Process for buying off the plan

I've been reading over the pro's and con's of buying off the plan, well... mainly cons.

How different is buying off the plan compared to an existing property? Being pre-approved, when do I need to get the bank & conveyancer involved?

I'm after more of a guide..

Get pre-approval
Draw up the contract & sign
Deposit of 5 - 10%
etc etc


Many thanks in advance.
Adam
 
Hi Adam

Most pre-approvals are only valid for a few months so if settlement is a long way out, there's probably little point in getting one as it may just result in an unnecessary hit to your credit file.

You'd know from your research that formal approval for an OTP property can't be granted until closer to completion. Therefore, it's important to sit down with a broker/banker to have your situation assessed - it wouldn't be a bad idea to order a copy of your credit file as well, just to make sure there's no issues on that front.

With OTP purchases - you really need to have a decent size deposit as a contingency for low vals or issues with finance (a bigger deposit will broaden your scope of lenders). These aren't the type of deals that you want to finance at 95% LVR + LMI.

Have your solicitor go over the contract before you exchange. You'll need them again closer to and during settlement.

Cheers

Jamie
 
As Jamie wrote above - you can be pre-approved for a million dollars, but if the property value comes in at $400,000, they may only lend you $360,000 even if you signed a contract for $650,000

The steps would be:

  • Check the location carefully eg. can views be built out? Is there a drug rehab centre next door (was in our case without realising it!)
  • Noise can be decievingly greater at height
  • Who is the architect? Past projects?
  • Who is the builder? Past projects?
  • Are they offering a rental guarantee? Why the desperation?
  • Floorplan/floorspace - big enough to get a loan for?
  • Ceiling height - remember they can vary the height from that shown in a mock up showroom (ours came in quite lower due to air con ducting)
  • How mnuch variation is allowed on contract?
  • How soon after cert of occupation must you settle?
  • negotiate the price - hard. Rememebr they have at least 30% margin in this compared to an existing property
  • Get ho,d of the contract, get your legal eagles to go over it
  • sign the contract if ok, pay deposit (or deposit bond)
  • wait
  • wait
  • wait
  • you will receive a letter saying certificate of occupancy has been got - you now have x weeks to settle.
  • talk to your friendly mortgage broker
  • pray that valuation comes in at purchase price and that the loan can be arrnaged prior to settlement
  • settle
  • inspect property from corner to corner and notify builders if anything is not right/missing/broken
  • get items fixed
  • done!~ try renting it out with x number of other units (if in a development) simultaneously

We went to the bank in the "wait" phase - they told us they could not value it until the cert of occupancy was issued, hence no loan could be arranged.

The Y-man
 
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