Pre-purchase information – how much is enough?
News
An updated version of this blog is available here
Under the terms of the Code, new home buyers must be provided with “enough information to help them make suitably informed decisions throughout the buying process”. But how much information is enough?
In most cases, the minimum will be a written Reservation Agreement, an explanation of the Home Warranty cover, details of any associated management services and organisations together with an estimate of the costs involved, and details of any additional fees such as transfer costs.
If the home has not yet been completed, the home buyer must also be given a brochure or plan illustrating the general layout and appearance of the property and its location within the development, and the standards to which it is being built. A list of the contents, fixtures and fittings of the property should also be provided, and page eight of the Code’s Builder Guidance lists clear examples of what this should cover.
To help you provide a great service and comply with the Code, we’ve outlined some of these requirements in more detail below.
Your Reservation Agreement – what’s included?
Your buyers will naturally be excited and very keen to secure their new home but does your Reservation Agreement cover everything your buyer needs to know before they sign? Is it clear and written in language that is free of jargon and easy to understand? At the very least, your Reservation Agreement should include:
- details of the Reservation fee
- how and when the agreement will end
- the property purchase price
- how long that price remains valid
- full details and estimates of any management services, ground rent and associated organisations or utilities which your buyers will be committing to with their purchase.
Remember to highlight the range (in monetary terms) of the possible cost retention of the reservation fee if your buyers change their mind and note that this may be challenged through the Code’s Independent Dispute Resolution Scheme if such costs are considered excessive.
We provide a Sample Reservation Agreement which covers all the requirements as set out in the Code. This is freely available to download from our Resources Hub and can be adapted to suit your processes.
Warranty cover
An explanation of the warranty cover with reliable and accurate information will help your buyer understand who is responsible for putting right any issues. Consider explaining the difference between the first two years covering defects and the full 10 year structural warranty to help prevent any potential misunderstanding once the buyer has moved in.
Contact details
Who should your buyers contact in the event they have a query? Does this point of contact change during the buying process? Give your customers plenty of opportunity to ask questions and encourage them to seek clarification if they are unclear. A Code compliant information pack will include all relevant contact details and how best to raise queries before, during and after their purchase.
Health and safety on site
Buyers will be subject to the usual health and safety precautions on a site that is still under development and it is your responsibility to ensure they are fully informed about these prior to their visits. Have you included this in your pack and are your buyers fully aware?
Legal Providers
At the point of reservation your buyers should appoint a professional legal adviser to carry out the legal formalities of the purchase. You can suggest a preferred provider in the interests of speed and convenience, but it must also be made clear to the buyer that they are free to select their own legal adviser if they wish and that whoever they choose will be required to act in their best interests.
A copy of the Code
Does your purchase pack include a copy of the Code? The Code is available to download from our website in a number of different formats as a hard copy for your buyers’ pack. Alternatively you can provide a link for your buyers to access our website to find out more about their rights and protections throughout their purchasing journey.
Vulnerable Customers
Working with vulnerable buyers may involve a more flexible approach, providing additional resources and information and a means of communication appropriate to support their specific needs. Your customers may not identify as being vulnerable so the onus is on you to recognise those buyers who may need extra support – including first time buyers – to help ensure they understand every stage of the buying process.
To help you comply with these obligations, we have created a Code Compliance Starter Pack available from our Resources Hub. This features a handy Code compliance checklist covering pre-contract, exchange of contract and the first two years of occupation. You will also find a host of other resources available to you as downloads or quick links to relevant information as well as a training section on the Code requirements for you and your sales agents.
Buying a new home is likely to be the largest purchase your buyers will make and supporting them with as much information as they need throughout the process is not just complying with the Code requirements, it’s also fundamental to providing great customer service.
