Homebuyers who purchase off plan \u2013 or in advance of their home actually being built \u2013 need to know that they will usually have quite a few more money issues to deal with than those who buy a pre-owned home, says Shaun Rademeyer, CEO of bond originator, BetterBond.<\/p>\n
He said that about 10% of the home loan applications being received currently are for off-plan purchases in new sectional title developments or to build new houses in estates where the prospective owners have already bought a stand.<\/p>\n
\u201cAnd of course there are many advantages in buying off-plan homes, including the fact that you can often customise them to suit your own needs and preferences. Even in apartment and townhouse developments, buyers can usually choose their interior fittings and finishes according to their personal tastes and budgets.<\/p>\n
\u201cIn plot-and-plan schemes they can often also choose the size and floorplan of their homes, while owner-builders in estates usually only have to follow the basic architectural guidelines while designing their dream homes.\u201d<\/p>\n
Rademeyer however, warned that there are many potential pitfalls when it comes to paying for a home that doesn’t yet exist, and buyers need the correct information to be able to avoid them.<\/p>\n
\u201cIt is very important, for example, for buyers to know that they should never pay a deposit for an \u2018off plan\u2019 home, or even sign any agreement to purchase such a home, until they have thoroughly checked the credentials of the developer and\/or the builder.<\/p>\n
\u201cThey should also be absolutely certain that any deposit they do pay will be held in trust by an attorney or a registered estate agent \u2013 and be repaid to them with interest if the development does not go ahead within a specified time. There have been far too many cases in recent years of bogus estate agents, builders\u2019 agents and construction companies printing up glossy brochures and taking deposits for proposed \u2018developments\u2019 before simply vanishing.<\/p>\n
\u201cThere have also been many cases of underfunded and half-built projects being delayed by months and even years, while the developer hangs on to the deposits of buyers – and any further amounts that they may have paid – because there was no cut-off date in the original purchase contracts.\u201d<\/p>\n
Those planning to buy into sectional title or estate developments – which is where most off-plan purchases occur – must remember to budget for the monthly levy as well as their home loan repayment and other regular expenses.<\/p>\n
\u201cThey should also make sure exactly what the levy covers \u2013 and by how much it is likely to increase once the development is finished. There could be quite a steep jump once the last unit is sold and the developer is no longer involved and no longer subsidising certain costs.\u201d<\/p>\n
Rademeyer said that those who purchase a sectional title unit off plan should also take into account that it is the developer who will have a direct contract with the actual builder, and that they will probably have very little control over the quality or speed of construction.<\/p>\n
\u201cThis makes it especially important in such instances to buy from a developer with a track record of maintaining very high standards and delivering on time, because ultimately it is your money at risk.<\/p>\n
On the other hand, those who are buying a freehold home off-plan are likely to have their own contract with the builder, who will be paid in instalments, or \u201cdraws\u201d from their building loan as certain stages of the building work are completed. \u201cAnd since they will have to sign each draw form authorising the bank to pay, they will have a large measure of control over the way the work is done.<\/p>\n
\u201cIn fact, we recommend that they visit their home building site as frequently as possible and monitor the workmanship closely, so that any problems can be rectified immediately \u2013 and certainly before the builder collects the last draw and they have to start repaying their loan,” Rademeyer said.<\/p>\n