Buying a house is an enormous step that costs you a fortune. One way of purchasing a property that costs you slightly less than “normal” is to buy off-plan. This means that you’re buying a brand spanking new home before it has been built. Sounds perfect right? Well, it can be but only if you enter into this contract and purchase with your eyes wide open and knowing all your facts.
Unfortunately, many things can go wrong
We’re talking about developers running out of funding, design being at a sub-par standard and the fittings and furnishings falling apart. But, if you do your background checks you should be A-okay. Do checks on the developer and the builder, and keep a close eye on the progress of your property. What you purchase off-plan and what you receive when taking occupation, must be tantamount the same thing. Most importantly, make sure you get everything in writing and ask questions about what you don’t understand. Also, it is wise to employ the services of a legal team to look over your contract.
Buying off-plan is a slightly different experience to purchasing an already existing property from the owner. Here’s what you need to know
When you purchase off-plan from a developer you won’t pay transfer duty. What’s more, the total amount includes 14 percent VAT and other transaction costs such as attorney and deeds office fees. Most importantly though, the bank will finance the total cost of the house including all the fees and expenses mentioned above. So when it’s time to whip out the mortgage loan calculator you can figure out your repayments based on the total amount you will require finance for.
When you buy directly from a developer you’re protected by the Consumer Protection Act (CPA). This is ideal because according to the CPA, if a product is delivered to the purchaser but it deviates from the original description of the product in the contract or in the marketing materials then the purchaser is within right to cancel the contract and return the goods. This means if your house is below standard you can do something about it. In comparison, purchasing a property from a private seller doesn’t afford you this type of risk aversion. You need to inspect the premises and once you’ve signed the deed of sale you cannot back out even if you find issues with the property. The best outcome is that the seller pays to fix the issues, but ultimately the house belongs to you.
Drawings and disputes
When you look to purchase directly from a developer you’ll be presented with illustrations of the properties they’re set to build. These are approved illustrations and initial plans. Once you’ve signed an agreement of sale you must receive a copy of these working drawings which contains any changes made. Even better, you should ask for a copy of the architects’ drawings and building plans as these have been approved by the local authorities. According to municipal building regulations, the building contractor must build in strict accordance with the drawings and plans that have been approved. If they fail to do so or deviate from the agreed upon plan then there will be grounds for dispute.
Loans and the like
When buying off-plan your home loan finance is slightly different. If you’re purchasing a sectional title unit then you have to pay a deposit to secure your property. The rest of the payment takes place once the building is complete and your home has been registered in your name. Whereas if you purchase a freestanding property you need to apply for a home loan. This money is for the stand which must be paid and transferred into your name before the builders can even begin. Your repayments for the stand begin as soon as everything is registered in your name but the repayments on the actual building won’t begin until the bond is registered in your name.