Off the plan purchase looks good

W

want2bewealthy

So Ive been looking around Darwin for a property priced at around 300k (cheaper end of the market) and not much turns up,

Ive contacted a developer who has some units in a sought after area for 300k to be completed late this year and wants 10% deposit, theyre 2 bed 2 bathroom and 100sqm so that sounds good to me, can anyone remind me of the things to be aware of when buying off the plan?

Thank you.
 
The big ticket items will be covered by other posters and other thread links, but a couple of things to look out for which may not be so obvious:
1. Some lenders don't like being too exposed to one project. For example, you may get pre approval on a deal, then find it being withdrawn close to settlement when they find they already have enough exposure to that project via loans to other buyers.
2. Valuations can be difficult or impossible to get in some projects due to lack of comparable sales. This can be quite common and can impact your ability to get finance at the LVR you might be budgeting on. Not a situation you want a month or so from settlement day.
3.Rising market = OTP Good
Flat of declining market = OTP Not So Good
 
want2bewealthy said:
So Ive been looking around Darwin for a property priced at around 300k (cheaper end of the market) and not much turns up,

Ive contacted a developer who has some units in a sought after area for 300k to be completed late this year and wants 10% deposit, theyre 2 bed 2 bathroom and 100sqm so that sounds good to me, can anyone remind me of the things to be aware of when buying off the plan?

Thank you.
Click to expand...

I just pulled the plug on an off-the-plan purchase in Darwin. Just couldn't deal with the risks - hard to argue with poor build quality (the contract I had said they would only resolve SERIOUS defects - and what that means is unclear). I am also concerned about the way I was dealt with by the bank - they approved my loan but seem far less concerned about keeping me as a customer than they have in the past. They would negotiate no discounts beyond 0.7% despite $1.6mil in loans with them, and were behaving like they were no longer interested in chasing business. Doesn't bode well when you have to stump up finance 6-8 months down the track (approval doesn't last this long).

Despite it being a bargain property (brand new, 4 beds in Durack, $421k after buildstart grant) I still decided not to go ahead because of the downside risks. On a side note, this weekend two properties sold in Durack around the $1mil mark! $1.03mil and $945k. Amazing stuff. When I was building my house there in 2005 the record sale for the area was in the mid 400's!
 
want2bewealthy said:
can anyone remind me of the things to be aware of when buying off the plan?Thank you.
Click to expand...

Aside frrom the other: build finshes can vary, developer goes broke risk - ESPECIALLY atm is finance risk.

You get approval now on end val now - and 9 months down the track either the val has dropped or the finance is pulled. Either way you stump up for the losses. I'd caution against doing OTP in the current environment. Just my opinion tho.
 
Wow AW1!

That would've been a nice score but thanks very much for letting me into some of your concearn's and its certainly helped aid my decision as well as all others who chimed in and helped out, thanks to everyone on a quick response its great to have you all to correspond with, such a great feeling.

I think it may be best to just hold off and buy a regular property when the deal is right.
 
Other things to check for:

1. warranties/repairs - who is responsible (will they still be there?)
2. previous projects/references
3. variations allowed in the contract re finishes, materials (you could end up with a bathroom full of burnt orange tiles)
4. specific inclusions (light fittings, doort stops, flyscreens, etc etc)
5. body corporate projections (check sanity of figures, and assume everything gets broken 3 times more often than forecast, power consumption of common areas and facilities)
6. check if views can be built out (do not take agent's word that nothing will be built in front/next door if views are important)

Cheers,

The Y-man
 
Amazing stuff

aw1 said:
Irisks. On a side note, this weekend two properties sold in Durack around the $1mil mark! $1.03mil and $945k. Amazing stuff.

"Really" I know this is off topic, but I follow what's going on here in Darwin pretty closely and I reckon if a property got that sort of price in Durack it would be front page news............. haven't seen it yet.:eek: Please enlighten me to the facts as I would be happy to see those prices happening.

Regards.
Click to expand...
 
chanos said:
aw1 said:
Irisks. On a side note, this weekend two properties sold in Durack around the $1mil mark! $1.03mil and $945k. Amazing stuff.

"Really" I know this is off topic, but I follow what's going on here in Darwin pretty closely and I reckon if a property got that sort of price in Durack it would be front page news............. haven't seen it yet.:eek: Please enlighten me to the facts as I would be happy to see those prices happening.

Regards.
Click to expand...

These are the properties in question:

http://www.realestate.com.au/cgi-bi...er=&cc=&c=37879829&s=nt&snf=rbs&tm=1235284917

http://www.realestate.com.au/cgi-bi...er=&cc=&c=37879829&s=nt&snf=rbs&tm=1235284917
Click to expand...
 
One OTP plan sale we looked at ( water front , Homebush bay ) is no longer going ahead .

The developer is no longer a developer and are looking at selling the site.

Cliff
 
Hi there wantobewealthy,

Another thing to be aware of,

Alot of OTP's are bought by mum and dad and beginner investor's (like myself in the early days). When things get tough, and these people need to sell in a hurry, the price of new units can fall quite substantially. Especially in larger developments.

You may say that you are not planning to sell so this would not affect you, but I read in another post that you are wanting to refinance some property. In times where credit is hard to come by and values on properties are dropping you may find this is where you need your equity the most.

You will also be aware that valuers DONOT take sales by the DEVELOPER as a market guide. Developers can have fat purses when it comes to advertising and can reach larger markets.

You woudl do better to wait until after they settle and buy one off a desperate seller that thought they were going to make a quick buck by flicking.

Regards JO
 
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