We have set out the typical process involved in buying an off plan property
The buyer payers a small 'reservation payment'. to demonstrate that they are serious about through with the purchase.
A deposit of 5-10% is typically made on exchange of contracts. This is typically 5-10% of the property value.
Some developers will allow the use of an insurance policy taken out by the investor known as an 'exchange' or 'deposit bond'. These policies are taken out where the investor doesn't have time to raise the deposit with the bond being paid out if the money is not found at exchange.
Depending on the developer's scheme, further payments might be made following a pre-agreed schedule. Often, there will just be one more payment before the property is completed.
Completion will usually happen when the building is signed off as being habitable. Sometimes the deposit is returned to the buyer at completion.
Sometimes the investor will not even 'complete' the project but sell the contract on to someone else at a higher price in order to avoid stamp duty. This is usually only possible if the contracts are “assignable” meaning it can be passed on to the new purchaser. This practice is referred to as “flipping” or “turning” a property - see our article on property investment strategies.
In this case, the property has hopefully risen in value since the original price was agreed
providing an instant profit for the investor.
Depending on the developer's scheme, further payments might be made following a pre-agreed schedule. Often, there will just be one more payment before the property is completed.
