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Old 24.01.2014, 12:50
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Purchasing of property (deposit) in advance of building

Hi,
We are after advice re purchasing of property via a 10% deposit upfront, and then paying the rest (including mortgage arranged) when the keys are handed to us over +1 year later.
Both the scheme and property look interesting on paper for us. Are there any caveats to be aware of?
Scheme in general: anything to be aware of? E.g., delay to completion, quality of the finished product etc. Not what you had expected, communication of stages of construction etc.
Any laws regarding these property schemes, for the purchasing party?



Would be grateful for advice from people who have been through such a scheme, or know of people who have and had any problems we should be aware of,,,
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Old 24.01.2014, 13:03
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Re: Purchasing of property (deposit) in advance of building

So, you are buying a house that will be built in the coming year?
If so, do check exactly what is in the contract. What happens when the builder defaults, are there any payments in between, who gets to decide on tiles, kitchen appliances, flooring etc? Who checks the progress and whether this is according to your specifications?

If you can read German I´d advice to check with Finanztest (DE) as they often have guides on what to consider when you do this. Not sure if they have something similar in CH?
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Old 24.01.2014, 13:16
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Re: Purchasing of property (deposit) in advance of building

Usually developers like to get payments on 3 or 4 instalments, but if you can get 10% deposit and the final 90% on completion in one go all well and good.

Check to se that the sellers have a history of happy customers and projects, you mortgage lender might help here. As will a visit to their offices. But most of all reckon with paying 10 to 20% more than the brochure price! The specs are usually for plain and low quality and you'll want a better kitchen, bathroom etc...

(We have done this twice here on new builds.)
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Old 24.01.2014, 13:16
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Re: Purchasing of property (deposit) in advance of building

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Are there any caveats to be aware of?
New builds are a minefield. Hire a experienced property lawyer who will go over all the paperwork and contract with a fine tooth comb and put your interests first. Then after receiving such advice, decide whether to go forward or not.

Also search the EF, it has been discussed here before, including some 'nice' surprises in hindsight. Buyer beware.
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Old 24.01.2014, 13:44
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Re: Purchasing of property (deposit) in advance of building

Been through the process seven years ago, on time,(actually one month early) on budget (to our spec) without any major problems. Do your research well with developer history, i.e. go and view property that they have built previously. I even knocked the front door to chat to current occupants to seek out any hidden crocodiles I should be aware of during and after the build phase.

Yes, standard can be a little boring so if you can stretch your budget I would advise to do so. Be aware, bathroom's are wildly expensive.

Appliances were included in the price and were of good quality -Miele.

Communication was good throughout and even sneaked into the property on Sundays to visualise, access, plan and feed back what you want doing or changing to the developer before the build advances to a point of no return.

Enjoy and good luck.
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Old 24.01.2014, 14:32
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Re: Purchasing of property (deposit) in advance of building

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. . . .
Would be grateful for advice from people who have been through such a scheme, or know of people who have and had any problems we should be aware of,,,
Here is a case of buying from plan where the contracts were signed and sealed (notariell verurkundet), the houses were completed, fully paid for and the new "owners" had in some cases actually moved into "their" properties. However, the contracts were not at that time entered into the property register (Grundbuch). Then the builder went bankrupt. Because the properties were not listed in the property register, there was the (theoretical) risk that the properties, although paid for, could have been auctioned to the highest bidder.


See SHAB: 91 / vom 14.05.2003 in the link below (entry in German) . . .
http://www.monetas.ch/htm/655/de/SHA...m?subj=1170850

You have one level of protection that the lender will also do checks of the creditworthiness of the contractor. Probably, you should also ensure that the property purchase is entered into the property register before you hand over too much money.
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Old 25.01.2014, 21:49
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Re: Purchasing of property (deposit) in advance of building

Thanks for the feedback, somethings to pay attention to, and if, we move forward
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Old 27.01.2014, 12:12
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Re: Purchasing of property (deposit) in advance of building

As others have said, it is the extras that can really add to the cost. Before signing anything I would insist on a cost breakdown on your "allowances" for flooring, kitchen, ect, you are generally obliged to use the builder's contractors but you can use some of your own, you will probably only get 75 to 80% refund on the "allowance" though. Negotiating the price down on new builds is pretty difficult but you may have more success negotiating more sensible "allowances" within the purchase price so you can get a better floor or kitchen fit out, thereby avoiding a bit of extra cost. What is shown to you as a "mock up" can vary greatly in quality and design to what you are able to have within the normal allowance they give you.
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Old 28.01.2014, 15:19
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Re: Purchasing of property (deposit) in advance of building

We went through this exact process 5 years ago, and it turned out very well.
I hasten to add that at the time we had no idea what we were doing, so it also had the potential to go horribly wrong!

The advice I would offer someone in a similar position would be:

1. Do you like the developer? Can you really see yourself working with him for months (and months and months)? How open does he seem to allowing you to have input, and does he take on board your concerns and requests? Don't ever hesitate to bring up the 'little thing'. It might only be a question about having a slightly higher fence, but if he brushes it aside now, what will happen when you have to negotiate the big stuff.

2. If you can live with some disturbance for a while, try to be one of the first people to move in. We were the second family to move into a street that would ultimately (2 years later) contain 30 houses. Living on a building site was hard work sometimes, but the developer was VERY keen to keep us happy throughout that time. He knew potential clients were dropping by and asking us about our experience, and he occasionally asked to show them certain things inside our home. We got a few substantial discounts to compensate us for our inconvenience, plus when things went wrong the tradesmen were on site and only to happy to pop by and fix them. For example one of my dogs ate a fairly large section of the living room wall - the plasterer came over after work and fixed it up for a bottle of wine.

3. Talk to others who have done the same, and ask them what they would do differently. We got some great ideas from friends who had also built from scratch, and did not repeat their design mistakes.

4. Try to think carefully about what sort of people the development will appeal to. This may sound obvious, but on our street almost every house has a young family with multiple children living there (including us). One elderly couple who bought a house here were recently saying they may have to move because the community here, although lovely, is not really their scene. We chose this particular development because we were fairly certain it would appeal to other families like ours which has provided playmates for our kids and like mined parents who are tolerant about the mess and noise that children bring with them!

Hope some of that helps - it is a big decision.
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Old 12.02.2015, 10:01
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Re: Purchasing of property (deposit) in advance of building

Interesting thread and quite pertinent to us at the moment. We're considering going down this route, but totally shit-scared if something should go wrong. Our main concern is that we would have to sell our flat in order for a) the bank to agree with the new financing and b) to be able to afford the 20% deposit. The estate agent explained that money would have to be released to fund the build in 3 to 4 parts. From this I presume we would have to agree and start paying the mortgage from the outset; so we would be paying rent on temporary accomodation as well as mortgage interest payments simultaneously, correct? I'm not sure I would be too happy paying mortgage interest payments on a property that we won't be living in. The upside, however, is that if we sell our flat and sign contracts for the sale and the build on the same day, we won't be penalised for breaking the mortgage agreement early.
My main concern is that we decide to go ahead, but then can't find a buyer for our flat in time and lose the house. Is there some kind of protection to prevent this; eg we have so many months to have the build of reserve before it goes to another buyer? It's going to be stressful few months I think.
I'm not concerned about the developer; they have a pretty good reputation and have built hundreds of properties in our area over the years.
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Old 12.02.2015, 12:41
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Re: Purchasing of property (deposit) in advance of building

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Interesting thread and quite pertinent to us at the moment. We're considering going down this route, but totally shit-scared if something should go wrong. Our main concern is that we would have to sell our flat in order for a) the bank to agree with the new financing and b) to be able to afford the 20% deposit. The estate agent explained that money would have to be released to fund the build in 3 to 4 parts. From this I presume we would have to agree and start paying the mortgage from the outset; so we would be paying rent on temporary accomodation as well as mortgage interest payments simultaneously, correct? I'm not sure I would be too happy paying mortgage interest payments on a property that we won't be living in. The upside, however, is that if we sell our flat and sign contracts for the sale and the build on the same day, we won't be penalised for breaking the mortgage agreement early.
My main concern is that we decide to go ahead, but then can't find a buyer for our flat in time and lose the house. Is there some kind of protection to prevent this; eg we have so many months to have the build of reserve before it goes to another buyer? It's going to be stressful few months I think.
I'm not concerned about the developer; they have a pretty good reputation and have built hundreds of properties in our area over the years.
Try and cut a deal with the developer maybe ?

I think you said you flat was in a good area and you have plenty of equity in it.

If this is the case, then it should sell easily. what is absolute bottom price you are ready to sell it at. If you can live with this amount, albeit not the absolute best price necesarily, then you have nothing to fear.

If you want to get absolute top dollar for your flat, then this may take time and you need to find alternative methods of financing to cover the bridge between house purchase and flat sale.

Basicaly, you need to find a compromise and go from their, if your flat is prices to sell (ie not top dollar) then you will certainly sell it.
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Old 12.02.2015, 12:54
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Re: Purchasing of property (deposit) in advance of building

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Try and cut a deal with the developer maybe ?

I think you said you flat was in a good area and you have plenty of equity in it.

If this is the case, then it should sell easily. what is absolute bottom price you are ready to sell it at. If you can live with this amount, albeit not the absolute best price necesarily, then you have nothing to fear.

If you want to get absolute top dollar for your flat, then this may take time and you need to find alternative methods of financing to cover the bridge between house purchase and flat sale.

Basicaly, you need to find a compromise and go from their, if your flat is prices to sell (ie not top dollar) then you will certainly sell it.
That's more or less what the estate agent said; price it to just about cover the deposit for a quick sale, or hang out for a better price and risk not selling it in time to close the deal on the house. She also said she had 5 or 6 clients looking for such a flat in our area.
Someone had made tentative reservations on the houses (there are 2 under construction), but she wasn't convinced they had the necessary funding.
I forgot to point out that all changes (frais de mutation etc) are included in the listed price.
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Last edited by PaddyG; 12.02.2015 at 13:08.
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Old 11.03.2015, 01:35
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Re: Purchasing of property (deposit) in advance of building

Make sure that the contract guarantees some minimal building quality standards. Otherwise the walls can be arbitrary crooked, and you won't be able to do anything about it.

In Switzerland usually SIA-norm (http://www.sia.ch/en/services/sia-norm/) is used, but it applies only if explicitly mentioned in the contract. Therefore make sure your contract enforces SIA-norm.
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Old 11.03.2015, 08:08
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Re: Purchasing of property (deposit) in advance of building

"She also said she had 5 or 6 clients looking for such a flat in our area."
Estate agents ALWAYS say they have a number of clients on their books looking in that area. Any the Pope wears pink frilly knickers ... (oh that might be true).

Buildings sold on plans - if you see others looking at their property during the build, talk to them & make sure you've got the same deal. Things change from one house to the next & you might get charged extra when someone else hasn't (bathroom cabinet, stair covering etc). EVERYTHING you change from the standard decided by the architect will cost more, eg moving an electrical socket might be billed chf 200 extra. If it has a liveable attic make sure the heating, parquet or whatever is included. Ask about the exterior finishing such as fences between properties which you may well have to pay for yourself.
Ask questions & make a note of the answers.
The best thing is you can probably choose your floor tiles, fixtures, kitchen etc yourself so it really feels like your home immediately.
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