Q & A's; Buying Off the Plan

Author: Hannah Aria. CEO Australian Prime Realtor. I have heard from many about the anxieties associated to buying off the plan. Even recently at a display centre, there was a lot of concern from potential buyers about buying-off-the-plan. I was happy to assist and offered answers in any way I could, here are a few Q & A's. 1. Is my Deposit Safe? When purchasing off the plan, a deposit is required to secure your property this is 10% of the purchase price. The money should be held in a trust account which means the agent or solicitor holding your deposit is only allowed to release the money to the developer upon completion of the site. Your solicitor or conveyancer should make it clear in the contracts that at no point is your deposit to be used for construction purposes or to finance the build, or to be released to the developer for any other reason. 2. What if the completion date changes? In my opinion, the longer it takes to complete the build, the better off you are. Put it this way, whilst construction is underway, property prices generally rise, you do not pay any holding costs or outgoings until completion. So basically, you have secured a property, that with time will appreciate in value over the 1-2 years it takes to build it and you don't need to pay for anything at all. At completion, your property is usually worth more than the price you bought it for. Holding cost include land tax/council rates...Note: There is also a risk that in a falling market, the property may be worth less than what you bought it for. 3. What if I don't get what I was promised in the plans? It should be set out clearly in the contracts what is included in the sale. Upon completion, an inspection would be conducted to ensure the developers deliver what has been promised. The purchaser should always allow for minor discrepancies however if there are any major differences i.e. size, finishes or anything substantial, the right to rescind the contracts can be exercised. You can only cancel the contracts before the contracts are completed (settlement) 4. What if the builder goes Bankrupt? You need to make sure you will get your money back in case this happens. Many builders and developers have gone into bankruptcy and some buyers have lost their deposits. You need to know where your money will be held. Ensure the deposit is paid into, and remains in a trust account as mentioned in point 1 above. Your conveyancer should ensure that you are protected from this scenario. 5. Rising interest rates. Be aware that when you are due to take out finance i.e. at the time near completion, the interest rate could have significantly changed. At the current time if interest rates are low, they can only up in future. Usually the loan process commences up to 3 months before the finance is required. 6. Stamp Duty Exemptions. In some states, stamp duty is discounted or waived when purchasing newly established properties or buying off the plan. This is a saving of thousands of dollars which ordinarily is paid when purchasing real estate in Australia. Check with your state or territory about what incentives, discounts and bonuses are offered to new purchases. You can also ask you local consumer affairs department for information about your rights and responsibilities relating to this topic. Author Hannah Aria CEO Australian Prime Realtor www.primerealtor.com.au