How to: Purchase an off the plan apartment

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When it comes to purchasing an off the plan apartment, one thing is constant - the ‘first in best dressed’ rule applies.

The key is to watch out for marketing campaigns for new developments, in order to stay ahead of the pack.

However there is no one size fits all strategy to promote new options, with each developer reaching out to potential buyers in different ways.

Developers generally start advertising their development a couple of weeks prior to the official launch to generate some buyer interest, and some will offer a VIP night.

“Rather than starting to advertise when the property is ready to go on the market, it will be a couple of weeks in the lead up to it so potential buyers have an option to look at it if they’re really keen,” says Melbourne Real Estate sales director Georgina Mellick.

“Some people just want to go to the open, but some people want the option to look in a bit earlier before it goes to market.

“It’s [VIP nights] just a bit of building the momentum for any of the people wanting to have a look in before.”

Accessing a property for sale earlier means having a greater chance of securing a better unit and potentially getting a discount, as most developers need to sell a certain pre-sale amount before the bank will grant them funding.

Off the plan apartments generally only require a deposit up front and the balance of the purchase price is paid upon settlement, typically 12 to 24 months down the track.

It’s important to keep in mind lenders will only give conditional approval to finance an off the plan purchase, subject to future valuation. When the unit is complete, the lender will have the apartment valued. If it comes in lower than the purchase price, the lender will finance a lesser percentage of the purchase price.

That means, if a buyer snaps up an apartment when the market is on its way up, the property is likely to gain some value before settlement date but the purchase price remains the same.

However, if an apartment is bought and the market drops, buyers may be short of cash at the end if the valuation comes in lower at settlement.

The Western Australia Department of Commerce says when buying a new apartment it’s important to check for provisions in the contract such as the completion date, whether buyers are entitled to resell the property before the purchase is completed and if they have the right to a pre-settlement inspection.

The department recommends visiting any other projects the developer is involved in, to find out if the projects are on schedule and if the quality of the work is good.

It is also important to get a copy of the plan and get the plans and specifications checked by an independent architect or building consultant and for the buyer to choose their own licensed valuer to value the property.

“Most disputes arise from a buyer not being happy with the end product,” says Holding Redlich lawyer Carolyn Chudleigh.

“The best way to avoid this is to be aware of exactly what all of the finishes should be,” says Chudleigh.

“All of this can be negotiated before exchange of contracts and should be included specifically in the contract if you want to be able to enforce performance against the vendor.

“If a contract is skinny on detail, there may be little room for complaints at the end of the day.”

The rule of thumb when buying off the plan is: first in first served – interested buyers should register early and attend VIP nights if they’re offered. Secondly, the contract should always be looked over by a solicitor before any signing occurs.

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