FINDING
Buying Off Plan
Unpacking the Benefits
It has become the norm for residential property developers to offer‘ all-inclusive’ pricing packages for newly developed homes. Buying such properties is commonly known as‘ buying off plan’, although the property may already be completed when you buy it.
These all-inclusive packages have significant benefits for the buyer: 1 The developer pays the bond costs, payable to the bank that finances the property 2 The developer pays the transfer costs, payable to the transferring attorney 3 There is no transfer duty payable on the transaction
In comparison, when you buy an existing home from another owner, the buyer pays these costs and transfer duty.
In addition to these cost savings, the buyer needs less cash for an‘ off plan’ purchase:
The bank usually only lends a portion of the purchase price of a property to the buyer. In the case of an existing home, the buyer thus needs to have enough cash available to pay for the deposit( which is the shortfall between the home loan and the sales price) and all the costs described above. When buying an off
plan home these costs are effectively included in the purchase price( where the developer pays these costs) and the buyer therefore finances these costs as part of the home loan( also known as a bond). Buyers often ask how they need to compare buying off plan homes to existing homes. What is the value of these benefits? Let’ s illustrate the benefits with two examples:
Example 1: A buyer has sufficient cash for the deposit and the fees
Lerato is in the market to buy a property and she viewed a classy off plan apartment that was recently completed by a reputable developer. She really loves it and wants to get her mind around how to compare this option with other existing properties that are on the market. Although she saved cash to pay for the deposit and costs, she does not want to exhaust her savings. Her bank has already done an Approval In Principle and informed her that she qualifies for a home loan of 90 % for a property of up to R1 250 000. Being a wise buyer, Lerato wants to know how to compare this new and modern off plan property to other properties that are available. Here is a comparison of buying the R1 200 000 off plan home to buying an existing property:
16 FEBRUARY 2017 SA Real Estate Investor www. reimag. co. za