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Buying off the plan – questions to ask yourself

Buying off-the-plan is a popular way to purchase property. Yet unlike traditional property purchases, when agreeing to buy off-the-plan, you are agreeing to pay for something which has yet to be built or is under construction.

But there are several things potential buyers can do to ensure they aren’t purchasing a dud.

The first is to know your rights. While these will vary between states, Fair Trading NSW (FTNSW) says that under state law there are a number of prohibited marketing tactics developer sales team are not allowed to use when offloading their properties.

These include advertising a property for a lesser price than other similar properties, if the advertised property is no longer available.

Likewise, the law dictates that agents must not indicate a price range for a property, where the lower end of the range is less than the agent’s estimated selling price for the property. They are also prohibited from holding on to your expression of interest payment or using high pressure tactics to get you to buy another property at a higher price if the property you made a payment for ends up being sold to someone else.

It’s important to remember that when it comes to purchase price, what you commit to when buying off the plan is what you’ll pay, even though the property may not be ready for quite some time.

Your lender won’t be able to value the property until it’s completed, so you won’t get the peace of mind of a bank valuation when you initially agree to purchase off the plan.

In the worst case scenario, if the bank’s valuation at the time of completion is less than the agreed purchase price, you may not be able to borrow enough to complete the sale. Therefore it’s wise to put ‘subject to finance’ in your off-the-plan contract (even if you have pre-approval).

FTNSW cautions that when you buy off-the-plan, you are paying for a property where the end product may not only differ from your expectations, but may be worth less than you have paid by the time it is finished.

“If you are thinking of entering into a contract to buy premises not yet built, exercise caution and obtain appropriate legal and other advice before signing any documents or paying any money,” it says.

Before you agree to purchase a property off-the-plan in any State or Territory, consider the following:

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