For many home buyers, and even those looking to buy an investment property, buying off the plan can be an attractive proposition; it lets you buy a property at today’s price before it’s even been built. While there are a number of benefits to this type of purchase, it’s not without risk. Here’s some of the things you need to consider before signing on the dotted line.
Understand the risks
One of the benefits of buying off the plan is the long settlement period while the development is being built. It gives you time to get your finances in order and, provided the market is buoyant, your property should increase in value over time.
However, if the market falls during the time it takes to build your property, you could struggle to sell and recoup your costs. Other risks include the development taking longer than anticipated to complete and the Bank’s appetite for lending changing during the build period.
You will need to pay an initial deposit which is often non-refundable, get your Solicitor to check the contract…before you sign!
Do your homework
If you decide to go ahead with buying a property off the plan, start by doing some serious research. Find out all you can about the developer, what’s their track record like? What other developments are they or have they been involved in?
Remember, when buying off the plan you need to exercise the same due diligence you would as buying an existing property.
Check the details
Most contracts allow the developer to make any changes without your consent, even altering the size of the unit you’ve purchased by up to 5 per cent. Other changes they could make include the layout, the materials to be used, and any finishes. Be aware that what you see in those first glossy brochures may not be what you get once your property is completed.
Check that your deposit is held in a third party’s trust account (a lawyer or solicitor) so you earn interest on that money. Your deposit cannot be used to fund the development, and most developments will only proceed once a certain number of units have been sold off the plan.
Cover yourself
Delays are inevitable when it comes to property development, so check that your contract includes a “sunset clause” which lets you cancel and get your deposit back if the developer does not make enough progress in a certain timeframe.
You’re also entitled to a 14-day cooling off period during which time you can cancel the contract should you change your mind.
Finances in order
If buying off the plan is an option you’d like to explore and you’d like to find out about financing a newly built home, get in touch with iLender 0800 536337 and let’s get your finances in order.
