| What are the disadvantages of purchasing property | | | | and the agreed purchase price is £200,000. If |
| “Off Plan”? | | | | the property market makes a downturn (or was |
| There certainly are many advantages to buying | | | | already falling) and property values are decreasing by |
| property Off Plan, but the disadvantages can not be | | | | 10% per annum, this buyer could see themselves |
| ignored. | | | | with a property worth only £160,000 on |
| One of the major factors which prevent increasing | | | | completion. A loss of £40,000 in a year! This |
| numbers of investors and homebuyers from buying | | | | then leads to potential mortgage problems, as the |
| Off Plan is that you are committing yourself to | | | | developer requires the balance of the original |
| purchase a property which you can not physically see | | | | purchase price of £200,000 upon completion, |
| or inspect. The decision to buy Off Plan property is | | | | based on a property which is worth only |
| based solely on a selection of plans and elevations | | | | £160,000. This situation also causes problems |
| and a brief specification from the developer/agent. | | | | for the developer, as many buyers will not be in the |
| The major concern is not that these details will | | | | financial situation where it is possible to complete and |
| change dramatically from the Off Plan stage to the | | | | would prefer to suffer the consequences of not |
| completed product, but that what the individual may | | | | completing on their contract. I would love to say that |
| envisage the end product to be will be different. A | | | | buyers would never commit themselves to buying |
| purchaser could find themselves in a situation to be | | | | Off Plan in a falling property market, but |
| legally bound to complete on a property which they | | | | unfortunately this situation has happened far too |
| no longer desire. | | | | often in the past and is sure to happen again in the |
| Another risk of buying Off Plan is that you are | | | | future if or when property values go south. |
| committing yourself to buy a property which will not | | | | However, I do not want for this article to be all |
| be completed for a period of time which could be up | | | | doom and gloom. It is not to suggest that buying Off |
| to or exceed 12 months. If a buyer found that their | | | | Plan property does not have benefits or it will |
| circumstances change from the Off Plan stage and | | | | certainly end in a substantial loss for buyers. |
| needed to re-sell quickly, their options would be | | | | Buying Off Plan requires an element of research to |
| limited until they had at least completed on the | | | | be undertaken. By “an element of |
| property. Assignable contracts can allow buyers to | | | | research” I mean as much research as is |
| re-sell their contract to a third party after exchanging | | | | necessary for the buyer to satisfy themselves that |
| contracts with the developer. Astute Off Plan buyers | | | | this is the right option for them. In this case, there is |
| should certainly give consideration to negotiating the | | | | no such thing as too much research. The more the |
| inclusion of an assignable contract, to allow for | | | | better! |
| unforeseen circumstances and increased flexibility. In | | | | Research the local property market, speak to estate |
| some cases astute investors have used assignable | | | | agents and ask their opinion on the future of the |
| contracts to re-sell before completion of the | | | | property market. Although nobody can say for |
| property and realise a profit from the increase in | | | | certain what will happen in the near future, a |
| property value between the time of Off Plan | | | | selection of advice from local property specialists will |
| reservation and re-assignment. But this article is not | | | | allow you to make an educated decision. Not sure if |
| about the advantages of buying Off Plan, so | | | | the Off Plan property prices are in line with current |
| let’s plough on with the potential | | | | market values? Again, speak to local estate agents |
| disadvantages… | | | | or even instruct a RICS Surveyor to undertake a |
| In a market where property values are falling, you | | | | property valuation on your behalf. |
| can imagine how frustrating and worrying it would be | | | | If the feedback you receive is not a resounding |
| for an Off Plan buyer who is tied into a property | | | | “go for it!” then it may be in your best |
| purchase. Seeing their new build property decrease in | | | | interest to decline buying Off Plan at that time. It |
| value, potentially every month and in many cases by | | | | may be that the timing in the current property |
| more than their earning income! | | | | market is not right or that the actual development |
| Let’s say a buyer reserves their chosen plot | | | | itself is set for success. |
| in a development Off Plan and promptly exchanges | | | | But when you find the ideal Off Plan opportunity, you |
| contracts with the developer (committing themselves | | | | could be a fool to miss it. |
| to the purchase). There is 12 months until completion | | | | |