Buying Off Plan
Who doesn’t like to buy something brand new? When it comes to purchases, if you can afford it new is often the way to go. Something new should be in pristine condition and a minimal risk of anything going wrong with it. This rationale makes perfect sense when it comes to buying a home too. A new home will have new fixtures and appliances and should look great without years of wear and tear. In most cases though, nobody is building, putting the property on the market and hoping for the best. In most cases, to buy a new property, you’ll have to buy off plan. Put simply buying off plans means you’ll see the designs and potentially a display of what the property will look like and based on that agree to purchase once it’s built. It sounds simple, but there are a few things to consider.
The Waiting Game
Something that can turn people away from buying off plan is that the property isn’t built yet. Construction may not have even commenced. In many cases it isn’t until several deposits from off plan. Once you agree to purchase you’re required to pay a deposit (usually 10%) of the property price. After paying your deposit, there’s typically an 18 month to two year wait for the property to be built. This can be longer depending on funding and other hold ups. It’s important to remember that your deposit money will be tied up and that you will still need to rent a place to live while your property is being built.
It's Not All Bad News
One big plus is that buying off plan is building a new home. This means, if this is your first home purchase, that you may be entitled to the first home owner grant. In NSW, if eligible, you will receive a grant of $10 000 dollars on any property that you are building up to the value of $75 000. You may also receive concessions or exemptions of stamp duty. The value of the grant may be incentive to buy off plan compared to buying an existing property, if you have time to wait.
Research Your Purchase
Like any major purchase, the best thing you can do going in is research. In most cases developers selling off the plan have built before. Find out what some of their past developments were and check them out. If the place doesn’t look too good after a couple of years that can ring alarm bells. Pay particular attention to the fixtures as this is where developers can make savings. If you can, talk to some of the people that live there. Find out if they had any delays or other issues. As well as the developers, you should research the area that you’re looking at. Look at the neighbourhood and confirm that it’s a place that you would like to live. What are property values like in that area? Is your potential investment a fair price? Also look at development in the area. In particular if the property you are looking at is an apartment and there are lot of apartments being developed, the value may be diluted. If after this you feel comfortable, there is still more research to be done. Research the contract. It will list all your entitlements regarding layout, fixtures and appliances. The contract will also have a lot of important information about your entitlements and timings. This is usually a good point to engage a lawyer, to ensure that the contract is lawful and that there won’t be any surprises down the track. The more you know the better prepared you’ll be.
An issue that often gets mentioned and that has featured in the news recently is that of the ‘Sunset Clause’. This is a clause in the contract that refers to an amount of progress or registration within a particular time frame. If this hasn’t happened the developer or the purchaser has the right to cancel the contract. In the past unscrupulous developers have used the clause to cancel the contract and sell the development for a better price, leaving buyers without their home. While the government has made changes to laws to protect buyers, it’s a good idea to have your solicitor make sure you’re getting the best contract you can.
Buying off plan can be a great way to get a new home, potentially with some government assistance. It’s important to make sure you are armed with the best knowledge before you proceed. If you are looking and need a little help, our property lawyers have a wealth of experience with buying off plan and the government entitlements for first home buyers. Contact us and we can guide you through the purchase process.