What does buying off the plan mean: the fine print

By Kate Beaumont, Mortgage Broker 

Buying a property off the plan can come with a number of incentives: government grants and building bonuses to help boost the construction industry, a lock-in price for the current market value, potential for capital gains, tax advantages and a seven-year builder’s guarantee.

Off the plan purchases tend to be attractive because you get the pick of the bunch. Getting in early can also mean these initial properties are cheaper. It’s a dream come true for many buyers and investors; but knowing all the information before you commit financially is important.

Because you are purchasing a property based on the floor-plans alone, you don’t have the luxury of walking through the house and inspecting everything in its physical form.  It is crucial that you understand exactly what you are getting before signing on the dotted line.

Investing in a home you can’t see can come with problems. Be sure to do your research. This includes getting your finances in order and talking to a mortgage broker prior to signing a contract. If you do not secure your finance in advance and the financing does not come through, you may lose your deposit.

It is also important to note that in most cases, there aren’t any ‘opt outs’ or ‘subject to finance’ clauses in the contract should the finance not be approved.  It is also important to take out home warranty insurance and choose the suburb, developer and builder wisely.  Here’s what else you need to know:

Changes Can Be Made Without Your Permission

Yes, you read that right. One of the biggest problems with off the plan purchases is that changes can be made to the property without your permission. While it will be written in the contract in the very fine print, it is a trap many buyers don’t see until it is too late.

After approving a floor plan and carefully considering every measurement and detail, you want to trust your investment is going to be exactly as it is in the plans. However, changes to the layout, appliances and finishes are common and often lead to frustrated purchasers who want a reduction in the purchase price. Be sure to check that there are no clauses allowing the developer to vary the construction of the development.

A small layout or size issues can have a major impact on the value of the property.

Oversupply of New Developments

Buying off the plan purchases comes with the risk of an oversupply of new developments. This can affect the resale price when it comes time to sell and can make it difficult to rent out the property down the track.  When there’s an oversupply of new properties in the one location, property prices tend to not increase in value for a period of time – sometimes a decade or more. The area is oversupplied and this usually makes it hard to sell.

For buyers who are looking at bigger building complexes, you need to be aware that all of a sudden there is probably going to be another 20, 50 or 100 units coming on the market at the same time. When the development has been finished all at once, there can be problems renting out the property or selling if there are not enough people looking for units in the area. If the builder or developer is telling you that there are guaranteed rental returns if you continue with the purchase, chances are it’s almost always a scam.

Failed Expectations

As with any big investment, you need to do your homework first. This includes detailed background checks of the builder and developer. Just because a property looks great on paper, it doesn’t mean it is going to be completed to the agreed upon standards. Issues like spending more money on the building foundations than were initially planned can lead to developers making cuts in other areas like the interiors of the building. These things add up and prevent the developer delivering on what has been promised.

Try to find a developer who has recently constructed similar properties so you can go and view them. This will give you a better idea on what to expect with your own investment. Understand as much about the development beforehand and be wary of agent fees. Another issue to look out for when it comes to the developer is bankruptcy. If the developer goes into liquidation before the project is completed, you run the risk of losing your deposit.

Elements of Surprise

To avoid any surprises once construction is complete, it is vital to set a benchmark with clear expectations from the beginning. This starts by knowing your rights when it comes to all the ‘little’ things. As mentioned above, the developer is entitled to make changes with fittings and fixtures. It’s important you specify what brands are to be used for appliances and air conditioning units so quality isn’t substituted if they’re switched over for something similar.

Whilst the developer is permitted to change the size and design to a minor extent, if anything major occurs like a deletion of a car park or balcony, you’re entitled to terminate the contract. Once the property has been constructed, carefully inspect everything to notify the developer of any defects. This should be done within the contractual period (usually within three months of settlement).

Site and Off the Plan Inspections

Apart from choosing a quiet location for your off the plan purchase, you need to thoroughly research the site and plans. Inspect every detail of the plans and visit the property site to check the location.

Look out for other construction jobs in the area which may affect the outcome of yours. Opt for views that can’t be built out and affect the value of the property and look for essentials to have in the plans to ensure nothing is missed. For example; there should be at least one car park on the title and high-quality fittings and finishes should be used.

Familiarise yourself with every bit of the layout. Consider any size issues, location of the windows and the entrance of the property which can all impact on attracting potential tenants and future buyers. Inspecting the property before settlement takes place can help to eliminate any problems too.

Check the Fine Print

Buying off the plan can come with many twists and turns; so going over the contract in detail is imperative. It is strongly advised to review the contract with a legal professional before jumping into the investment. You need to be confident you’re going to be getting what you paid for, whether there are any penalties should you decide to withdraw from the contract and what will happen to your paid deposit if the developer runs into any financial dramas.

If you have any questions about your finances, contact us today to book an appointment.

Kate Beaumont is an Authorised Representative and credit representative of AMP Financial Planning.


Blueprint Planning Pty Ltd (ABN 78 097 264 554), trading as Blueprint Wealth, is an authorised representative and credit representative of AMP Financial Planning, Australian Financial Services Licensee and Australian Credit Licensee.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider you financial situation and needs before making any decisions based on this information.