Buying and selling real estate 'off the plan' means the agreement to buy and sell takes place before the building is completed. So the property is sold on the basis of the building plans.
When purchasers are considering a property that is not yet built they need to fully understand all the elements of the property they will expect to receive once the property is built otherwise they will be highly unlikely to go ahead with an off-plan purchase.
There are several advantages to both the purchaser and the property developer to complete a sale contract prior to completion of the building. Both parties can rest assured that the important task of finding a purchaser and finding a property has been taken care of. Once the building is complete, the plan of subdivision has been registered and the certificate of occupancy has been issued, settlement can take place. Meaning the sale price and and land title for the property will change hands achieving both the buyer and sellers goal.
Should the property not sell until the construction is complete, the property developer will incur additional expenses such as furniture staging and holding costs including property maintenance, additional marketing expenditure, insurance, utility connection fees, council and water rates. Properties that are sold off plan settle sooner by approximately 60 to 150 days providing significant savings for the property developer in holding costs and allowing them the funds to move on to their next project.
For the purchaser, there may be distinct advantages such as their personal choice of appliances, colour schemes and other finishes making their new home truly unique. Buyers will also receive the benefit of locking in their purchase price at the time of sale, safeguarding against property price rises after the property has been constructed. A ten percent deposit is usually paid by the purchaser and held in the real estate agent's trust account. Buyers can usually purchase with reduced competition from other prospective purchasers as auctions are usually not the preferred method for off-plan purchases.
For the purchaser to feel safe in going ahead with the purchase prior to seeing their new home they must be provided with as much information as possible about the finished product. This includes detailed plans of the building with measurements of room sizes, landscaping plans, samples of the types of finishes that will be included, model numbers of kitchen appliances, colour schemes and so on. This will allow the purchaser to make an informed decision and truly understand what they will be getting in their new home.
Another advantage of purchasing off plan for the purchaser is the additional time they will get that may be used to sell their existing property. This can ease the time pressure that is often felt by people who purchase their next home before they have sold the one they are in.
In the case of some larger scale developments, a developer may have their builder construct a 'display unit' which will allow the purchaser to see and feel first hand what the finishes, colours and styles will look like in the flesh however this is only viable for development of a significant enough scale to make the construction of such a display unit feasible. The same benefit can be provided on a smaller scale by utilising detailed specifications lists and samples of the finished product.
There is a lot of unfounded fear around buying and selling off-plan but you can rest assured that there are many benefits for both parties as long as everyone knows what they are getting.
For any real estate advice or information contact the author, Licensed Estate Agent Simon Wendt on 0407 040 706.
