Debbie Shankar - 17 Jul, 2015

Buying Off-the-Plan with Ease

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Property investors, owner-occupiers and first home buyers all buy off-the-plan property, as it typically allows them to lock-in prices and to save while their new home is being constructed. However, before you jump into an buying off-the-plan home there are a number of facts you need to know to ensure that you buy with ease and you avoid any problems.

The Advantages of Buying Off-the-plan

There are a number of advantages to buying off-the-plan. These are as follows:

•  Stamp Duty Savings – Stamp duty is typically based on the price of a property at the time of purchase, which is often less than when a property is finished.

•  Depreciation for Investors – A new building usually attracts higher depreciation than one that has been in existence for some time.

•  First Home Buyer Grants – Many off-the-plan purchases attract government grants for newly constructed dwellings, which can be up to $15,000 in some states. In addition, first home buyers may also be eligible for a stamp duty exemptions or reductions.

•  An Ability to Customise Property – In most instances when you buy off-the-plan you’ll be able to choose from a number of floor plans and finishes.

•  Easy Payment Terms – Usually a deposit is required to secure your off-the-plan property and the balance is due when the property is completed.

The Disadvantages of Buying Off-the-plan

When buying off-the-plan you may encounter a number of issues. These are as follows:

•  Artist’s Impressions – When you buy off-the-plan you’re given an artist’s impression of the property and a floor plan. While these give you an idea of what you’re purchasing it is not the same as actually walking through your home before you buy it.

•  The Finished Project May Be Different to the Original Plans – Often builders and developers encounter problems and may need to alter plans and other aspects of a property in order for it to be completed. This may mean that your property looks different to what you expected.

•  The Project May Encounter Delays or May Even Be Cancelled – Not all off-the-plan projects proceed as expected. The builder or developer may not be able to get the right planning permission or may encounter financial issues. These difficulties can cause lengthy delays or may see the project halted altogether.

•  Lower Property Capital Value than Anticipated – The capital value of an off-the-plan property may be less than originally anticipated or the property’s value, when complete, may be less than the price you paid for it.

Hints for Buying Off-the-plan

To avoid any difficulties when buying off-the-plan you need to:

•  Do Your Homework – Before you sign a contract, make sure you research the area you’re buying in, the property itself, and the developer. Visit the area, look at the amenities, and drive passed the proposed development area. Look at other properties that are selling in the area, compare prices and home features. Ask about other projects the developer has completed, and if you can view these.

Clarify what fixtures, fittings and inclusions are covered in the contract, and what additional costs purchasing the property may incur, such as local council fees and strata charges. Compare these costs and the purchase price of the property to other developments of a similar nature to ensure that the property is fairly priced.

•  Find a Good Conveyancer – A conveyancer is a property lawyer who can help you understand the legalities associated with buying a property. Off-the-plan contracts often have clauses that do not appear in standard contracts. These clauses may allow a developer to make changes to the building, the final sale price or even the completion date. Your conveyancer will be able to identify any issues that may affect you when they review your contract. They will then be able to warn you of how these could affect you. The most common issues you’ll encounter are:

•  Finance and settlement clauses – Make sure the contract gives you enough time to arrange finance with your chosen lender when the property is complete. Your mortgage broker or lender should be able to give you an estimate for final home loan approval

•  Design change clause – Make sure changes that can be made to the property are acceptable. These changes may include room and living area sizes, the brand or quality of fixtures and fittings, or the size of your car parking area.

•  Sunset clause – If your home has not been completed by a specified date then you and/or the developer can pull out of the contract. Make sure you approve of these terms before you agree to them.

•  Know How Much You Need For a Deposit – Most off-the-plan projects ask for a 10% deposit upfront, but this can differ. So make sure you clarify this before you commit to buying the property. It’s also important that you ask about how the developer wants the deposit paid. Some developers prefer a bank guarantee, deposit bond or a cash deposit.

•  Gain Home Loan Pre-approval – Gaining pre-approval for a home loan allows you to discuss your plans with your broker or lender before you commit to a contract. If there are any problems these will usually becoming apparent and, in most instances, you’ll be able to rectify these before you go ahead with the purchase of an off-the-plan property.

Are you looking to purchase an off-the-plan property? Then contact eChoice and we’ll help you find the right home loan.

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