In the world of new-build housing, there are two scenarios: buying a completed but unused house or buying off-plan. Although the latter case can be more cumbersome, it can be appealing when you have the right information. This article explains what you should ask before buying off-plan and other things to consider.
What does buying a house off-plan mean?
Buying off-plan is when you buy a property before it is built. This model has several advantages to this model, like having more time to save and knowing it is brand new. However, it is not without difficulties, such as waiting to move into the house or certain associated risks, i.e. the development being cancelled. It is, therefore, crucial to be fully aware of the implications and details of this type of real estate transaction before taking the plunge.
What should I ask before buying off-plan?
To minimise possible complications, here are some essential questions you should ask before buying an off-plan property:
- Can I get a full breakdown of the property price? It is essential to have a clear view of all the costs that will be incurred, including VAT, notary fees, registration fees, agency fees and whether additional items such as a storage room or parking space are included.
- How is the payment plan structured? Understanding the payment schedule will help you better manage your finances.
- Is an initial deposit required?
- How many instalments will there be, and when are they due?
- Are the amounts I advance insured or guaranteed? You need to know if the amounts you pay are secure if the developer does not complete the construction.
- When is construction scheduled to begin and end? Knowing the construction stages can help you plan accordingly. Also, keep in mind that there may be unforeseen delays.
- Can you provide specific details about the house's design and features? You will need a detailed floor plan and specifications to understand what you're buying. Ask for information about finishes, appliances and other features.
- Do I have the option to personalise certain aspects of the property? Find out if the developer allows any customisation, such as choosing finishes or changes to the layout, and if this would involve an additional cost.
- What warranties does the property cover? Understanding the property warranties that cover structural, installation and finish defects is essential.
- What happens if the project is delayed? Check if there are any penalties for the developer in case the delivery of the house is delayed.
- Have all the necessary licences and permits for construction been obtained? Ensure the development has the building permit and the property will be registered at the Land Registry.
- What will the community and common areas look like? If the property is in a community or a building with shared areas, you should ask how they will be maintained and how much it will cost.
- What are the cancellation conditions like? You must understand the implications and possible costs if you ever need to walk away.
- What will the handover process be like? Ask how and when the house will be handed over and whether you can inspect the property before the final handover.
Steps to buying an off-plan property
After finding the property and price right for your needs, follow these steps:
- Sign a reservation agreement and pay the reservation deposit.
- Then sign the purchase contract. This is done once the building permit has been obtained. During this process, 10% of the property's amount is usually paid (including the reservation already paid), and another 10% is paid in instalments until the property is handed over.
- The money must be deposited in a designated account specific to the development.
- The remaining 80% is paid upon formalising the title deed, either through a mortgage or in any other way the buyer chooses. Don't forget the taxes.
- Important: upon reservation or in the private contract, the buyer must present financial information that justifies the source of their money. This is known as Anti-Money Laundering (AML).
- The developer must include all information about the company and the land being built on: Commercial Registration number, Building permit, building's Land Registry number. If they don't, request it so you know who the seller is.
Advantages and disadvantages of buying a house off-plan
Buying off-plan can have several advantages and disadvantages, many depend on the buyer's circumstances. Here are some of the most common ones:
Advantages of buying off-plan
- Customisation: When you buy off-plan, you can often personalise certain aspects of the home, such as interior design, finishes, fixtures and fittings.
- Price: Off-plan homes are usually priced lower than already-built homes.
- Time to save: Generally, you have more time to save for the final outlay since you can pay a percentage at the beginning and the rest upon completion.
- New build: As a new-build home, everything will be brand new, reducing the need for initial refurbishment or repairs.
- Guarantees: According to the Spanish Building Law, the new-build property offers guarantees for a given time for certain types of defects.
Risks of buying off-plan
- Delays: Construction can be delayed due to several factors, sometimes resulting in a later-than-expected delivery date.
- Financial risk: If the builder or developer encounters financial problems, the construction may be left half-finished, or you may even lose your initial investment.
- Project variations: Although you can personalise your home, there may be changes to the original project that are not under your control.
- Difficulty envisaging your home: When buying off-plan, you're buying a property that does not exist. This can make it harder to imagine the finished home, or it may not match your expectations once completed.
- Market uncertainty: If the real estate market changes significantly during construction, the property value may be more than when you initially purchased it.
What guarantees are there for new housing, and what do they cover?
According to the Spanish Building Law, new builds must provide guarantees covering workmanship and materials for any defects or hidden faults that may arise during the property's construction:
- Ten years for structural defects (such as beams, pillars, concrete slabs, foundations, etc.). This is included in the ten-year insurance, which is essential for the developer to be able to hand over the property.
- Three years for defects affecting the property's livability.
- One year for defects in the property's finishes.
Discover new developments in your area
If you want to buy an off-plan house, you can find a selection of new developments on idealista. Click on this link or use the filters in the search engine.