Things to Consider Before Buying An Off-The-Plan Home
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There are many positives to purchasing an Off-The-Plan (OTP) property. Firstly, new builds are usually eligible for special government grants, such as HomeBuilder and the Queensland First Home Owner’s Grant that have been implemented to support the construction industry and first home buyers. Buying OTP also offers you the luxury of time – if you need it. Once the deposit is paid you won’t need to start paying your mortgage until the building is complete, so if you are not quite ready to move out, you can have months, to save more money before settlement.
With these benefits does come risks, however, so it is prudent to ask lots of questions before committing to an OTP purchase. We have compiled some of the most vital questions you should be asking and the relevant people you should be getting to answer them.
What should I ask my lender?
The bank or lender that you plan to borrow from may have special policies that apply strictly to purchasers of OTP properties. As a borrower, it is important that you know where you stand so you should ensure you ask your lender the following:
- Will the bank lend to me without a valuation? i.e. will the bank lend without seeing the property, on a valuation based purely on the contract?
- Will I even be able to apply for finance prior to the commencement of the build? If not, at which point will I be able to apply for finance?
What should I ask my solicitor or conveyancer?
Your solicitor or conveyancer will be able to answer all the legal questions you may have about the purchase of an off-the-plan property. Different rules apply to OTP purchases, so be sure to seek clarity on the below before you sign the Contract of Sale.
The most common questions about OTP purchases you will need to ask are:
- What are the penalties, if any, for rescinding the contract?
- Does the contract have a “sunset clause”? A sunset clause is a date by which the project must be completed. If it is not finished by this date you are within your rights to cancel the contract and have your money returned or enter into a new one with the developer.
- Is there a cooling-off period in which I am allowed to withdraw from the contract? If so, how long is that period, and will I be required to forfeit some or all of my deposit if I do so?
- Is the developer allowed to delay settlement if the project isn’t completed in time?
What should I ask the property developer?
Some of the most important questions will need to be directed to the property developer. After all, they are the ones with the most visibility and control over the construction of the property. Some crucial questions include:
- How long will construction of the property take?
- Have the developers accounted for flexibility around the completion date? i.e. is it going to take far longer than planned to complete the build?
- Can I make changes to the proposed finishes and fixtures prior to completion?
- What is the process for having building defects rectified at the builder’s expense?
- How close are the developers to receiving development approval based on the number of properties sold?
If you have purchased or are considering purchasing an OTP property and need advice on the conveyancing process, contact our conveyancing team today.