What You Need To Consider Before Buying A Newly-Built Home From Developer
Category When To Buy Newly-Built Properties
An increasing number of South African homebuyers are electing to buy newly-built properties rather than pre-owned homes, and there are in fact a number of very good reasons for doing so.
No transfer duty
For most buyers, the most important of these is the cash they save because there is no transfer duty payable on homes bought directly from a developer or builder. Instead, VAT is assumed to be included in the purchase price (provided that the developer is registered as a VAT vendor).
Another big plus is that new developments by established building or development companies are often “pre-approved” by a lender, making it much easier for prospective buyers in these projects to obtain home loans.
High chance of customisation opportunity
In addition, residential developers often give buyers the opportunity to choose their own fittings and finishes, and sometimes even the chance to customise the layout of their new home and garden to suit their own needs. On top of that, new homes in South Africa come with certain structural guarantees and must comply with certain “green” design and building principles, making them more eco-friendly and energy-efficient. This all translates into less maintenance and long-term savings for their owners.
The other side of the coin
However, there are also quite a few potential pitfalls that those who are considering a newly-built home need to try and avoid if they want their home-buying experience to be as exciting and fulfilling as it should be. These include:
Deposit scams when buying “off-plan”
Anyone can print a fancy brochure full of floorplans and attractive pictures so you should never sign an offer to purchase a home that has yet to be built unless you have:
- Seen the land on which it is due to be constructed
- Established that the developer has a good reputation, is registered with the National Home Builders Registration Council
- Seen that the property developer has a track record of successfully completed projects.
In addition, you must make sure that any deposit you are asked to pay is going into the trust account of an attorney or any estate agent so you will not lose your money if something goes wrong with the development or the building company.
It can be exciting and financially rewarding to be one of the first owners in a new development, but you need to know that the project will be finished and fully-developed within a reasonable period. If there are 50 stands, for example, and only 20 homes have been built in the development in the past five years, that may be cause for concern. In this case, you should probably give it a second thought, unless the developer can prove to you that the other 30 stands have now been sold and that they will be completed within the next few months. If this isn’t on the cards, then you could find yourself living on a “building site” for several years and therefore unable to sell because the levy income from only a handful of owners would be insufficient to provide the type of security and the additional facilities that were originally promised – things that would make your home appealing to potential buyers.
Too many “extras” and upgrades
Check your plans and building contract very carefully before you sign for a newly-built home in order to determine exactly what building materials, equipment, fittings and finishes are included in the specifications (and what else may be regarded as “extra” for which you would have to pay an additional amount). Do not make the mistake of assuming that all the top-of-the-line finishes that you see in the developer’s show-home will automatically be included in your home, or take it for granted that the rooms in your home will be the same size. A whole lot of the features you like most may not actually be included in the basic contract and including them could put the home beyond your budget. In addition, if you do decide to opt for upgrades, you should not just accept a whole package. Consider each item to see if you really need it or could live without it, and make certain that everything you choose is individually specified in your building contract along with its price.
No completion or hand-over date
Your contract must contain a date by which your new home will be finished and ready for occupation. If it is not finished by the date stipulated, you will then be entitled to cancel the contract and get back all the money you have paid so far, including the deposit and any progress payments made to a builder. If your contract does not contain this clause, you could find yourself at the mercy of a builder who is taking far too long to finish the project while you are stuck making bond repayments on a home you cannot occupy.
No provision to rectify problems
Even newly-built homes can have faults, and whether it is a cracked tile or a major water leak, you should not have to live with it or pay to get it fixed before you’ve even unpacked. To prevent this from happening, you must make sure that your building contract states that you will have a certain number of days after taking occupation to draw up a “snag” list of defects for the developer or builder to fix before you finally sign the occupation certificate. You should also retain the right to call in an independent and professional home inspector to help you at this point, especially if this is your first home purchase.
Purchasing your own home is one of the most important investments you will ever make, so it’s in your interest to ensure that you’ve considered everything you need to before buying, especially if it’s a newly built home in which you’re interested.
Source - BetterLife Home Loans Newsletter
Author: Better Life Home Loans