Buying a property off the plan comes with many risks.
With Mascot Towers and Opal Towers in Sydney, many have learned a hard lesson. It’s paramount that you do your due diligence and proceed with caution. These buildings are not a once of. There are many buildings that have or have had major defective issues.
Last week developer Ralan Group appointed administrators to take over the company. According to various newspaper articles this week, buyers who have bought off the plan properties through Ralan could lose their deposits. This could be 10% of the purchase price.
We’ve put together a few warnings signs together if you are considering buying off the plan.
Seek INDEPENDENT legal advice. Do not engage a lawyer who is connected to the company or financial advisor that has recommended the property.
Huge Commissions and Freebies
Real Estate Agents, Financial Planners, Financial Advisors and property investment companies, mortgage brokers are getting paid commissions as high as 6%. This is generally factored into the asking price. YES, you are paying for it.
Beware of freebies such as “developer will pay the stamp duty”, “free furniture”, “Rental Guarantee”, all the things that sound too good to be true.
Buying Out of Area
If you are considering buying a property in an area outside where you live speak to a couple of local real estate agent’s and ask them about the development, pricing and what they are likely to rent for. Do your due diligence online and offline.
“Do Your Own Research, Seek Your Own Independent Advice”
Ask who the developer and builders are. Research the developer and the builder. Ask what other projects they have done. Speak to owners in these buildings. Search court records to see if there has been any litigation.
The developer has the right to make variances to the property that you “think you are buying”. For example, a wall that you did not know about has been built and the property now is boxy. Make sure a Schedule of Finishes are in the Contract and make sure there is a floor plan.
Are there other opportunities in other areas or established buildings? Have you considered a house and land package in a regional area? Some regional areas are giving far greater returns than major City developments. Look for growing areas where there are significant infrastructure plans. Uni’s, hospitals, education, transport etc.
“If it’s too good to be true it generally is”