There’s always a risk when it comes to buying something you can’t see. Buying off-plan means you are buying your new home in a sectional title complex or cluster home scheme before it is built. This means that you will be depending on the developer and builder to complete your home properly and timeously.
This usually happens when you have been attracted to a new development where one unit has been constructed as an example, or where no units have been constructed at all.
Paul Stevens, CEO of Just Property, shares some tips…
1. Why buy something that isn’t built?
When buying from a developer, you don’t pay transfer fees. The most important financial incentive for buying from the developer is that the bank will finance the total cost of the house, including the VAT and other fees.
Buying from the developer means you are protected by the Consumer Protection Act, which does not apply when buying from a private seller. The act gives consumers more protection and imposes greater responsibility on developers to look after their interests, specifically because buyers cannot see the finished product.
You can also influence the final product and variations in price to suit your needs by choosing the colour of the carpets, curtains and tiles for example.
2. Can I be sure of what I’m buying?
If you are not monitoring the progress of your unit closely, you could find the layout and size have been altered along with fittings and finishes. Check the contract carefully and make sure that the specifications of fixtures and finishes are listed in detail and not just referred to in its general clause.
The big difference between buying a sectional title apartment and freehold unit in a development is that the entire sectional title block must be completed before the buyers pay for their units.
Contractors working with reputable developers and builders will specify that any discrepancies between the promised and the completed sizes should not exceed five to 10%.
3. What if the property has been badly built?
As a consumer you have the right to, within three months, give an instruction to rectify any non-compliance and deviations from the original plans.
Within 12 months, you can instruct the builder to repair roof leaks attributable to workmanship and design materials. Within five years, homeowners can also instruct the builder to rectify major structural defects caused by non-compliance with regards to technical building standards.
4. Can I sell before taking transfer?
It’s possible to sell your property before taking transfer, but proceed with caution.
If you are buying specifically to sell for a profit before transfer, you may be disappointed. It is not uncommon for the deed of sale to stipulate that buyers cannot sell their units before transfer without the written consent of the developer.
Properties in the later phase of development tend to be marketed at significantly higher prices, so developers will be trying to sell the more expensive stands without buyers in the first phase undercutting them.
5. How can I ensure tenants will look after my property?
You will never know how tenants will treat your property, so
it’s a good idea to take out landlord insurance. This insurance covers you for potential loss of rent due to tenants defaulting on rent, causing malicious or accidental damage and public liability.
6. The benefits of buying off-plan
Like any major investment, buying real estate off-plan could be a high risk if insufficient research has been undertaken.
But, according to Stevens, there are perks to buying property that has yet to be built.
– Big transfer duty savings
One of the well-known and biggest reasons for buying off-plan property is the potential for huge savings on transfer duty, which can put a huge dent in your pocket, especially if you’re a first-time buyer.
– Depreciation benefits
If you are buying off-plan as an investment, and plan to lease your new home to renters, you may be eligible for large tax deductions.
Get a full depreciation schedule from a quantity surveyor once your property settles. This will assist during tax season when claiming deductions for your new asset’s brand new fittings and fixtures.
– Repair cost savings
It goes without saying that a brand new home, if built well, will not need the ongoing maintenance that an older property often needs.
– Lower power bills
Your off-plan home should be fitted with power-saving appliances like gas, water and electricity systems. These are a boon for the owner and possible future tenants alike.
– Potential capital gains
Buying off-plan allows you to buy at today’s price. In a rising market, this could mean that owning a property worth more than you paid for by the time the deal settles after construction.