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.
STEP 1.
Determine your borrowing capacity. Employ a Mortgage Broker to do this and apply to a suitable lender for a Loan Pre-approval.
STEP 2.
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.
STEP 3.
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.
STEP 4.
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.
STEP 5.
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.
STEP 6.
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.
STEP 7.
When satisfied, sign and exchange contracts. Use a deposit bond to pay the balance of the 10% deposit.
STEP 8.
Pay Stamp Duty within 2 months of Exchange of Contracts. Each State's requirements may differ.
STEP 9.
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
