Continued from the last edition
Having pointed out some of the benefits of off-plan purchase, we would now consider the downsides of it.
• The most likely is the possibility of delays in completing or delivery of the project. This would affect home owners who want to move in immediately
• One has to commit to their purchase early on, put a non refundable deposit down, sign contracts and exchange usually within a relatively short period of time and then wait however long until the house is built. Because you are buying off-plan, you cannot see what you are buying and therefore do not know what the finished product would look like in reality. Buyers based their purchase on past record or reputation of developers, or word of mouth.
• There is tendency for developers to use sub-standard, low end materials for construction and finishing. Off-plan buyers run the risk of getting low quality products after investment.
• There might also be the risk of the property not been constructed because of financial problems encountered by the developer. Problems like this tend to make the purchaser loose time and other possibilities for investment.
• Many financial companies would prefer to provide funding to properties they can see visibly unlike the off-plan option, thereby reducing the financial options for buyers.
• For some developments, the developers make specific arrangements with banks for exclusive mortgages, although not all developments have this option. It is always wise to exercise caution and get competitive quotes from other mortgage suppliers before simply accepting the developer’s option.
• During the time until your property is built and ready to be handed over, there is a possibility of a change property market which could lead to an increase or decrease in the prices of houses. This means that in many cases, your new home could be worth more than the price it was bought. However there is always a chance that the property prices could crash and decrease so when the keys are handed over to you. This is not so much of a problem as the property can be kept for a while until property prices increases. However if you were looking to buy off plan properties as an investment and sell on soon after purchase, this means that you will probably not get the right price and be able to cover your costs so you may have to consider renting it out. It may not be possible to always predict whether the price of an off plan development will increase upon completion. For example although economic recessions are thought to reduce property prices, the price of Nigerian properties were on the rise despite the economic meltdown.
HOW THESE CONS CAN BE MITIGATED
The cons highlighted can be mitigated by implementing the following below;
1. Potential buyers should question the number of sales being reported by the developer. There are situations whereby developers communicate a fast sales rate of their projects which is in reality far from the truth. Buyers should always ask the tough questions, get conviction as well as proof before committing funds.
2. Check that you have all the information of the developer and their track records. Ensure that the fixtures, fittings and finishings promised in the display and printed material are guaranteed.
3. Investors must seek advice from an experienced solicitor to ensure there are no loopholes or ambiguities in the sales contract. All loopholes should be brought to your attention so you are aware of what you are getting into.