Why Do Developers Sell Off-Plan?
Property development is massively expensive so the developers and their banks/financiers require some assurance that the units they are going to build will be sought-after by purchasers, be they residential investors, owner occupiers or buyers seeking a pied-a-terre. Selling a home off plan is one of the few ways of providing evidence and comfort to the bank that their investment is secure.
Selling early is therefore a hedge by the developer against any marketing correction or unforeseen market competition. Developers constantly assess commercial risk and will, wherever possible, try to remove uncertainty – even at the cost of a speculative profit. They may sell the units either individually or in bulk before any building works start on site. Many developers will offer market packages, or a variety of other benefits, to the early buyers to assist with the selling process. This may include assistance with the eventual re-sale, either during the construction stage or after physical completion or with legal fees or stamp duty allowance.
The developer may also offer some incentives to assist with the future investment by offering a long term rental guarantee or furniture pack, if the property is intended to be a held investment. A word of caution though, it is important to make sure your contract allows you to sell on your new investment at any time of your choosing as some developers may put restrictive clauses into their contracts. However, it is very important to remember when making a commitment to an off plan purchase you are exchanging a contract for a property acquisition and therefore, if there is a market correction, you are still liable to acquire the property at completion at the contract price.
*Article by Hurford Salvi & Carr at: http://propertyoffplan.com/off-plan-stages-explained/why-do-developers-sell-off-plan
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