Buying Off The Plan – Buyer Beware

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Wow – that’s what most of us would say after reading through the glossy brochure, viewing the amazing website and touring the extremely professional sales office.  One of the first questions you need to ask yourself is in fact how professional is this developer and what is their reputation like.

Like any property the legal principle of Caveat Emptor “Buyer Beware” also applies to new homes. The difference is that as an investor you will need to take a different approach when conducting your due diligence.

For existing homes and apartments it is a far more simpler approach as you actually have a property to investigate whereas with new properties you are searching for the unknown.

Your first port of call should be to find out as much information as you can about the developer: 1) research past projects – this can be hard as vendors are the ones with the real knowledge so try  making enquiries with local real estate agents to see if they can provide you with some insight about project, 2) you may want to obtain a strata inspection report for a past project that is now complete – the report will provide valuable insight from the owners corporation regarding any outstanding issues or problems that the developer should address or in the worst case is there any litigation pending  3) have a full understanding of the contract that you are signing.

Off the plan contracts have developed over the past 20 years and they are drafted in a way that favours the developer. Generally speaking any requests to remove conditions or water them down are usually rejected. A developers goal is to provide all buyers with a property that reflects (or as close as possible) what they advertise. To achieve this we see clauses in contracts that give the developer an unfettered discretion to alter, vary, amend just about anything from the size of the property, floor plan layouts and appliances. We also see clauses that allow the developer to call upon settlement while the complex is still being constructed – interim occupation certificates are commonly issued which certifies the safe occupation of the apartment but owners can find themselves with a situation where common areas still resemble a construction site.

These are just some of the risks you take when buying off the plan. You may find yourself signing a contract and 12-18 months later having to see if you need to make the tough decision as to whether you have the ability to rescind the contract or settle on a property that is not like that glossy brochure you first laid your eyes on.

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