When you buy ‘off the plan’, it means the property you’re buying is not built yet. Typically, you’ll only have to pay the deposit upfront, then the balance of the purchase price once the property is completed.
Because an off the plan purchase is a new build home, you may qualify for stamp duty exemptions or first home owner concessions, depending on your circumstances. (Check your state or territory’s rules online).
Lenders may offer conditional approval for off-the plan purchases, but they won’t lend you the funds until they have performed a valuation of the property upon completion. In 2018, many buyers were caught out because their off-the-plan property was valued at less than the agreed purchase price and the lender would not lend the amount required to complete the sale.
There may also be other risks with purchasing an off the plan property, including:
Terminating an off-the plan contract can be tricky, but there may be grounds to do so. For example, if the vendor has engaged in misleading conduct or the developer doesn’t complete construction before the sunset date, you may be able to terminate the contract.
However, if you want to terminate the contract because a lender has valued the completed property at less than the agreed purchase price, you may have difficulty. You could potentially lose your deposit and may have to compensate the developer for any loss.
Seek legal advice about your options if you wish to terminate an off-the-plan contract. More importantly, ask your solicitor to examine any contract before you sign, to ensure you have appropriate exit clauses in place – more about this below.
Some buyers decide they want to sell the property before settlement. This is legal under most off-the-plan contracts and can prove to be lucrative if the property’s value has gone up, but there are risks involved.
If you do decide to go ahead with your off the plan purchase, I can help to organise pre-approval on your home loan and help you choose a lender that will work with you on this type of purchase. I can also refer you to a reliable conveyancer or solicitor to help you avoid the legal pitfalls. If you’re having difficulty organising finance to complete an off the plan purchase, please get in touch asap!
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.