It's exciting to be a property's first owner. When you're buying off the plan, you get to the select the floor plan and the colours of the walls, but along with the opportunities come increased risks.
One of the most common problems is a blow-out in the time between putting down the 10 per cent deposit and completion. The original 18 months to two years can easily stretch to three or four years.
In that time, lenders may have tightened their lending criteria and interest rates may rise.
And, when the lender does the valuation on the finished apartment or town-house or house, it could be less than the purchase price.
Graham Hand and his wife, Deborah Solomon, wanted to buy an apartment for their daughter, Elana.
The Sydney parents bought an apartment off the plan and had the layout changed to suit the needs of Elana, who uses a wheelchair.
"We were very pleased with the end result, it's a fantastic building," Hand says.
But the apartment, a restored flour mill in Sydney's historic Pyrmont, was finished behind schedule.
Hand, 58, who is the managing editor of investment newsletter Cuffelinks, says the blow-out was manageable as Elana could stay at home for longer.
But other buyers in the same block told Hand, who wrote a blog post about his experience, how frustrated they were by the uncertainty over when their apartments would be completed.
The apartment was bought in June 2013 and Hand was told it would be completed by the end of 2014. The date kept being pushed out. It was completed at the end of 2015.
"We wanted a new apartment and buying off the plan is the only way to do that," Hand says.
"Buyers have to realise, and I didn't realise, that the completion date is wishful thinking. The period did drag on and other buyers were driven to distraction not knowing where they were going to live."
Justin Lawrence, a partner with Henderson & Ball Lawyers in Kew in Melbourne, has acted for many off-the-plan buyers.
He says it is easy for buyers to be seduced by slick marketing.
You can read the full article on the Sydney Morning Herald
Article originally published on 26 November 2016. Author: John Collett