Buying Off the Plan, and Things You Need to Know Before Signing on the Bottom Line
When you purchase an already built home, it is a relatively simple process. You sign on the dotted line, you organise your pest and building inspection reports, and you obtain your finance approval from your lender within a five-day cooling-off period.
When buying off the plan, you are purchasing vacant land and a dwelling that will get built on it according to the architectural plans in the contract. Essentially, you are buying something that does not exist yet.
There are many players involved from the time of signing the contract to having it ready for settlement, including but not limited to the council, valuers, building surveyors, builders, and certifiers. There are also many additional matters to consider when purchasing off the plan, versus when purchasing an already built home. This includes:
Researching the builder
Understanding how much you can borrow
Understanding how a future decrease in value will impact your borrowing power
Ensuring that the appropriate insurances and warranties are in place
With so many players involved, and so many extra matters to be considered, it only follows that the risk of something going wrong increases exponentially than when purchasing an already built home.
Your lawyer can help assess the level of risk by undertaking due diligence on the builder to minimise the risk of the builder one day becoming bankrupt and construction halting indefinitely, leaving you to take on the task of finding a new builder to finish the job. Your lawyer can also seek changes to the contract to minimise the risk involved. These changes can include:
Ensuring that there is a way out of the contract if construction does not progress according to plan.
Ensuring that the contract does not unfairly favour the vendor
Safeguarding your deposit
Ensuring you have the right to rescind the contract in certain circumstances
It is easy to get caught up in the excitement of purchasing your first home, but you cannot let your enthusiasm get in the way of doing proper due diligence, or it can cost you in the long run.
