Firstly, some clients do not seem aware of the restricted mortgage market for such purchases. In the past virgin money was one of the only lenders but they have now withdrawn from the market for reasons unknown.
Clydesdale Bank and Woolwich (Barclays) both seem to still be active in this market but it is important that you make it very clear to your broker from the outset, the nature of the purchase as the mortgage products are different to a usual purchase and you therefore run the risk of thinking you have a suitable mortgage product only to find you cannot then use it.
In particular, the loan to value figure, which the lender will base their offer on, is the original price agreed by the first buyer with the developer and NOT what you agree to pay to the assignor. You may be unable to borrow sufficient money to make up the full price. Woolwich, in particular, need to be made aware of the fact that the price in the transfer deed to you will not be the same as the price you are ultimately paying overall.
Secondly, when negotiating the offer which you make with the agents, please take into account when you will be paying the “uplift” or profit that you will be paying the assignor.
You may be asked to pay this upon assignment of the contract as opposed to completion of the purchase with the developer.
You may also be asked to pay a holding deposit to the agent which we would recommend that you resist as this can add greatly to the complexity of the financial arrangements, along with developers often offering the original buyer a sum towards legal costs, which are rarely if ever paid towards your costs.
Finally, with stricter anti money laundering regulations now in place and due to become even stricter, the developer will often ask for considerable detail about you and your source of funding for the purchase before they will give consent to any assignment of the contract in your favour.