2 BUYING YOUR PROPERTY
ROLE OF THE
DEVELOPER L
ove them or hate them, property developers have had a tough few years as many fl y-by-nights fell at the wayside when the global downturn began to kick in.
But now, in areas such as Orlando in Florida, new-build schemes are beginning to multiply, and you may fi nd yourself considering buying a property from a developer. What’s more, there are some pretty good deals out there from developers keen to get the market going, such as offers of free furnishings or white goods. The fi rst thing to point out is that you can buy a new home direct from the developer – through their on-site sales offi ce or wherever their own sales team have offi ces – but you can also buy their properties via agents.
If you’re buying a property in Spain, you may also buy a new (repossessed) property via a bank, which is a different ballgame again – and you’ll need to gain expert advice on this (see page 20 for some pointers).
But in the main, you’ll be buying via the developer or an agent, and it is worth bearing in mind that buying direct from the developer could in some cases save you a mark-up, so it is worth doing your research and comparing price tags, especially if you’ve set your heart on one particular community or development.
You should also always try negotiating on price as buyers are in short supply these days. If you are a serious buyer, they will be keen to talk to you. But whichever route you pursue, you must do your research on the track record of the developer.
Contract is with the developer A common misconception is that you’re buying from the agent, but in the case of new-builds it’s the developer who you will enter into contract with, not the agent. If anything goes wrong with the build, it’s the developer that you will ultimately be dealing with, not the third party.
So ask for full details of projects they have completed already – what is their recent track
record? Get your legal advisor to check they are fi nancially sound, but also research their reputation.
Can you chat with people who have bought from them already? If a development hasn’t been begun yet (and you are buying off plan) then going to see other projects from the same developer at least gives you an idea of the build quality they can turn out. Of course it won’t be a guarantee that your property will be the same or better, but developers often promote the “quality” of a project by showing- off other schemes, and you should be wary if they are not keen to do this for any reason. You should also ask the developer about the building code or regulations of the country where the property is located, guarantees and planning permissions.
Regulations and standards obviously differ from country to country – especially those in hurricane or earthquake zones - and are also still evolving in emerging markets. You can’t always expect the same standards as the UK – though you can expect much better in countries such as Switzerland! - so be realistic.
You should expect that full planning permissions have been received. If buying off plan before such permissions are granted, be very wary. Ask why this is, ensure you will have full rights to a refund if permissions are not obtained, and question whether you want to take the risk when there are so many already-built properties being sold off cheaply. Then there is timing. Many projects have been delayed in recent years and with fi nancial uncertainty ongoing in many countries, you need some sort of accountability. So when the developer provides you with a building schedule for your property, there should be penalty clauses for delays. The staged payments set out in the sales contract act as a form of guarantee – but should be held in a third-party escrow account for full protection.
As with any building work, you should never
make the fi nal payment until all the snagging issues are resolved.
DEVELOP.. COMMON... SENSE..
Know who you are
buying from: direct from the developer or via one of their agents? Don’t sign a
purchase agreement or sales agreement without seeking full independent, legal advice. Research the track
record of the developer. Your legal adviser should perform due diligence on the developer, including planning permissions, land title, and bank guarantees. Check out their
recent projects, fi nd out how fi nancially sound they are. Do other projects measure up in quality? Investigate how
the development will be managed on completion – who will do it, how much will they charge? Estimates could increase once the complex is completed.
AIPP CONSUMER GUIDE 25
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