Purchasing property "off the plan", is only applicable to the construction of new homes where construction is yet to commence, or alternatively, where construction has commenced but is yet to be completed.

In Victoria there are many advantages in buying property at this preliminary stage.

  • You will usually pay less than the market value for the property when purchasing off-the plan, as developers financially benefit strong pre-sale records and in return their financial risk is reduced. Usually they can sell most lots in a development prior to construction, meaning they can calculate what funds to expect upon completion. 
  • You will only pay a fraction of the full stamp duty normally applied. For example, you would save approximately $9,000.00 when purchasing a $240,000.00 property "off the plan".

But buyer beware!  With these advantages also come disadvantages, the obvious being you must hand over your deposit money for something that is not yet built.  Before signing a contract and committing funds, it is imperative that you do some research on the proposed property, carry out inspections, ask plenty of questions and seek professional advice.  This will help you ensure that you know what you are getting, who you are dealing with, and the terms of your agreement.

Here are some of the most important issues that you should be aware before purchasing "off the plan":

Enquiries & Inspections

In purchasing "off the plan" you must rely on the reputation, honesty, goodwill and the financial security of the developer;

  • Research the developer before you sign the contract. Find out how long they have been in the industry and how many projects they have been involved in. Ask if you can inspect similar houses already built under the developers instruction, so that you can see the quality of the finished work.
  • Check with Builder's Licensing Authorities to see if complaints have been lodged about the developer.
  • If the developer goes under before the property is finished, you may be left with nothing to show for your deposit, conveyancing and other legal costs. Ask to see the developer's balance sheet so that you can determine their financial strength and their ability to deliver their promises.
  • Carefully inspect any display homes, models and plans of the property you intend to purchase. Investigate the details, the fixtures, fittings and finishes.
  • Note that while you might make a quick capital gain because the value of the property has increased between the deposit being paid and settlement, you may also be vulnerable to market fluctuations, oversupply and interest rate rises. These can all cause the value of the property to fall over time. You should find out how long the development has been on the market and check with local real estate agents to see what the property values are like in the area in which you intend to build.

The Contract

"Off the plan" Contracts can be very complex and may contain unexpected provisos and clauses which can lead to the detriment of an uninformed purchaser.

  • Ballarat & District Mobile Conveyancing can examine the fine details found in the Contract to identiy whether there are any important omissions from the written agreement.
  • The Contract should fully disclose all charges. You should be aware of whether there are any hidden charges or any other ways in which the purchase price may increase.
  • The Contract should clearly specify the cost of upgrading fixtures and fittings from the standard options. It should also include carpeting, painting, window dressings, and possibly appliances. Make sure that whatever you have discussed with the builder/developer in this regard, such as particular brands of fittings, are stipulated in the Contract.
  • The Contract should require the developer to commence construction within a specified time. It should list the remedies available to you if construction is delayed and whether there are any penalties for late completion.
  • You should determine whether you have any remedy or if there is a dispute procedure in place should the developer misrepresent the property, or you are dissatisfied with the finished product.
  • The Contract should include where relevant a copy of the draft Strata Plan (showing the lot, any garage, car space, or storeroom), a copy of the approved plans and specifications, and a description of the proposed registered "Title".

As you can see, before purchasing property "off the plan" you can commence some of the groundwork. However, like with any property transaction you should seek the professional advice of our team.