What to be aware of when buying off the plan

Given the recent news of an apartment glut happening within days of reports of some blocks being over 70% sold in a matter of hours, the team at Naritas thought it wise to do a report that could help buyers minimise having a bad experience buying off the plan.  We look at some of the things to consider when buying off the plan.

Hensley-PottsPoint


The Hensley development in Potts Point saw 70 per cent of the 44 units sold in two hours.

 

The benefits

  • A major benefit of purchasing off the plan is that you’ll own a brand new property. There are also financial benefits. For example, you’ll have the security of knowing how much you’ll pay for the property in the future, even if its value increases. Construction usually takes a year or two, so there’s time to save before you settle.
  • If you need to borrow money for the deposit, speak to your credit adviser about how to best structure the purchase. Most home loan lenders won’t approve a loan for a long settlement period (i.e. over 6 months), but a broker can provide advice about what assurances you can get regarding the amount you may be able to borrow when it comes time to settle.
  • Depending on which state or territory you’re in, you may have access to stamp duty and tax concessions, or government grants. If you’re purchasing the property as an investment you may also be eligible for tax benefits such as depreciation. You should consult with your accountant for personal financial advice specific to your circumstances.

Things to look out for

  • Off-the-plan contracts try to cover future issues. Check that certain scenarios, such as construction delays or if you want to withdraw, are clearly addressed. Once the building is complete it might not meet your expectations. It is vital to speak with a legal adviser that is entirely independent of the vendor and their agents before signing the contract to avoid any surprises.
  • Find out whether the developer has taken out home warranty insurance. Depending on the relevant state or territory laws, builders may be required to include a certificate of insurance in the contract. Even if this isn’t the case, you can ask the developer for proof of insurance before you settle. Your broker or home loan lender may help with this as part of the lending process.
  • The property might be everything you dreamed of, but there’s always a risk the market may have changed by the time you settle. While you can’t avoid this, you should do some homework before you buy. For example, look at properties being built in the area to work out if there’s likely to be an oversupply.
  • Most lenders will look at the value of your property, rather than what was paid for it when considering how much they will lend you. It’s worth speaking to your credit adviser about how your property may be valued and what your home loan options are. At Naritas we take the time to ensure the valuer has all the information they need to make an accurate (and hopefully favourable) valuation. Items such as a list of comparable sales, list of detailed inclusions, overview of the building and facilities as well as a background on the developer and the work they have done recently will come in handy when looking to ensure the best possible outcome.

 

How do I get started with a finance approval for an off the plan purchase with Naritas?

The team at Naritas are experts in delivering timely guidance & finance approvals.  We have over 100 lenders on our panel & a high quality team of dedicated advisers to steer you efficiently through the approval process.

To make an enquiry online with our team, click here. Alternatively please feel free to phone us on 1300 558 887 during business hours.