The ins and outs of buying property off-plan
Everyone has that one friend who doesn't shop online. Not because they're worried about security breaches, but because they're uncomfortable purchasing something they haven't seen for themselves.
It's similar when you're buying a property off plan - there's nothing to see so you just have to trust that what you see on the plans is something that you're going to like when it materialises. Of course, it is not quite so simplistic, but it is useful to understand the pros and cons of buying a property off plan to understand whether it is an option you would be comfortable with.
What does it mean to buy off-plan?
"Buying off plan simply means buying into a cluster or sectional title development where only a sample unit has been built," explains Paulette Stassen, Property Consultant at Leapfrog Durbanville. In some cases no units have been built at all, and thus the builder's plans or the developer's blueprints are the only indication of what the property will look like on completion.
What are the benefits of buying off plan?
One of the main incentives for buying off-plan is that there are no transfer fees payable and VAT is included in the purchase price. "This makes it a particularly attractive option for first-time buyers as transfer fees can be a significant financial barrier to entering the property market," Stassen says.
Buyers usually also get to choose the stand for their property and can have some input into the layout of the home and the finishes, such as the sanitaryware, tiles, carpets, cupboards and fittings.
Because the property is being built from scratch it will be brand new when the new owner moves in. "That new car smell" is well known, but the "new house smell" is equally delightful!
"Another undeniable advantage of buying off-plan is that these properties normally sell at reduced prices in comparison to what they will cost once construction is completed. With construction normally taking between 18 and 24 months from launch to completion, an apartment bought off-plan can already be worth 10% more when it is ready for occupation than when it was bought off-plan some months earlier," Stassen highlights.
What are the potential risks and disadvantages of buying off-plan?
Any savvy buyer will do their homework before signing to commit to buying off-plan, but there is always a chance that things could go awry. It may happen that the final product doesn't match the expectation created by the plan (or the builder's promises) but luckily there is some recourse for the buyer.
"Purchasing a property off-plan means you're buying from the developer and as such protected by the Consumer Protection Act, which gives the buyer some insurance and necessitates the developer to take greater care and responsibility with the outcome of the project," Stassen advises. The Consumer Protection Act allows the buyers to give instruction, within three months, to have any non-compliance issues or deviations from the original plans to be rectified.
Stassen further elaborates: "Also bear in mind that the buyer has 12 months in which they can instruct the builder to fix roof leaks that result from inferior workmanship or building materials. Major structural defects that are attributable to non-compliance to technical building standards must be fixed by the builder in the ensuing five years."
What happens at the handover inspection?
Upon completion of the property and before the buyer takes occupation, the developer will accompany the new homeowner on an inspection of the property.
- Pay careful attention to the following:
- Ensure the plugs and stove are in working order
- Check the straightness of the walls and door frames
- Make sure the taps and other plumbing works
- See to it that the cupboards are securely and neatly installed, and open and close properly
- Check for hairline cracks in the tile and even against the wall
- Ensure the silicon sealing is properly done in the kitchen and bathrooms
- Check for cracks, scratches and marks in general
What are the most important considerations for the buyer?
It is important to understand that, just like with any other investment, that there is some risk involved. "The best way to mitigate the risk is to ask questions, keep an open-mind and raise any concerns or issues that come up as soon as they arise. Make regular contact with the developer during the building process and visit the site frequently to check on the progress," Stassen emphasizes. Another way to reduce the risk to the buy from a reputable property developer. A trusted property advisor will be able to offer you some guidance in this regard.
Author: Leapfrog Property Group