Thursday, December 08, 2022

Considering buying property off the plan? Here are 6 crucial steps to protect yourself

Considering buying property off the plan? Here are 6 crucial steps to protect yourself

Buying a property is the biggest personal investment decision most Australians will ever make. With the price of standalone homes rising dramatically in many capital cities, more people are looking to buy apartments.

Buying a closed plan apartment can be one way to enter the property market.

Buying the plan means that the consumers are committed to buy the property at today’s prices, before its construction. Disposal takes place after construction is complete.

This approach comes with risks and challenges – but following six key steps can help consumers protect themselves.

three major challenges

If you are not a planning apartment buyer, you face three major challenges.

First, consumers are subject to fairly biased and complicated sales contracts that favor developers. This puts buyers in an unequal bargaining position.

Secondly, many consumers are unaware of the property rights and obligations that arise from purchasing a level title property.

Straight titling enables individual ownership of lots (such as apartments) as well as shared ownership of common property (such as lobbies, garages, driveways and gardens).

Lot owners are legally required to engage in the cooperative management and maintenance of their apartment complexes with their fellow lot owners.

Third, some consumers have received a poor quality product with no building defects.

With the prices of stand alone homes increasing dramatically in many capital cities, more people are looking to buy apartments out of the plan.

Our research shows there is room for improvement

We recently completed a research project examining the importance of information disclosure requirements of off plan apartment sale contracts. we:

  • Reviewed information disclosure requirements across multiple industries to understand what the standard is, and compared it with information disclosure requirements included in out-of-plan purchases.

  • Conducted in-depth interviews with 31 industry practitioners and stakeholders from around Australia, including lawyers, property developers, real estate agents, policy managers, consumer policy advocates and planning apartment buyers.

  • Yojna conducted an online survey of 512 residential apartment buyers.

We found opportunities for system improvement, and outlined recommendations for key stakeholders:

Read more: Rewrite Australia’s building code to restore public confidence in apartments

We found that the majority of plan apartment buyers in Australia are typically “mom and dad” investors, but a growing proportion are owner-occupied.

The buyers outside the scheme are middle to high income earners, well educated, working in professional or managerial roles and between 20 and 44 years of age.

About 46% of the plan’s buyers are Australian couples with dependent children. About 69% of buyers were born in Australia. This is contrary to the widely held belief that most of the plan apartment buyers are foreign investors.

systemic change needed

Our findings suggest that there is limited consumer protection through regulations when buying plan apartments. Consumers need to educate themselves, engage effectively in the purchasing process, and ensure that they are making informed decisions.

However, no amount of disclosure will fix problems built into the system such as lack of accountability, discretion on developers and poor quality products.

In particular, consumers need to be protected from features within these contracts that are inherently harmful. These include for the developer to cancel the contract, changing the plan or floor structure, or financial clauses that make it difficult for the buyer to get his deposit back.

It is up to the developer to disclose that the buyer may not have the financial literacy skills required to understand the true cost of the charges associated with the property.

A Couple Sees A Realtor On Plans.
Policy changes are needed to better protect buyers and the onus has been placed on developers to make such contractual features more clear.

Policy changes are needed to better protect buyers and the onus has been placed on developers to make such contractual features more clear.

There is a lack of government oversight of property contracts and the housing sector more broadly.

In other areas, such as contract buyers for consumer goods (such as mobile telephones, whitegoods, insurance) there are separate and clear roles for government oversight, accountability and consumer protection for non-compliance.

For example if you buy a fridge and it gets damaged, the seller will have to replace it or refund your money. But many off plan contracts have no such legal protection. Instead, it is on the buyers to take the developer to court.

And many buyers may not be eager to conclude plan sales contracts because they already invested emotionally in the lifestyle “dream” of living in a complex with a pool, a gym, and similar amenities. (without fully understanding what straight fees usually come with them).

six steps to protect yourself

Buyers should follow six important steps to protect themselves while buying their home out of plan:

1) Evaluate the credibility of the builder. Google everything you can about them, and what’s reported. What else has he made? Are their other building defects long enough to show? Are previous buyers happy? Can you search a developer’s building license number to see if any complaints have been filed with the regulators?

2) Estimate market dynamics such as general economic conditions that may affect apartment prices. If the local market collapses or is flooded with apartments, you may still have a property worth less than what you paid for it.

3) Get legal advice on contract documents – and make sure your attorney knows exactly what to do and examine the contract really closely.

4) Understand the rights and obligations associated with community life. All those extra features, such as a pool, usually come with an additional fee.

5) Consider an independent building inspection. If problems are identified at that time, notify the developer immediately. Some defects can be corrected but others may not be apparent in the coming years.

6) Know where to get help. Usually this will be through the fair trade department in your state, so make sure you know how to contact them.

Read more: Dealing with apartment defects: A how-to guide for level owners and buyers

This article is republished from – The Conversation – Read the – original article.

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