What you need to know about buying off-plan
The property market has seen a surge recently in off-plan buying in new sectional title apartment and townhouse developments, as the demand for smaller, more secure and lower maintenance homes continues to increase.
“There is also no transfer duty to pay on a home bought directly from a builder or developer, plus newly-built homes come with structural and roof guarantees, while most existing homes are sold voetstoots, or as-is,” says Berry Everitt, CEO of the Chas Everitt International property group.
“However, buying off-plan - or before the home is actually built - is not a decision to be taken lightly, especially by inexperienced, first-time buyers, because you cannot see what you are getting. So if you do decide to go this route you need to take extra care to avoid disappointment with the finished product.”
Writing in the Property Signposts newsletter, he says that to start with, it is vital to buy only from a reputable developer or builder who has a track record of producing quality homes in similar projects. Some will have their own sales agents, but it adds an extra layer of protection if the off-plan homes are being sold by qualified and experienced agents.
“The second thing to do is make sure exactly what it is that you’re buying in terms of floorspace and finishes, and that this is clearly written into your sale agreement. It is not uncommon for developers to create a “show unit” to help buyers imagine what their home will look like once it is finished, but you need to double check that yours will be the same size and not smaller.”
Everitt says you also need to check your agreement to ensure that all the finishes on show, such as the floor and wall tiles, granite kitchen counters and built-in cupboards, are included in the advertised sale price. Otherwise you could end up paying considerably more in “extras” to get a homes that actually looks like the show unit.
“Alternatively, when considering an off-plan purchase, you shouldn’t be embarrassed to ask if there is any saving to be made by not having luxury finishes included at this stage. This might make the home more affordable for now and give you the opportunity to upgrade the finishes at a later stage – with the added advantage that you won’t be paying them off, with interest, for 20-year period of your home loan.”
The third thing that will make an off-plan purchase easier, he says, is to get your home loan from the developer's lender – that is, the bank that is financing the project. “Not only should it be easier to get home-loan approval from this bank, because it has already evaluated the project and the units that will be built, but you might also get a preferential interest rate and possibly a reduction in bond registration costs.”