November 2016 Newsletter

BUYING OFF THE PLAN

By David Servi

Australians thinking about buying a home or an investment property should consider buying off the plan, says Spencer & Servi principal David Servi.

“It can be daunting to part with many hundreds of thousands of dollars before seeing the reality of your purchase,” he says. “‘Try before you buy’ has been ingrained in the Australian psyche, and artist’s impressions and virtual walk-throughs can only take you so far. But there are real advantages to buying before construction has begun, especially for first home buyers”.

For those who can imagine the property as it will be and who have a certain amount of courage, buying off the plan can work well, he adds, giving purchasers the time to get their finances together and plan for the future.

“Buying with a known developer, the benefits are that you’re locked into today’s prices. In a rising market, this could mean the property will be worth more than you paid for it by the time the deal settles after construction,” David says. “Buying off the plan gives you a little more time to save up a bit extra for all those new home costs, and you don’t have the frustration of missing out at auction. You may even have some choice of the finishes – tile or carpet colour - in your brand new apartment”.
Buying off the plan can be a particularly attractive option for first time homebuyers, who might not have enough cash for full settlement at 10 or 12 weeks if they buy at an auction, or in a private sale. If they buy off the plan, they’re likely to have months, or even years, to amass the money needed for settlement.
Some developers will also accept deposit bonds from cash-strapped buyers who can’t manage to come up with the standard 10 per cent deposit, but some will only accept deposit bonds issued by certain institutions, such as QBE Insurance. Of course there is a fee to be paid for getting the deposit bond, depending on the length of time for which it is needed.
Developers usually like to sell as many apartments as possible at an early stage in the development process, David says, so there can be deals on offer for buyers who get in early.
A ten per cent deposit is usually required, but on occasion this percentage will differ, depending on the developer. All deposits are held in trust – which is reassuring for the novice buyer.
It is, of course, important that buyers choose a well-established developer, David explains. “And it is essential that buyers have a clear contract, and consult expert property lawyers and accountants before signing on the dotted line”.