Take all necessary steps to protect your investment when buying off-plan
WHILE the prospect of moving into a brand-new home is appealing, there are many potential pitfalls when it comes to paying for a home that doesn’t yet exist, says Shaun Rademeyer, chief executive of BetterBond. Here are some hints as to how to avoid them:
Check credentials: Buyers of off-plan homes should not pay a deposit or sign an agreement to purchase until they have thoroughly checked the credentials of the developer and/or the builder.
“You should also be absolutely certain that any deposit you do pay will be held in trust by an attorney or a registered estate agent – and be repaid with interest if the development does not go ahead within a specified time.”
Look at the developers’ partners: When a new develop- ment is launched, prospective buyers should ensure the developers are partnered with a bank or a reputable bond originator to help get the home loans they will need.
“This is a good sign that the development is legitimate and that the developer has already secured the necessary finance to finish it. In addition, buyers will immediately be able to get a professional assess- ment of what they can afford and whether they are likely to obtain the home loan they want, or whether they first need to work on their credit record or pay off some debt.”
Budget for monthly levies: Buyers planning to buy into sectional title or estate developments – where most offplan purchases occur – must remember to budget for the monthly levies as well as the home loans and other regular expenses.
“They should also make sure they know exactly what the levy covers – and by how much it is likely to increase once the development is finished. There could be quite a steep jump once the last unit is sold and the developer is no longer involved and no longer subsidising certain costs,” Rademeyer says.