Seven questions every off the plan buyer should be asking

Seven questions every off the plan buyer should be asking
Seven questions every off the plan buyer should be asking

Calling the increase in strata developments and land sales in Western Australia a “boom”, Consumer Protection has provided some clear guidelines for prospective off the plan buyers.

Revealing a booklet to buying off the plan on their website, acting commissioner for Consumer Protection, Gary Newcombe, said that the biggest risk is if the development fails to go ahead as planned.

“For this reason, it is absolutely essential that buyers ensure that any deposit they pay up front is held in a designated trust account by an independent party such as a real estate agent until the property is ready to settle,” Newcombe said.

“When buying off the plan it is also important to know the status of any planning approvals, the likely timelines for these being settled and what happens if approvals are not granted within acceptable periods.”

He noted that the contracts for developments are usually created by the developer and their agents, and so there’s a risk that the developer’s interests are protected but that consumers’ are not to the same extent.

He also said that buyers should consider whether their own circumstances may change, and then affect their ability to fulfil their contractual requirements.

 “There might be changes in the buyer’s financial situation, interest rates may rise and property values may fall – all factors that will affect their ability to get finance when settlement time comes many months or even years down the track,” he said.

“The risk of a buyer defaulting could mean their deposit is lost and the developer could claim other damages and losses.”

He warned that their guidelines should not replace legal advice.

The top seven questions from the guide:

  1.  What are the pros and cons of buying off-the-plan?

  2.  Who should hold the deposit and to whom will interest, if any, be paid?

  3.  What happens if the buyer can’t go through with the deal, or the development doesn’t proceed as planned?

  4.  Can the developer increase the price of the land or property after the contract with an agreed price is signed?

  5.  Can the quality of the property be guaranteed and what happens if the builder changes the plans?

  6.  What’s at risk if the buyer can’t get finance by the settlement date?

  7.  Under what circumstances can a buyer pull out of the contract without any penalty?

Source: Consumer Protection

Jennifer Duke

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

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