Buying Property Off the Plan carries risks… avoid unplanned disasters!
Do your market research
Before you agree to purchase an “off the plan” property, you should always do your research (or seek advice from a qualified professional) to ensure the price offered reflects the current market price.
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, or you may find it difficult to secure finance for it.
It is always preferable to buy “off the plan” only in areas that have shown consistent and steady market growth over the last ten or so years.
When you buy property “off the plan” you are purchasing it many months, sometimes years, before construction has been completed.
Research the Developer and Builder
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 the agent for a list of previously completed successful projects, so you can go and look yourself.
Check the Schedule of Finishes and Inclusions
When you buy property ‘off the plan’ be sure to check the schedule of fittings and finishes, including the appliances which the developer plans to use for the finished property. You need to be satisfied of the quality and type of these.
Ask your property lawyer to confirm that the contract contains a clause which ensures that any changes made to these fittings and finishes must be of equivalent or superior quality.
Analyse the 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. 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? It’s about choosing a property that makes good use of its space.
Double check the variance clause
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 property lawyer to ensure that the “acceptable variance” is not too much.
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. When you finally make the decision to purchase it, you will receive a Contract to purchase something that you hope will meet your expectations. This is inevitably riskier than purchasing an existing property.
For this reason, it is even more critical that, BEFORE you sign the Contract, you have a good property 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.
There are many significant “Special Conditions” and other considerations in ‘off the plan’ Contracts. So, investing in the help and advice of an experienced and competent property lawyer is a very wise move!
Check on the Progress
It is important to be informed of the progress of the development. This simply means asking the agent developer to provide you with regular updates on the project.
Your property lawyer will also keep you informed of important dates along the way.
If you are thinking of buying a property off the plan, or would like more information, please don’t hesitate to contact our expert property team on 1800 994 279 or contact our team directly.