Putting money on the line for something that doesn’t yet exist sounds a little crazy, right?
Yet thousands of Australians buy property off the plan every year.
This guide will help remove some of the stress from the purchase.
Step 1. Finance: It’s crucial to understand your lender’s policy when it comes to off-the-plan purchases, said Alex Caraco, executive director of iBuyNew. “Most banks today will expect investors to have a minimum of 20 per cent deposit,” he says.
Step 2. Government grants: If you’re a first home buyer you may be eligible for a government grant. Caraco says the available grants vary from state to state and commonly range between $10,000 and $20,000, with a cap on purchase price between $600,000 and $650,000.
Step 3. What to buy: Owner-occupiers should focus on long-term amenity and quality inclusions and will often target two or three-bedroom properties. For investors, yield will be a top priority, and for first home buyers, the focus will likely be on price point.
Step 4. Where to buy: Physically visit the location and view the display suite. Caraco said it’s possible to do a credit check on developers and builders to see if they’re in a good financial position. He also advises buyers to visit a developer’s previous work and research resales in those developments.
Step 5. When to buy: If finance is proving tricky, Caraco recommends buying into a development that is close to completion. “Banks aren’t so tough on their valuation because they can see the finished product,” he says. “You may also have other buyers who have settled, confirming the price.”
Step 6. Selections: Most projects offer a fixed selection of floorplans and finishes, with little room for change. Also double-check inclusions as often items like airconditioning, window coverings and parking.
Step 7. Contracts: Always get independent legal advice on the sale contract. Include a sunset clause, which requires the vendor to complete the project by a particular date or within a specified timeframe, which should allow you to walk away from the contract and retrieve your deposit if the vendor doesn’t deliver on time. On the flipside, it also allows the developer to rescind the contract.
Step 8. Purchase: Between $2000 and $5000 is generally required as a reservation fee when you choose your apartment, Caraco said. This is refundable until contract exchange, when you will be required to provide a 10 per cent, non-refundable deposit. The balance of the purchase price will be due on settlement, when the building is complete. Thoroughly inspect your apartment before paying the balance to check any problems have been fixed.