1. Lock in the right price by doing market research
When you buy property ‘off the plan’ you are purchasing it many months, sometimes years, in advance before construction has been completed sometimes even before construction has started. For this reason, it is important to lock in a set price that is based on the current market price, instead of an unknown future price, which could be much higher.
Therefore, before you agree on a price, you should always do your own research (or seek advice from a qualified professional) to ensure the price offered reflects the current market price for similar properties in the area, including the average rental prices.
Of course, there is always a chance that the property market will fall, which might mean you end up paying too much for the property and you may therefore find it more difficult to secure finance for it leading up to settlement time. This is why it is preferable to buy ‘off the plan’ only in areas that have shown consistent and steady market growth over the last ten or so years.
2. Double check the variance clause
Buying Off the Plan in NSW
When you buy property ‘off the plan’ you are making a decision based on what you’ve seen in brochures and other marketing materials. Unfortunately, the measurements (room dimensions and total area) mentioned in these materials don’t always match up with the finished product.
A ‘variance clause’ in your contract will detail how much variance is going to be acceptable when it comes to the difference between what was advertised and the finished product. The “acceptable variance” is different in each contract, which is why it’s important to seek the advice of a good conveyancing lawyer to ensure that the “acceptable variance” is not too much.
3. Ask for ‘Proof of Progress’
When you buy property ‘off the plan’ it is important to ensure the developer is ticking all the right boxes by asking the developer for proof of progress. This simply means asking the developer to provide you with an update on the project, including what approvals have already been obtained and what still needs to be approved. This information should correlate to the project timeframe that you have been provided, so you can be assured the project will be completed on time.
Every developer should have this information on hand, ready to give you.
If you are not sure what to ask for, seek the advice of a good conveyancing lawyer to handle it on your behalf.
4. Do background checks
When you buy property ‘off the plan’ it’s always a good idea to do a background check on the developer and/or builder before you agree to purchase. This includes looking at their project history and asking around to get a sense of their reputation within the industry. An easy way to do this is to ask them for a list of previously completed successful projects, so you can go and look yourself.
5. Don’t be afraid to ask for samples
When you buy property ‘off the plan’ it’s acceptable for you to ask to see samples of the fittings and finishes, and details of the proposed kitchen appliances (including model numbers), which the developer plans to use for the finished property. You need to check the quality and type of these so you can be confident that you are getting exactly what you expect, and not cheap substitutes. Every developer should have these samples on hand, ready to show you.
6. Analyse the floor plan carefully
When you buy property ‘off the plan’ it is vital you carefully analyse the proposed floor plan. This includes not only the floor plan of the property you are purchasing, but the plans for the entire complex. If it isn’t a stand-alone property, you need to consider:
The distance between your property and others
The size and location of areas, such as car parking spaces and storage areas
The size and location of access areas, including entry doors, elevators and staircases
Analysing the floor plan carefully is an important step. If you are quoted a “Total Square Metres” area, make sure you know what that area relates to. Does it take all the storage areas, parking spaces, balconies and gardens into consideration? If so, your living space may not be as big as what you thought! It’s best to focus on individual room sizes and carefully check the measurements (as discussed in tip 2), as this is what will have the biggest impact on your enjoyment of the property and your ability to resell the property down the track. It’s about choosing a property that makes good use of its space. Every floor plan is different, which is why it’s important to seek the advice of a good conveyancing lawyer who has seen hundreds of floor plans and knows exactly what to look for.
7. It all comes down to the Contract
As discussed in tip 1, when you buy property ‘off the plan’ you are buying something that doesn’t exist. So when you finally make the decision to purchase it, you will receive a Contract to purchase something that you hope will meet your expectations, which is always going to be more risky than purchasing an existing property. For this reason, it is even more critical that, BEFORE you sign the Contract, you have a good conveyancing lawyer thoroughly review the Contract on your behalf and advise you about the Contract’s contents. The Contract should accurately reflect the developer’s representations regarding the property, in order for it to fulfil your expectations.
There are many other significant, and often tricky, “Special Conditions” and other considerations in ‘off the plan’ Contracts. So investing in the help and advice of an experienced and competent conveyancing lawyer is a very wise move!