Buying off the Plan

There are negatives and positives for Buying off the Plan.

Buying off the Plan means you are purchasing a property which has not yet been built.  Generally you will be able to view detailed plans, models or displays of the proposed building.

Usually 10% of the purchase price is paid when the contracts are signed.  This may be by way of a Bank Guarantee or an Insurance Bond.  The balance is paid once the building has been completed and title has been issued.  The 10% is treated as a deposit and is usually kept in an interest bearing account.  Generally the Seller's solicitor will handle this.  The interest accrued is usually shared between the Purchaser and Seller. 

Over the years, units have sold off the plan for much lower prices than the prices set for the completed units.  This is because the Developer's financier perceives the risk as being much lower when they know say, 50% of the development has been sold.  These contracts are unconditional.  You are lessening the risk for the developer's financier.

Buying off the Plan also allows you to have a say in the finishes to your unit.  You may be able to alter the plan slightly, change the colour of the tiles or the electrical fittings.  Of course, you will have to pay for the extras - this is usually about cost plus 10%.  Just make sure you have a fixed price for any changes prior to them being done rather than waiting until the building is completed because this item can sometimes blow out in cost.

Before you commit to buying off the plan, find out what is included in the purchase price.  Request a schedule of finishes,  specifically ask about fittings, fixtures, carpets and painting.  Make sure they will be included in the price.  If particular brands for fittings have been mentioned, ensure they are specified in the contract.  Keep in mind that under some conditions (which should be covered in your contract), the builder can use other brand fittings if they are of equal quality.  Ensure you have detailed plans, the proposed Body Corporate details and any Management Contracts attached to your contract.

I suggest researching your developer before you sign the contract.  Ask if they have built other properties that you can have a look at.  This will allow you to see the quality of their finished work.  You should also check with the Building Services Authority to see if complaints have been lodged about the developer or builder.

Many people have made a lot of money in the past by buying off the plan.  They purchase at the lower price, pay the 10% deposit and then if we are in a rapidly rising market, the unit is worth much, much more at the time of settlement.  In many cases they have re-sold the property prior to settlement and picked up $50,000 to $100,000 or more profit on just 10% deposit.  As contracts are dated at the time of signing, and if the building has taken more than a year to complete, the capital gains tax is much lower as well.

  My advice is always to be sure you have the money to be able to settle the property.  You lose your deposit and can also be sued if you cannot settle.