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Buying off the plan or from mortgagees: what could possibly go wrong!
Here's a bit of advice for free from a bloke who's seen good trusting folk taken to the cleaners a few times: DON'T SIGN ANYTHING YOU DON'T FULLY UNDERSTAND.
I'm sure you've heard all this before, but don't just assume it's all good. Just don't do it. Doing your shirt is a much bigger blow to your ego than not understanding a complex document.
At the very least, run a contract past someone else who knows more about it than you. But preferably past a lawyer or settlement agent who can explain the terms of the contract to you before you sign it, and thus commit yourself.
The few hundred you spend at this stage on a lawyer may well be the cheapest few hundred you ever spend.
This is especially important with off the plan contracts and mortgagee sales, where you are essentially presented with a take it or leave it contract.
Most off the plan contracts are 100-odd page documents drafted by lawyers for the developer that are very often heavily biased in favour of the seller.
For example, despite verbal assurances about completion dates, these contracts usually contain very lax timelines for completion, such that it is not uncommon for them to settle 2 or 3 years after you were expecting. However once they do reach completion there are typically very tight timelines to actually get to settlement, which often your bank can't meet because it's been so long since you entered the contract they basically have to start afresh with the loan approval process.
And if that's not bad enough, generally these contracts give buyers no rights to charge sellers penalties for being late, but will give the seller rights to charge buyers.
Mortgagee contracts are often just as bad with lots of the normal protections for buyers simply removed. One example is that typically there are no warranties about encumbrances against the title so the risks are assumed by the buyer.
If I am the buyer assuming such risk, the price better be MASSIVELY reduced. Without getting advice on the contract, how can you have any idea what the risk is to be able to price it?
Real estate contracts generally take the form of an offer and acceptance. In other words, buyers, make the offer YOU WANT TO MAKE, don't just accept the one foisted on you by the seller.
We have been quite successful at modifying mortgagee contracts to reduce the risk to buyers and replace many of their protections, so the take home message is SEEK APPROPRIATE ADVICE.
The costs are minuscule against the benefits.
Disclaimer: None of the above should be considered legal advice. Readers are advised to retain their own independent legal counsel. Which is the point to the article.