Off The Plan

A guide to buying off-the-plan

Boutique developments in niche areas can present good buying opportunities

1. Do your research

Information is power, so become an "area expert" by learning about sale prices, average time on the market, stock turnover, what sort of properties are sought-after, and the current supply and demand in the location being considered.

Also, look at the developer's history. "What else have they built? Do they deliver quality builds on time? Are they financial?"

And avoid big developments -"blocks with thousands of apartments and shared amenities" - as they're not unique and are less likely to hold their value.

2. Visit a display - and ask questions

Next, visit a display, but don't be tricked by glossy brochures and slick sales talk. We recommend asking lots of questions and getting a copy of the contract to review.

"Think about changes or specifications you want to request, as some builders will vary plans and finishes for you,"

3. Consult a solicitor

Now, see a trusted solicitor. They "will advise and negotiate on special conditions, negotiable clauses, and any contractual changes you wish to seek".

4. Get a deposit bond

Rather than putting down a cash deposit - usually 10 per cent for off-the-plan - we recommend applying for a deposit bond.

Usually available when the settlement is more than six months away, a deposit bond is essentially an insurance policy that promises the developer that the purchaser will pay the deposit at settlement.

We say there's no need for buyers to tie up thousands of dollars of their own money for years whilst the project is being built.

Applying for a deposit bond is recommended over putting down a cash deposit.

5. Note the sunset clause

Record the "sunset clause" date in the contract, so you can get out of the deal should the developer take too long to complete the project. This is a right you may formally exercise and is time-sensitive.

6. Apply for finance

Within six months of the settlement, apply for finance. Make sure you've calculated all the upfront and ongoing costs that you'll need to cover to ensure your budget is sufficient.

7. Get ready for settlement

The developer notifies buyers when it lodges the strata plan for registration with the relevant state body, and this is when you should prepare for settlement, a settlement generally happens only weeks later.

The strata plan shows the boundaries of lots and unit entitlements.

The strata plan shows the boundaries of lots and unit entitlements. 

8. Arrange valuation

The next step is for the lender to value the complete property. This is a key step.

"Right now, a lot of people who bought off-the-plan are being forced to settle and bank valuations don't stack up - the bank values it at less than the contract price - so they can't get the loan and can't settle, which leaves the developer in a pickle," We say.

Careful research about the market and property should help avoid this situation.

9. Inspect

After the valuation, buyers should do a final inspection of the finished product. Not inspecting is one of the biggest mistakes, especially among inter-state buyers. "Once you settle, it is too late to complain," she says.

"You have a lot of power before settlement and can leverage this - i.e. by refusing to settle unless things are changed or rectified. This can even lead to a discounted price if, for example, inferior materials were used. After settlement, you cannot vary anything, because the contract is complete."

10. Settle

As in all property transactions, settlement by a lawyer or conveyancer is the final step.