Buying Off the Plan – The Pros, the Cons and Things You Should Consider
In Australia, the majority of home-buyers and investors choose to buy already established homes and apartments, whether they are a few years old or a hundred years old in the case on heritage and period properties. Another method of buying which has risen in popularity, especially in Melbourne, is buying ‘off the plan’. Purchasing a property in this manner can come with great benefits but there are also a number of risks to be aware of. Robert Wood and Associates are the property settlement lawyers experienced in helping Melburnians with all aspects of conveyancing and property law. Here’s our guide to buying off the plan, and a few things you should consider before you sign the contract.
What Is ‘Off the Plan’ Property?
Buying a property (house, townhouse or apartment) ‘off-the-plan’ means signing a contract to purchase a property that has not been built yet. You can view the developer’s plans and computer-generated images, and you may be able to view a display suite or sample home, but you are unable to view the physical building in which you are buying into.
What Are the Pros of Buying Off the Plan?
There are a number of reasons this way of purchasing a property has become so popular, some of these include:
Buying a brand new home, that has never been lived in before. There will be no repairs or maintenance required and it will be more than likely fitted out with the latest technology, for example LED lights, water-saving taps and solar panels.
Financial savings and incentives. Some states and territories offer incentives for buying off-the-plan. This may include stamp duty reductions and cash grants which can often save you tens-of-thousands of dollars.
In the early stages of the sales process, developers are also likely to offer some great incentives from cashback offers to free furniture. This is to ensure they have sold their required quota of properties for construction to commence.
Greater choice on the location and finishes of your property. For apartments, this can mean choosing the level, aspect and floorplan that suits your lifestyle best. Additionally, you will usually be able to select your colour scheme, floor coverings, appliances and fixtures to suit your own style.
You have more time to save. While you are required to pay a deposit upon signing the contract, the balance is not due until settlement. Off-the-plan properties don’t settle until it has been built so there could months or years between paying the deposit and the balance amount.
With off the plan properties, a greater portion of your expenses and bills can be offset against your tax return.
And What About the Cons?
When you purchase a property off the plan, you are committing to something that has not yet been built so there are some risks.
The quality of the developer and their ability to finance the construction is one of the biggest uncertainties faced by most purchasers. Nearly all developers can create amazing plans and renders, but not all of them can deliver a property to the standards you are expecting.
Depending on the terms of your contract, developers are often entitled to make small changes during construction. It’s important to understand if any such changes are allowed under your contract. Good property solicitors in Melbourne will be able to help you understand the contract and will alert you to any pertinent clauses.
In most of cases, developers will require a certain number of off-plan sales to enable construction funding to commence building. If the developer is unable to make a sufficient number of sales, the project may not proceed.
Tips for Buying Off the Plan Successfully
- Research the developer so you can be confident they are reputable and have a proven track record of delivering similar projects on time and to a high standard of finish.
- Also ensure the developer is backed by a strong service team that can follow through with requests and communication.
- Make sure you know as much as possible about the property, the specifications and finishes upfront, this includes all brands, makes and models of appliances and fittings.
- Ensure your deposit is held in a trust account, never let a developer take your money.
- Confirm what the developer’s pre-sale requirement is to start construction.
- Understand the timeframes around the delivery of the project and the sunset dates in the contract of sale (the sunset date is the final date for the developer to deliver the building).
Most importantly, work with experienced property settlement lawyers and don’t be afraid to ask a lot of questions. Professional property solicitors will help to ensure everything is correctly documented in your contract and that the contract includes detailed information regarding proposed plans, specifications and sunset clauses so that you end up getting exactly what you paid for and what you expect.
Consult Our Property Lawyers in Melbourne’s Eastern Suburbs
Buying property is one of the biggest and most expensive investments you will ever make, so it’s essential to undertake thorough due diligence, whether buying an established home or off the plan. Get in touch with Robert Wood and Associates today for expert, honest advice to ensure you make a sound investment. Call (03) 9762 3877 or enquire online now.
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