Questions to Ask before buying off-plan

There’s always a risk in buying something you can’t see. Buying off-plan means you are purchasing your new home in a sectional title complex or cluster home scheme before it is built and will be depending on the developer and builder to complete your home properly and timeously.

This usually happens when you have been attracted to a new development where one unit has been constructed as an example or where no units have been constructed at all. Paul Stevens, CEO of Just Property, has provided the following questions and answers to assist anyone planning on purchasing off-plan. 

Why buy something that isn’t built?

When buying from a developer you don’t pay transfer fees and the most important financial incentive for buying from developer is that bank will finance total cost of house, including VAT’s and all fees. 

Buying from developer means you are protected by the Consumer Protection Act, which does not apply when buying from private seller. The act gives consumers more protection and imposes greater responsibility on developers to look after their interests, specifically because buyers cannot see the finished product before signing the contract 
You can also influence the final product and variations in price to suit your needs, eg: Choosing the colour of the carpets, curtains, tiles etc.  

Can I be sure of what I’m buying? 

If you are not monitoring the progress of your unit closely you can find the layout and size have been altered along with fittings and finishes. Check the contract carefully and make sure that the specifications of fixtures and finishes are listed in detail and not just referred to in its general clause

The big difference between buying sectional title apartment and freehold unit in a development is that the entire sectional title block must be completed before the buyers pay for their units, and contractors with reputable developers and builders will specify that any discrepancies between the promised and the completed sizes should not exceed five to 10 percent. 

What if the property has been badly built? 

As a consumer you have the right to:

- Within 3 months, instruct rectify any non compliance and deviations from the original plans
- Within 12 months instruct the builder to repair roof leaks attributable to workmanship, design materials etc
- Within five years instruct the builder to rectify major structural defects caused by non-compliance with technical building standards 

Can I sell before taking transfer?

It’s possible to sell your property before taking transfer but proceed with caution. If you are buying specifically to sell to a profit before transfer you may be disappointed. It is not uncommon for the deed of sale to stipulate that buyers cannot sell their units before transfer without the written consent of the developer. Properties in the later phase of development tend to be marketed at significantly higher prices , so developers will be trying to sell their more expensive plots while buyers in the first phase are undercutting them. 

How can I ensure tenants will look after my new property?

You can never know how tenants will treat your property so
it could be a good idea to take out landlord insurance. This insurance covers you for potential loss of rent due to tenants defaulting on rent, causing malicious or accidental damage and public liability.

The Benefits of Buying Off-Plan

Like any major investment, buying real estate off-plan can be high risk if insufficient research has taken place. But according to Paul Stevens of Just Property, there are also perks to buying property yet to be built, which he lists as follows. 

 1. Big Transfer duty savings

One of the well-known and biggest reasons for buying off-the-plan property is the potential for huge savings on transfer duty, which can put a huge dent in your pocket, especially when you’re a first time buyer.

2. Depreciation benefits

If you’re buying off-plan as an investment and plan to lease your new home to renters, you may be eligible for large tax deductions. Get a full depreciation schedule from a quantity surveyor once your property settles. This will assist at tax time when claiming deductions for your new asset’s brand new fittings and fixtures.

3. Repair cost savings

It goes without saying that a brand new home – if well built – will not need the ongoing maintenance that an older property often needs.

4. Lower power bills

Your off-plan home should be fitted with some of the most power-saving appliances and gas/water/electricity systems on the market, which is a boon for owner occupants and future tenants alike.

5. Potential capital gains

Buying off-plan allows you to buy at today’s price. In a rising market, this can mean you own a property worth more than you paid for it by the time the deal settles after construction.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 24 May 2018
      Most real estate professionals agree that 2017 was one the toughest years to date; an eminently challenging 12 months that subdued even the strongest markets - including the country’s economic powerhouse of Sandton.
    • 24 May 2018
      These are uncertain and challenging times for the real estate industry, but the non-profit organisation Rebosa is fighting for their interests and finding pragmatic solutions to industry issues such as the urgent need to fast-track transformation says Richard Gray, Rebosa chairman.
    • 24 May 2018
      The decision to invest in property isn’t one that’s taken lightly, or dealt with flippantly. The same should ring true when deciding on an estate agent partner to handle the letting out of your property.
    • 23 May 2018
      Homeowners who are thinking of selling and “trading up” to a bigger or a better home had better be quick now if they want to get the best deal.
    • 23 May 2018
      The new Loftus Park development in Arcadia is really going to boost the demand for homes and rental accommodation close by and the neighbouring suburb of Sunnyside, says Gerhard Kotzé, MD of estate agency group RealNet Holdings.
    • 23 May 2018
      The importance of correctly pricing a property for sale is more imperative than ever. This is according to Debbie Justus-Ferns, divisional manager of Renprop Residential Sales, who says that despite this crucial selling fact being emphasised so often, in the current market, many sellers are still expecting unrealistic prices for their homes which is having a negative impact on the ultimate sale price.
    • 22 May 2018
      Extreme weather appears to be the new normal, evident by the volume of insurance-related disputes reaching the industry watchdog’s desk. To avoid a situation in which your insurer refuses to pay up, you should proactively ensure that your home is well-maintained and ready for whatever winter has in store.
    • 22 May 2018
      As the impact of technology on the real estate industry becomes more significant, it is clear that there is a need for an objective look at not only traditional real estate models but also online and other alternative low-commission real estate agencies, to examine what they offer and what their impact might be.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us