With such strong demand for Sydney property and the availability of development finance, it is no surprise to see that Sydney property is once again being sold ‘off-the-plan’. So, what do you need to know about purchasing off-the-plan? Here are some quick tips from our conveyancing experts to help you buy with confidence.
- Know what you are buying – always check the plans to confirm that you are buying the lot you think you are. And if a car space is included but has not been allocated, then it will generally be allocated at the vendor’s discretion when plans are registered.
- The finished product may not be what you expect – understand the tolerances for variations because the final product may differ to the display units you see.
- Inclusions and finishes – the schedule of finishes lists the items included in the sale. Generally, the vendor can substitute these with other brands which may be different to those shown on display.
- If you use a cash deposit, it will generally be invested in an interest bearing account and the interest earned from exchange date to settlement date will be shared between the parties.
- If you use a deposit bond, expect to pay a fee and note that the bond doesn’t earn interest. However the benefit is that your cash is not locked away and is available for other purposes. If settlement is delayed, deposit bonds need to be extended to be in line with the sunset date….depending on the length of the extension, this can be costly.
- Be prepared for delays- even though the Contract provides a sunset date (i.e. development to be registered by a specified date), this can be extended by the vendor which means that settlement will be delayed. Generally such an extension cannot be more than 6 months. Common reasons for extending the sunset date include adverse weather, strike action and issues with finance.
- Know that the development can be on sold which would mean that you are now dealing with a new developer that you may not know or trust.
- Don’t leave your finance to the last minute- although we seek updates as to upcoming registration and settlement, completion of the contract is generally to take place 14 days from the date the vendor notifies us of registration of the building. This means that your bank only has 14 days to carry out a valuation of the property, prepare and issue you loan documents and finalise the loan funds for settlement. That can be quite a scramble!
- Be conservative when investigating your borrowing options – it’s very important to obtain pre-approval prior to exchange to understand your borrowing power. Buyers need to be aware that some developments can take 2-3 years to complete, during which time your financial circumstances may have changed, which may impact on your borrowing power.
- Most off-the-plan contracts offer a 3 month defect period – a buyer has 3 months in which to notify the vendor of any defects or fault in the property that may be caused by faulty materials or workmanship. The vendor is obliged to rectify and make good any defects or faults except for defects which are caused by wear and tear, minor shrinkage or minor settlement cracks.
- Have a qualified inspector carry out your inspection – as the buyer is only entitled to carry out 1 pre-settlement inspection it always recommended that you have a builder/ qualified building inspector to carry out the inspection with you. The building inspector will provide you with a written report as to any issues/defects with regards to the final product.
- If the property is or may become an investment property, you should always obtain a depreciation schedule for tax purposes because the deductions can be significant.
As always, have fun, good luck and be sure to have a BridgePoint Group Lawyer handle your conveyancing!