As alluded to in earlier articles, buying an off plan condominium forward contract, i.e. the right to purchase and take delivery of a completed unit later on but at an agreed price today, can be a good way to ‘get in early’ and lock into a square meter price that in theory at least will be lower than at the time of completion a few years hence.
By Jerry Dingley
Some developers or appointed agents will conduct an in house pre-launch event where only their existing private clients and /or ‘VIP’ contacts are invited to attend to select the best units before the projects remaining ones are made available to the mass market often at higher prices.
Many potential buyers however whilst they may like the idea of buying early pre-sale contracts would prefer to wait at least until the project has received its building permits and bank finance approval before parting with any money.
By the same token, they do not want to wait until final completion as by then the developer could have perhaps raised prices several times and the best units will be long gone.
Ergo, there also exists a ‘middle ground’ way of achieving the desired result, granted at a higher price than the early bird pre-launch ones, but still at a significant discount to the developers then current market price, and with less risk of non-completion.
Some estimates suggest that 30% of early buyers are in fact speculators looking to sell their contracts on to someone else prior to completion and thus to make a profit on the amount they have already paid in deposits and stage payments. Some will list through an agency, but nowadays many will list directly on their own on one of the popular local websites that have sprung up to cater specifically to this need.
An early stage buyer will often have secured the best unit floorplans and locations within the building, whereas the developer will in all likelihood now be selling the remaining units that are perhaps less desirable, and almost certainly at higher prices. Some of these speculators, are looking for quick exits at smaller profit margins as they understand that the longer they wait to sell, the greater the risk of not being able to sell, and thus they would then have to complete themselves or face forfeiting the total amount they have already paid, plus losing the right to buy the condominium.
A word of warning though if you do decide to follow this strategy of buying someone else’s ‘right to buy’ contract from a resale website listing is that you need to make absolutely sure that the person you are dealing with is the real ‘owner’ of the contract, and do not pay any advance payments to anyone.
The best way to do that is confirm with the developer directly, as they handled the original deal and will usually be happy to oversee and supervise the assignment transaction for both seller and buyer and in the presence of all parties on site at their offices.
You will be required to pay to the seller the amount that they have already paid to the developer (this can be easily verified by seeing the receipts) plus the agreed amount of profit, then you will also take on the contract obligation to pay the remaining stage payments and amount due on completion, plus building management fees, sinking fund, and any land office taxes, all of which are transparent and verifiable at outset. At this stage of course you will also be free to sell the ‘right to buy’ contract on again should the need and or opportunity arise to do so.