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“OFF THE PLAN” Property Purchase- Things to consider<<<Back to
Information Sheet Index
Purchasing property “off the plan”, that is,
before construction has commenced, has become a popular choice for
many Australians.
In Victoria, there are a number of advantages in buying property
at this preliminary stage.
-
You generally pay less than the market
value for an existing property. It is financially advantageous for
developers (or builders) to obtain strong pre-sales before they
start to build and they offer a good deal because their financial
risk is reduced. Usually they can sell most of the properties in
the development prior to construction, so they know how much to
expect on completion and financial institutions are more willing
to lend them money for the project;
- You pay only a fraction of the full stamp
duty otherwise payable. For example: you would save approximately
$9000 when purchasing a $240,000 property “off the plan”. This
saving only applies to new properties purchased “off the plan” and
only in Victoria;
But buyer beware! With these advantages also come disadvantages, the obvious
one being that you must hand over your deposit money for something
that is not yet built. Before signing a contract and committing
funds, it is imperative that you do some research on the proposed
property, carry out inspections, ask plenty of questions and
seek professional advice. This will help you ensure that you know
what you are getting, what you are dealing with, and the terms of
your agreement.
Here are some of the most important issues that you should
be aware before purchasing “off the plan”:
Enquiries and Inspections
- In purchasing “off the plan” you must
rely on the reputation, honesty, goodwill and the financial
security of the developer;
- Research the developer before you sign
the contract. Find out how long they have been in the industry and
how many projects they have previously built. Ask if you can
inspect similar properties they have built so that you can see the
quality of their finished work;
- Check with Builder’s Licensing
Authorities to see if complaints have been lodged about the
developer;
- If the developer goes under before the
property is finished, you may be left with nothing to show for
your deposit, conveyancing and other legal costs. Ask to see the
developer’s balance sheet so that you can determine their
financial strength and their ability to deliver their promises;
- Carefully inspect any display homes,
models and plans of the property you intend to purchase.
Investigate the details, the fixtures, fittings and finishes;
- Note that while it is possible to make a
quick capital gain on your purchase if the value of the property
rises between when the deposit is paid and the time for
settlement, you are also vulnerable to market fluctuations,
oversupply and interest rate rises. These can all cause the value
of the property to fall over time. You should find out how long
the development has been on the market and check with local real
estate agents to see what the property values are like in the area
in which you intend to build.
The Contract
- “Off the plan” contracts can be complex
documents and may contain unexpected provisos and clauses which
can lead to the detriment of an uninformed purchaser.
- Balben Property Transfers can examine the
fine details found in the contract. We can also identify whether
there are any important omissions from the written agreement.
- The contract should fully disclose all
charges. You should be aware of whether there are any hidden
charges or any other ways in which the purchase price may
increase.
- The contract should clearly specify the
cost of upgrading fixtures and fittings if you do not like the
standard ones. It should also include carpeting, painting, window
dressings, and possibly appliances. Make sure that whatever has
been discussed on these matters of detail, like particular brands
of fittings, are stipulated in the contract.
- The contract should require the developer
to commence construction within a specified time. It should also
contemplate the remedies available to you if construction is
delayed and whether there are any penalties for late completion.
- You should determine whether you have any
remedy or if there is a dispute procedure in place if the
developer has misrepresented the property or you are dissatisfied
with the completed product.
- A copy of the draft Strata Plan (showing
the lot and any garage, car space, or storeroom), a copy of the
approved plans and specifications, and a description of the
“title” proposed to be registered should all be included in the
contract.
As you can see, before purchasing property “off the plan”, you
can do some of the groundwork. However, like with any property
transaction you should seek the professional advice of the team here
at Balben Property Transfers.
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