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