Buying off the plan is an appealing option for many first home buyers. As well as a fixed price, homes are built to modern standards with heating and insulation, and typically require far less maintenance once completed. But buying off the plan is not without risk and there are a few potential pitfalls to look out for. Here’s an outline of some of the things to check before you buy a home off the plan.
The developer’s credentials
Start by researching the developer’s background, looking at any construction projects they’ve worked on previously. Were these completed on time? And were they of a high standard? Look up the company name on the Companies Office website to find out who the directors and shareholders are. You can also check on the Insolvency and Trustee Service Register to see if any people involved in the project have been – or are currently – bankrupt.
And a quick check on Google might turn up some red flags in reviews or news articles.
A sunset clause
Off the plan contracts usually include a sunset clause. That’s the date by which time the project must be completed or the purchaser (or developer) can cancel the agreement without penalty. Sunset clauses are there to safeguard the purchaser against development projects that run over time and budget, allowing the purchaser to cancel and still get their deposit back if things don’t go according to plan. Be sure to seek legal advice to ensure the sunset clause – and any other variations to contract or clauses in the agreement – are in your best interests.
Check what you’re getting
Buying off the plan usually means you don’t get to see what it is you’re buying until the property is built. And while you may be able to view other recently built projects, developers reserve the right to alter the project plans by as much as five per cent without your consent, and can even change the layout or use different materials and fixtures from those you agreed on.
That’s why it’s even more important that you do your due diligence and exercise as much caution as you would if you were buying an existing home. Check exactly what is included in your build and have your lawyer go over the contract to check that any variations to the contract will not materially affect the value of the property. It’s vital that home buyers who buy off the plan enter the agreement with eyes wide open, having completed their due diligence and after seeking legal advice.
Be clear on the finance
On signing the agreement, buyers usually need to pay a deposit which is generally between 5 and 10%. It’s a good idea to check that your deposit is being held in a trust account so it can’t be misappropriated and you can be refunded if the developer fails to meet the terms of the contract. Also be realistic about how long the build will take and remember that builds don’t always go according to schedule. So plan for contingencies, ensuring you have somewhere to stay until your new home is ready to move in.
Securing finance for an off the plan build can be a little more complicated so it’s worthwhile discussing your options with a mortgage adviser who understands the nuances of this type of finance. Mortgage Express branded mortgage advisers are experienced at helping clients secure finance for off the plan builds, and have worked with many first home buyers, helping them understand the purchase process and guiding them every step of the way. Get in touch with Mortgage Express today to speak to an adviser in your area about buying a home off the plan.