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Buying property off-plan? Vital questions to ask the developer

Buying homes off-plan in future developments can result in the buyer getting a really “good bargain” in the current market.

The buyer should carefully examine the sales agreement, if possible with the help of a building professional and/or an attorney.

This is according to Rowan Alexander, Director of Alexander Swart Property based in Cape Town’s Northern Suburbs, who says the developer of a new project will often need to sell a fairly high proportion of the proposed homes, in order to kick-start the project and to qualify for development finance. To achieve these sales the developer will in all probability cut the prices to really competitive levels, especially in the initial sales months.

“The chances are, therefore, that the buyer will get real value for money on his or her purchase, a price that is unlikely ever to be repeated,” he says.

Erik Joubert, Managing Director of Trinity Projects for whom Alexander Swart Property have marketed several Northern Suburbs developments, corroborates this, but says because at the time of most launches, no homes will have been built (except in some cases a show house) buyers often understandably feel that in buying off-plan they are being exposed to higher risk.

“Marketing material and attractive artist impressions are easy to produce, but as we all know, they can be misleading,” says Joubert.

“How then does the buyer judge the quality of a new development, its landscaping, architectural merit and its financial viability?”

Vital questions for a sound investment

He says the buyer should start by checking the track record and ‘credibility’ of the developer, if possible visit already completed projects delivered by the company and ask questions such as: Has the developer ever been bankrupt? Did they stick to delivery schedules and dates and did they try to introduce ‘extras’ down the line? Did they deal quickly and efficiently with any post-sale snags?

“Those organisations which have produced successful projects over the years, in which it is clear that great attention was paid to design details, quality workmanship and landscaping will probably continue to perform well and stick to their principles,” says Joubert.

“These are the developers with which one should be associated.”

Next, the buyer should carefully examine the sales agreement, if possible with the help of a building professional and/or an attorney, and ask questions such as: is it professional and free from grammatical errors and contradictions? Is it clear and comprehensive, with full lists of specifications for all materials and fittings to be installed? Are the floor plans properly dimensioned? Do the plans indicate the north orientation of the home? Are the parking bays conveniently sited in relation to the homes? Will the homes have enough cupboards and has space been allowed for appliances? Is the balcony included in the total floor plan? Will the occupants be allowed to have pets? 

These and similar matters should be settled upfront, in such a way that no disagreements can arise later.

Other matters to note. Equally important, says Alexander, there should be questions about the tricky subject of development rights. Have these already been obtained? Have the zoning, sub-division, consolidation (where applicable), environmental authorisation, water licenses and other approvals been granted?

The buyer has to appreciate that it is not illegal to sell property subject to these and other approvals still being obtained, but if they are not in place, delays could follow. 

Objections from the public or interested parties can hold up developments for months or years, even when such objections are specious - and, when rights are finally granted, in many cases the approval conditions and process may alter the whole development quite radically. Ensuring the necessary approvals are in place therefore makes a great deal of sense.

Then, too, buyers should check the new development’s standing with the major financial institutions. Has it received pre-approval for end user finance from the major lending institutions? If it has, the bond application process will be easier, the banks will be more willing to advance finance to individuals and will probably do so at a better interest rates and may include other advantages.

The banks’ evaluators have a comprehensive checklist for each pre-approved development. This includes pre-valuations, checking land ownership and whether the developer is registered with the NHBRC (obligatory for all building contractors and developers). They will also check the status and reputation of the professional team on the project.


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