What to consider before buying off the plan

Buying 'off the plan' is increasingly popular. But what are some of the things you need to know before you sign on the dotted line?

As the name suggests, buying ‘off the plan’ means you’re buying a property that hasn’t been built yet. There are lots of reasons you might consider buying off the plan – not least of all, the excitement of moving into a property that’s brand new.

But, like all things property, it’s important to make sure that you know exactly what you’re getting into. Here are some questions you may want to consider before committing to an off-the-plan property purchase.

What else can I see?

Don’t necessarily rely on a visit to a show home to convince you. Have a good look at the plans, take a 3D tour if there’s one available and check out any photos or design sketches. The ‘show home’ is there to attract your interest – your job is to get a feel for how the basic design might translate into the physical house, unit or apartment that you’re considering buying.

What is the timeline between deposit and completion?

There may be some advantages to having a little gap between putting your deposit down (generally 10%) and settlement or putting the remainder of your finance in place. It gives you a little extra time to save and sometimes you may even earn interest on your cash deposit over the construction period, which may vary from 6 months to 3 years.

But when the timeline stretches out unexpectedly – and if there’s a hike in interest rates – you could find that you’re no longer able to borrow the amount that you initially thought you could. In extreme cases, you could be left with a deposit paid, but a gap in your financing and limited time to find the extra money.

Read more about the risks and benefits of buying off the plan.

Will I be eligible for the First Home Owner Grant (FHOG)?

The FHOG has changed a lot since it was first introduced in 2000. While eligibility varies between states, it’s generally only available if you’re buying a new house and planning to live in it. This includes buying your first home off the plan. 

Some states may also offer stamp duty concessions for eligible first home buyers. Take the time to get your head around what your entitlements may be.

What does my lawyer think?

You should ask your lawyer or conveyancer to review the agreement carefully and double-check for any unusual costs or conditions. Don’t forget to ask them to tell you:

• what will happen if there are delays
• what will happen in the event that the project runs out of money (i.e. the developer happens to go bankrupt during construction)
• whether you have an exit clause for a change of mind. 

Hint: the ‘sunset clause’ will tell you how long the developer has to finish the project. It’s probably a little longer than you’re expecting.

Does the developer have a history of success?

Take the time to have a chat. Generally the developer should be able to point to previously completed developments, and tell you about the average sale price. A solid track record can point to future success, so you may want to do your own research into how these properties have appreciated in the past. The internet might be able to point to any issues that people have had with the developer in the past, so make a search.

Do the builder and architect have a history of completed products?

You might need to get Googling and find out about previous projects that the team have worked on. Go and see some of them if you can. It’s a good idea to check out the standard to which the buildings are finished for insight into the way they work and what you could expect at completion. 

What will I be able to customise?

Generally you should be able to make some choices about your finished home, however every developer has different package options which you will need to review. Whether it’s carpet, colour, tiling or maybe your garden landscaping, find out where you’ll be able to have some input and inject your personality into your new space.

What's included in the property?

Most often the finishes and fixtures that will be included in your new house will all be laid out in your agreement. Make sure you know exactly what’s going to be included, right down to the first and second choices for the appliance brands. Consider if there are costs for additional fixtures and finishes, or for replacing appliances that aren’t up to scratch, as this could very quickly blow your budget. 

What if something's not right?

Before you take possession of your finished home, you may have the chance to make a pre-inspection to check for defects, which is also a great time to make sure you have the fittings and appliances that you’re expecting. Your contract should set out your rights should any defects be found – and ideally the developer and builder should resolve these completely before you take possession and move in. 

To sum up

• Buying ‘off the plan’ is a popular option for first home buyers in Australia, and means choosing a property on a planned development.
• You’ll put down a deposit amount (usually 10%) and the remainder of your finance needs to be in place by the agreed settlement date.
• You may want to consider seeking legal advice before committing to buying off the plan, as the agreements in place with property developers can be very complex.