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Buying Off the Plan

Tuesday, 18th June 2013

Buying off the plan - what are the pros and cons?

Buying off the plan is defined by NSW Fair Trading as purchasing a strata unit or retirement unit before it has been constructed.  Often the design of the building and sketches of its final appearance are included in advertising material.

Usually a deposit is paid with the balance due once the building is completed.  The timing of completion may depend on how much of the building is sold, off the plan.  Often the property developer needs to secure buyers to minimise the risk and having contracts to buy is a good sign for financial lenders such as banks.

There are pros and cons to buying off the plan, which are explained below.

One of the advantages is that he apartment buyer may get a property that is discounted if they get in at the early stage of the development.  At this stage, the developer is often keen to have some sales contracts before construction starts.  As the marketing campaign progresses and the building commences it may be that it creates enough hype and interest from other buyers that the apartment may increase in value even before it is completed.

Buying off the plan also means that the purchaser gets a brand new apartment that either may be fitted out and decorated to their specification (up to a certain amount), or they may get to choose the flooring, tiles, lights and tap fittings from a small selection provided by the developer.

Purchasers may also be able to get the apartment in the position that suits them - such as north east facing - or ground floor with a small garden.  Care should be taken when reading plans to make sure the apartment chosen is in the desired position in the building.

There are also things to look out for when buying off the plan and an old saying 'buyer beware' is one that should be in the back of any purchasers mind.  Buyers should not buy into hype and do some research of the surrounding area to get an idea of what the true market value of the property is.  Investors who think they are going to make a quick dollar may be disappointed if the building takes longer than expected and there are always fluctuations in the property market.  Investors should also check what the rights are to resell the property before signing any contracts, otherwise it could end in disappointment.

Beware too that the quality and finishes may not be of the same standard as the flashy mock apartment that is set up to market the development.  Where possible get details including the manufacturer of the finishes, colour name and material and check them out independently.

If you're going to live in the apartment have a good look at where the amenities are.  For example, where are the letterboxes and garbage bins in relation to the apartment?  Will the sound of the garbage collection be a weekly disturbance, are the letterboxes in a position where they can be easily accessed by residents and Australia Post but not thieves?

Developers of strata schemes may also have signed binding management contracts between the owners corporation and caretakers/building managers.  NSW Fair Trading advises that prospective buyers are entitled to know the details and see copies of any such contracts.  You lawyer or licensed conveyancer can arrange the necessary searches.

For more information about buying off the plan go to the office of Fair Trading or Consumer Affairs in your state.

This article appears courtesy of BCS

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