doing so. The most common reason for lowball offers is a lack of demand in the housing market.
Most developers have a base price that they will not go under. This tends to be below the full asking price and aims to ensure that the properties in the area maintain a certain value.
What Shall I Base My Offer On?
There are several factors that you should consider when calculating how much you want to offer.
Here is what you need to bear in mind:
Properties in the Development
Firstly, you should look at the properties in the development and how many are yet to be sold. This will provide a good indication of the demand. If there is a high level of demand, you may not have negotiating power as the seller is likely to receive an abundance of offers. However, if there is little demand, you will have more room to negotiate.
How Long They Have Been Available
If the property has been available for a long time could be an indicator that the developer is struggling to sell the property. This means they may be more open to negotiation.
Other Developments Nearby
Looking at similar houses and the actual sold prices can give you a good foundation for negotiation. If the new build property you are interested in is selling for a much higher price, you can cite the other properties as a reason why you are offering less.
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How to Negotiate on New Builds?
Before you submit your offer, you need to be able to justify the amount. Therefore, it’s crucial that you conduct as much research as possible, especially if you are submitting a cheeky offer.
If you are a cash buyer, you will be in a stronger position for negotiations. This is because you will be able to proceed with the transaction without having to worry about applying for a mortgage.
Here is how you should negotiate on new builds:
Check Land Registry
Your solicitor can check the Land Registry records for the final prices of other plots and similar developments. However, this is dependent on whether the other plots have been registered.
New build properties are viewed as complex cases and this means it can take a long time for them to appear on the Land Registry. It can take anywhere between 6 months and 22 months for the property to appear.
If the plot has been on the market for a long time, other properties in the same development may have been sold, meaning that your solicitor can check.
Get a Snagging Survey
A snagging survey is a survey that is designed for new build properties. Your surveyor will inspect the property and land. If the property has not been built, they will inspect the architectural blueprints and building materials.
Your surveyor will write a report highlighting potential issues that could impact the property over time. The average cost of a snagging survey is £450.
Once a snagging survey is conducted, you can take any issues to the developer within two years following your property purchase.
Ask about Stamp Duty
Paying Stamp Duty Land Tax (SDLT) on a new build property is no different to buying an older property. Some developers may offer an incentive and pay your Stamp Duty on your behalf. Bear in mind that Stamp Duty rates can differ across the UK.
Use our Stamp Duty Calculator to see how much you owe
Fittings and Fixtures
If the property is still being developed, you can negotiate certain fixtures and fittings. If you have viewed a show home, you may be able to discuss optional extras that could be included in your home such as furniture and white goods. This is dependent on what the developer has to offer and whether these fittings are off-plan or not.
If you are unsure what extras are available, you can ask to see the developer's model homes.
Year End
If the developer has not met their sales quota, they may feel under pressure to sell as many plots as possible before the developer's year-end. If this is the case, they may be more open to negotiations and offer developer incentives. Your developer may also offer free upgrades such as higher-quality finishings.
Get an Offer in Writing
Once you have received your offer from the developer, make sure that the offer has been agreed in writing. Written agreements ensure that there is a legal record of your offer as you progress with the conveyancing process.
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Do I Need a Conveyancer for a New Build?
You will need to hire a conveyancer or solicitor when buying a new build. Not every firm offers new build services due to the extra training that is involved.
The new build buying process can have a quick turnaround, especially if the property has been built and is ready to be lived in. There is extra paperwork involved that needs to be submitted once you pay a reservation fee.
The developer will recommend that you work with their solicitor due to the short timeframe. However, it is important to note that your developer may receive a commission. Hiring a different solicitor means that there will also be a fresh pair of eyes on the property. They may be able to point out faults that the developer's solicitor has missed.
Your solicitor will arrange various checks such as conveyancing searches and a National House Building Council (NHBC) inspection. They will be able to provide you with expert advice, which is essential if you are a first-time buyer wanting to get your foot on the property ladder.
Read more about New Build Conveyancing Solicitors
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