Buying property off the plan
BUYING off the plan is the practice of purchasing property when the development is still in the planning stage and is awaiting construction.
To assist purchasers many developers provide a demonstration unit, brochure and video presentations and importantly sample finishes so they can see what the property will look like. This display should also outline details such as the layout, the size and dimensions available and in some cases the view or the outlook. Many will include more detailed financial information to assist the purchaser such as the anticipated state of the rental market as well as future property values at time of completion and estimates of the likely maintenance contributions that will need to be paid.
Some advantages in buying off the plan are;
- The savings on Stamp Duty; duty is calculated on the value of the land not the purchase price. These savings may vary from state to state.
- You can continue to save money whilst the development is being constructed.
- In a rising market you buy at today's prices not on completion prices, saving you money.
Some of the pitfalls include;
- Time delays.
- If the market falls between the time you sign the contract and move in then you have paid too much.
- Your vision of the property and the finished product may differ greatly.
- It is important not to go into this blindly and every effort should be made to understand the contract and any issues which may arise in the construction of the development.
Here is a checklist to help you get on your way.
Be sure to:
1. Choose a property that suits your requirements including size, location and lifestyle.
2. Have a thorough understanding of pricing in the area and compare recent sales of similar style developments.
3. Research the developer and where possible inspect their previous developments.
4. Have a solicitor experienced in buying off the plan to go over the contract. It should include;
- A description of title being registered as well as a copy of the specifications and approved plans.
- Interior plans, showing internal improvements with a schedule of finishes and appliances.
- An obligation by the vendor to commence construction within a specified time frame as well as use the proper materials and work in a workmanlike manner.
- Have the ability to deal with variations in the contract.
- Provisions for the vendor to rectify any defects which arise but exclude or minor settlement cracks).
- Details of building costs for depreciation purposes.
5. Organise a building inspection prior to settlement in order to satisfy work is complete and meets the terms and conditions of the contract. This should be done prior to paying the balance of the purchase price.
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