Better rules for the sale of new homes introduced
New rules have been introduced to help mortgage lenders ensure that new-build properties are valued accurately.
The Royal Institution of Chartered Surveyors (RICS) has made changes to its Red Book rules, which require builders or developers of newly-built, converted or renovated properties to fill out a disclosure of incentives form.
The 12-question form, designed with the Council of Mortgage Lenders (CML) will tell the mortgage lender of any significant discount or incentives on offer, which RICS and the CML hope will ensure the valuation is accurate.
“These new measures will help reinforce lenders' confidence in the market for newly-built property, which has fallen due to recent experience of losses and frauds,” said Michael Coogan, director general of the CML. “If developers ensure that they are transparent, and disclose any discounts or incentives on offer to buyers, lenders' confidence should start to return. In the meantime, recent lender experience means buyers of new-build properties will be expected to provide significant deposits so that lenders can manage their risks."
Many lenders still refuse to lend on new-build properties, while those that do typically ask for at least 25% of the value to be put down before granting a mortgage.
The CML first became concerned about inaccurate valuations in February, as many buyers were in receipt of significant incentives from the developer. These may have included developers offering to pay the buyers' deposits, legal and moving fees, or offering cash-back incentives on completion of the sale.
The new measures are supported by the Law Society of England and Wales, the Home Builders' Federation, Homes for Scotland and the Construction Employers Federation.
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.