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Buying off plan: How to reduce the risk of purchasing a property you haven't even seen

JUNE 13, 2016
Buying off plan: How to reduce the risk of purchasing a property you haven't even seen

Developments are popping up all over Port Elizabeth, but buying a new home off-plan is still something that many people shy away from because they can’t actually view what they are buying or worry that it is a complicated process.

However, the truth is that buying off-plan is really simple and can be a very intelligent investment, says Chas Everitt Nelson Mandela Bay director Charlotte Vermaak.

“The advantages include the fact that if you pick a development in a popular location, the value of your home is likely to rise steeply between the time you buy it and the time it is actually built, so you will immediately have equity when you move in.

“Newly-built homes come with all kinds of structural guarantees, so that you don’t have to worry about hidden defects, and the fact that you will save on maintenance costs at least for the first few years of ownership. In addition, buying off-plan will usually enable you to have a say as regards the design features, fittings and fixtures and thus customise your home to your taste.”

Nevertheless, there can be risks, and buyers need to take some important steps to avoid these, she says. These include:

Research your development
Make sure you are clued up about the timeline of the project so you can plan your finances and when to move in. Bear in mind that there may also be extras to pay for such as boundary walls or fencing and instant lawn for your garden.

If your development is going to be part of a bigger complex or estate, find out when the other homes will be finished, otherwise you risk living on a building site for the first few years.

Research the developer
“It is also vital to make sure that the developer is reputable and has insurance so that if the project does not go ahead, you will get your deposit back. It is best to use an independent lawyer to check the paperwork,” Vermaak says.

“Before you buy, though, you should also look at other properties the company has built to gauge the value for money you would get, and take note of the quality of building and finishing to get an idea of what you could to expect upon completion.”

Research the finances
Buying off-plan has its own financial nuances. If it is a sectional title property, sometimes termed a turnkey home, your home loan will have to be granted before the developer or builder starts construction, but the property and the bond will not actually be registered in your name at the Deeds Office until it is complete and the bank’s inspectors have signed it off and agreed to release the home loan funds to the developer.    

If it is a freehold or plot-and-plan property, you will actually need two home loans, one for the purchase of the land, and one for the purchase of the building. The first will be registered on transfer of the stand into your name, but you will only have to start repaying the second when your home is complete. The developer or builder will be able to draw against the second – known as a building loan – during construction, but only as the home reaches certain standard stages of completion that are signed off by the bank’s inspector and by you.

Check on the construction  
Whatever type of home you buy off-plan, it is very important that you visit the building site regularly and check on the construction as it proceeds to make sure that everything is being done and installed as per your detailed building contract.

“You are going to be the one paying back the loan at the end of the day,” Vermaak notes, “so if you have any concerns about sub-standard work, you must resolve them with the developer and the bank before any more home loan funds are paid out to the builder.

“Then at the end of the process, you really must go through the completed home very carefully and compile a ‘snag’ list of all the little things that need to be addressed – right down to a missing key or a cracked tile - before you sign off the occupation certificate.”    

What’s available off-plan in Port Elizabeth

Fairview townhouse, R985,000
A Sectional Title Development with two, three-bedroom units available, similar to a cluster development/duet. This is your opportunity to own a brand new home in an upcoming area of Port Elizabeth. Close to leading schools, shopping centres and other amenities.  Details.

Camper Park retirement village townhouse, R580,000
Life right ownership retirement village for the over 50s, with two-bedroomed homes available off plot and plan. Situated in a secure complex with an alarm system and aluminium windows for low maintenance, each property is fully enclosed with a garden. Choose between one or two bathrooms and single or double garages. Prices range from R585,000.00 for 84m² to R660,000.00 for 109m² dwellings. Details.