It is important when buying property off the plan that you buy from a reputable developer. Unfortunately there are some dodgy developers in Australia that scam the system, exploit loopholes and cut corners and end up doing a poor job. Their lack of quality workmanship can result in major issues down the line such as crumbling and cracking interior walls making the property uninhabitable.
This might be your first time buying property off the plan and you may not even know who a good developer is and who you should trust. That is why you need to talk to experts like iBuyNew. We know the property market inside out and know which developers to steer well clear of.
We pride ourselves on our choice of developments and only work with reputable developers with a clean track record. We have previously worked with many of our developers as we recognise their quality of work and trust them having formed strong bonds with them over time.
By purchasing property without any help and not doing your due diligence, you might fall victim to the smooth talk from a developer.
One such scam that is currently happening in Australia is where developers are exploiting the exit clauses of contracts. Buyers will pay their 10% deposit, but the developer will later cancel the off the plan contract in order to resell the properties at a much higher price. These original buyers have not only missed out on potential capital gains, but they have wasted valuable time waiting for a property to be completed. All that they are left with now is distrust for developers and a deposit which might not be enough in today’s rising market, especially in Sydney to get back on the property ladder and start afresh.
What happens if a Developer goes under?
One of the biggest risks buyers fear when buying an off the plan property is that a developer or builder will go under before completion or that a project will fail to get started. However, buyers should be aware that they will not lose all their money as in Australia your deposit is 100% secured, even if the developer cannot proceed.
This is because when you pay your 10% deposit to secure your property, this money is held in trust by the vendor’s solicitor or the selling agent, so in the event that a developer cannot complete the project the buyer will receive their deposit back in full.
In some cases you can pay the deposit directly to the developer to receive a higher rate of interest which might appeal to you; however if the developer does become insolvent then your money will be at risk as it is not held in a trust account. At iBuyNew, we would advise against this approach.
In order to protect yourself, it is important that you work with a reputable company that helps explain to you the risks involved as well as making sure you use a conveyancer that is a specialist in off the plan contracts. We are here to help you with this.
3 key things to remember:
- If a deal sounds too good to be true, then it probably is. Use your common sense.
- Make sure you use a conveyancer that is familiar with off the plan contracts.
- Seek advice from professionals… not friends!
Ensure you buy from a reputable developer by speaking to an iBuyNew Property Consultant today.
Published on 14th of May 2015 by Marty Stanowich