Buying off the plan??



From: Fiona W

Hi All,

I am very new to this 'game'! I have read and read and read as much as I can about buying off the plan and deposit bonds etc, but I am not sure of the process of putting it in to practice. You find a property and offer a price...then what? Do I get a bank valuation before I sign anything, or do I sign something subject to a bank valuation. Do I see a solicitor first (for what?). Sorry if I sound a bit like a dodo, but it's like the chicken and the egg...what do you do in what order?! I am keen to start ASAP so any advice would be FANTASTIC! (Excellent forum by the way!)

- Fiona (Multimillionaire-2-B)
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Reply: 1
From: Rolf Latham

Hi Fiona

Suggest you find out how much you can borrow, then get some form of pre-approval depending on how long away completion is.

At the same time you can grab a form for a deposit bond.

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Reply: 2
From: Mike .

Hi Fiona,

Many of the steps involved in buying 'off the plan' are, of course, common to all conveyancing transactions. Other matters, for example, understanding the plans and making sure the finished product matches expectations, apply particularly to this method of buying residential property.


Determine your borrowing capacity. Employ a Mortgage Broker to do this and apply to a suitable lender for a Loan Pre-approval.


Locate a suitable property to buy 'off the plan'. Buying 'off the plan' involves signing a Contract of Sale and paying a deposit - in other words, entering into a legally binding agreement - to purchase a lot, development or apartment BEFORE it has been completed.


Lodge a reservation deposit of $1,000, if required. Check beforehand whether it is refundable in the event that you do not proceed with the purchase. Question any request to sign documents without advice from your solicitor. The $1,000 will be included with the balance of the 10% deposit at Exchange of Contracts. Now the property can't be sold to anyone else.


You now have 10-15 working days to arrange Exchange of Contracts. Have a solicitor, who understands 'off the plan' purchases, examine the contract and include special conditions that will protect your interests and ensure the finished product matches your expectations.


With the C.o.S., the vendor should also have provided you with plans of the unit including lot size and building dimensions. Also included should be a Schedule of Fixtures and Fittings. Show these to a Quantity Surveyor or Architect to determine quality and value of purchase.


Insert into the Contract other extras you would like such as skylights, air-conditioning, insulation, ceiling fans, light dimmers, extra power-points, kitchen and bathroom exhausts, external TV aerial etc. Negotiate these as early as possible since many of them will be easier to install during construction.


When satisfied, sign and exchange contracts. Use a deposit bond to pay the balance of the 10% deposit.


Pay Stamp Duty within 2 months of Exchange of Contracts. Each State's requirements may differ.


Employ a Building Inspector to check construction before cladding covers the plumbing, electricals, & framework. They won't report anything that is hidden.

STEP 10.

One month prior to Settlement, have your Mortgage Broker submit the Loan Application and order a Valuation. Loan Approval should occur within two weeks. When the loan is approved visit the bank to setup any linked accounts or credit facility.

STEP 11.

While you're waiting for the Loan Approval, get the Building Inspector back to check exterior walls, roof, windows and interior finish. Also check that all inclusions are present. Refer to the Schedule of Fixtures and Fittings.

If possible, be present at the inspection to ask questions such as, "Can you determine if the Pest Control treatment was applied to the ground correctly?" If in doubt, get a certificate from the builder or employ an independent Pest Inspector.

If corrections or finishing touches need to be done, then have the builder do them while he is still on-site and before the tenants move in. Ideally, you want the place tenanted before or upon settlement.

STEP 12.

Employ a Property Manager to tenant the property upon Settlement. Check the Lease Agreement. Include: max. persons, non-smoking, no pets etc, if required.

STEP 13.

At Settlement monies will be transferred, Bank will hold Title Deed and Mortgage docs. Solicitor will provide a statement of fees and costs and bill you for any fees not paid from the bank loan.

STEP 14.

Within one month after Settlement, arrange Landlord Protection and Contents insurance.

This is by no means an exhaustive list and other details will need attending to along the way. Have your advisors make you aware of these in advance.

Regards, Mike
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Reply: 3
From: Michael G


I've never done this myself, but sounds like a good idea.

Negotiate with the developer to split the contract in two, one covering land the other covering construction.

In theory since you only pay stamp duty on land, this would then reduce your stamp duty costs.

And an idea of mine (if I ever got the chance), if you buying for an IP, consider your target market. My thought was if you target two single high income earners, they may appreciate an ensuite off each bathroom instead of a main bathroom?, you could have a separate stand alone toilet (with a small wash basin) for guests?

Also consider whats more important for tenants, larger living area, or larger private bedroom.

Another thought was possibly lock on bedrooms for extra privacy/security. Tenants may trust each other, but what about their flatmates guests?, they may appreciate being able to lock their room (and computer and nice mountain bike up) ???

Just some thoughts...

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Reply: 3.1
From: Kristine .


The most important factor is storage.

In the Residential Tenancies tutorial, the tutor joked that you could rent a tent if it had a lock up garage/shed, and ducted heating!

I guess in Queensland air conditioning may take the place of heating


By the way, as an independent Agent who has no stock but looks for the right property for the individual client, I would be pleased to make more contributions to this Forum but don't want to be seen as 'pushing my own barrow'.
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Reply: 3.1.1
From: Fiona W

Thanks for your help people. Your comments and suggestions have been extremely useful.

-Fiona (Multimillionaire-2-B)
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Reply: 3.1.2
From: Mike .

Hi Kristine,

You said: "By the way, as an independent Agent who has no stock but looks for the right property for the individual client, I would be pleased to make more contributions to this Forum but don't want to be seen as 'pushing my own barrow'."

Have a look at the TOP 10 message posters. I don't believe anyone on that list is pushing their own barrow. Yes, some of them are professionals such as yourself and we know about their services because they have been generous in providing us with insights from their profession.

It shows in their posts that their main aim is to increase our knowledge and understanding. If forum members wish to use their services as a result, then that is purely a spin-off. There is nothing wrong with that.

I know that there are other professionals out there reluctant to participate for the same reason or because they think it might reflect on their company. That is a pity. We need more diverse views on this forum to make it a great forum.

I think this forum would be poorer without professionals such as Rolf Latham, Michael Yardney, Ross Sondergeld, Paul Murphy and yourself.

Kristine, the fact that you are not in the TOP 10 Logins but you are in the TOP 10 Message Posters suggests that you are one of the best contributors on this forum. Keep up the good work.

Regards, Mike

PS: Not just trying to get my Messages Posted total up, here!
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From: Kristine .

Thanks, Mike

Your encouragement and salient points are noted and appreciated.

I find it interesting, that there are not more (any?) agents visiting / contributing to this Forum.

Ross seems to be on sabbatical, and no-one else (have I missed something?)has identified themself as an agent.

I must admit, I enjoy scanning the posts and remain convinced that education and information is what people want, but sometimes we don't quite know where to start asking the questions.

Thanks again for the encouragement - stay tuned for my next fourty-five posts!

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