Know the risks
One of the benefits of buying off the plan is the long settlement period while the development is being built. It gives you time to get your finances in order and, provided the market is buoyant, your property should increase in value over time.
Conversely, if the market falls during the time it takes to build your property, you could struggle to sell and recoup your costs. Other risks include the property not meeting your expectations once built, the development taking longer than anticipated to complete, and the developer’s business failing midway through the project.
Be aware, that you’ll be required to pay a deposit up front and show that you have the necessary finance in place to pay the balance due on completion.
Do your homework
If you decide to go ahead with buying a property off the plan, start by doing some serious research. Find out all you can about the developer and construction firm you’ll be buying from. What are their track records like? What other developments are they or have they been involved in?
Use Google to search or check the Companies Office to find out who the directors and shareholders of the company are, and check whether any of those involved have ever been bankrupt. You need to be confident that the people you’re paying are going to deliver on their promises.
Remember, when buying off the plan you need to exercise the same due diligence you would as buying an existing property.
Check the details
Most contracts allow the developer to make any changes without your consent, even altering the size of the unit you’ve purchased by up to 5 per cent. Other changes they could make include the layout, the materials to be used, and any finishes. Be aware that what you see in those first glossy brochures may not be what you get once your property is completed.
Check that your deposit is held in a third party’s trust account (a lawyer or solicitor) so you earn interest on that money. Your deposit cannot be used to fund the development, and most developments will only proceed once a certain number of units have been sold off the plan. Cover yourself
Delays are inevitable when it comes to property development, so check that your contract includes a “sunset clause” which lets you cancel and get your deposit back if the developer does not make enough progress in a certain timeframe.
You’re also entitled to a 14-day cooling off period during which time you can cancel the contract should you change your mind.
Finances in order
If buying off the plan is an option you’d like to explore and you’d like to find out about financing a newly built home, get in touch with a Best Mortgage adviser and let’s get your finances in order.