The latest house builder's sales gimmick?
Desperate house builders have come up with a new incentive to sell their stock homes - 'Rent to buy' or 'Try before you buy'.
Not to be confused with the government's "Rent to Homebuy" scheme, where a new home is rented at 80% of the market rent to allow buyers to save a deposit, with a view to buying it within a defined period, usually around three years.
The thinking behind this latest scheme is that buyers can save for a deposit whilst renting, with the house builder refunding up to 50% of the rent (up to a maximum 5% of the purchase price) if they decide to buy.
The average unassisted first-time buyer is likely to spend £81,320 on rent over a 16-year period before buying their first home at the age of 37.
Many say that we test drive a new car, so why not live in a new home before buying it.
This has some advantages for would be buyers in that they will be able to see the quality of the new home before committing themselves.
They will be able to experience first hand, the level of the house builder's Customer Care during the rental period.
House builders offering this scheme will therefore need to ensure their homes and the service they provide are of the highest quality!
Buyers will also be able to check if the new home is going to be suitable in terms of size, location, neighbours, noise, parking etc. before taking the financial plunge.
Buyers can decide if the location suits them too by getting a feel for the area.
In addition, rent isn't being wasted as some of it can be put towards a deposit if they eventually buy.
House builders benefit buy receiving rent whilst the home is being "tried" but could end up with several second-hand "new homes" requiring refurbishment if those trying, decide not to go ahead and buy should the new home be poor value and/or low quality and/or if their after sales service is dire.
How does try before you buy work?
Try before you buy has been used by house builders since the financial crisis in 2008 specifically aimed at first-time buyers in an attempt to get rid of stock units.
Prospective buyers rent a property for say 12 months and at the end of the period they can have say half the rent paid returned by the house builder to put towards the deposit for a new home, or they can simply walk away.
Buyers should be aware that any returned rent will normally be the extent of the incentive to buy and that other incentives such as part-exchange and deposit paid might not be available.
It is also important that both parties agree on a fixed price for the "new" home before rental begins so there are no surprises due to any changes in the market whilst renting.
Explo're Living has been running the scheme at its developments at Chadwell Heath Essex, Ramsgate Kent, and in Hertford and has now included Grand Ocean in Saltdean - 6 miles east of Brighton.
At Grand Ocean, Explo're Living will refund up to 5% of the purchase price from the rent paid for use towards the deposit.
Whilst renting, buyers will get a feel for the area and most will experience the daily peak-time traffic congestion at nearby Rottingdean on the A259 coast road to Brighton.
Explo're Living was the housing division of Laing O'Rourke before it was mothballed in October 2011 for two years.
Explo're Living has struggled to make a profit since being set up a few years ago. Losing £8.2m on a turnover of £33m in 2010 and lost £4.4m on a reduced turnover of £19m last year.
