Good morning,
Buying off the plan
I have many clients who consider buying a property off the plan.
Firstly, I must declare that I personally am not a great proponent of such purchases, as I see the risks far outweighing the benefits in buying a property that has not been constructed. You are not guaranteed that the display property will faithfully reflect the finished property which you believe that you are purchasing. Each contract needs careful examination to review the conditions in your contract. It well may be that certain conditions may be amended to better protect your purchase or after careful consideration it may be preferable to forego such a purchase.
I consider the benefits of buying off the plan are:
- You may be able to purchase your property at a discount;
- you may be able to have the ability to individualise the layout/design of your property;
- you have additional time between exchanging contracts and paying your deposit to save extra money, prior to the completion of the purchase of the property;
- the potential to earn interest on your deposit;
- there may be stamp duty concessions; and
- there may be taxation benefits for investors.
These are some of disadvantages:
- The completed property may not meet your expectations;
- the contract will allow for changes to the design to meet council regulations;
- the size may vary by +/- 5%;
- the construction may be delayed causing potential additional rental costs;
- the position of a garage/carport or storage area may vary;
- the contract conditions may allow the builder to refund the deposit and terminate the contract if the building of the property is not completed by a certain date;
- the contract conditions may not allow you to terminate the contract and recover your deposit if the building is not completed within a certain time frame;
- in the event your builder goes broke, you may lose your deposit if the contract allows the builder to access the deposit prior to completion;
- your property may be subject to faulty workmanship that results in your ability to recover your costs on resale or in some cases, have no ability to resell at all;
- a change in interest rates or lending policies may result in your inability to borrow the pre-approved loan, resulting in a shortfall in funds to finalise your purchase; and
- the need to ensure that the developer, builder architect has a good track record. However, due to many reasons a good reliable builder may either go broke and/or build a defective building.
Unfortunately, in this economic climate builders have been under great economic stress with delays due to weather and rising costs of materials that several years ago were totally unforeseen. As a result, I have had to assist builders and off the plan purchasers, negotiate these difficult times unforeseen when the construction or purchases were commenced. In purchasing an established property many of the above-mentioned risks are either non-existent or minimalised.
I am able to further explain these matters fully and review a contract for an off the plan purchase if you or someone are contemplating such a purchase, please do not hesitate in contacting me.
Regards,
Jeffrey
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