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This is where an estate agency or
development company offers property for sale
that is yet to be completed or has not yet
commenced construction. Increasingly, large
residential developments are being offered for
sale before completion. Buying off the plan
represents unique challenges for the
conveyancing process as a multitude of
different considerations are required to be
taken into account.
Buying off the plan can be a very risky
venture and when considering buying a property
of this sort you should be aware of the
following risks relating to price after
completion, changes to construction and
management contracts:
- Is the selling price fair? You
have little way of knowing what the selling
price will be after the completion of the
property. While some consumers find they
have a completed unit that has a market
price higher than that which they paid for
it, often the opposite is true. Remember,
market prices for real estate fluctuate
greatly;
- Can they change the plans? Yes,
changes to building plans often have to
made during the construction process. Often
the completed building will be quite
different to that originally conceived.
This may have an effect on the desirability
of the property and the price compared with
the original estimate if the building is
not substantially the same as the original
plan;
- Quality of construction. The
purchaser has no guarantee that the
property will be constructed to a certain
level of quality. Indeed, the purchaser has
little idea of what the standard of
fixtures and fittings will be after the
property has been completed. A variable
quality in these fixtures and fittings may
have a detrimental effect on the value of
the property after completion; and
- Management contracts. Often the
developers will enter into contracts for
the management of the property for after
completion. These contracts may not be in
the best interests of the property's value
or utility and may be difficult for the
owner's corporation or body corporate to
overturn or change.
Generally, buying off the plan is very risky
as the final product may not be as it was
originally imaged. Financially, while buying
off the plan may lead to the securing of a
property for less than its worth when
completed. However, the reverse may often be
true and a buyer may buy an unfinished home or
unit that turns out to be worth less than the
original asking price.
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