How does an off-plan sale work?

Vente sur plan

Many buyers buy a property before it is actually built. This is called an off-plan sale.  There are two methods, each has its advantages and disadvantages. Description.

Why invest in a property that does not exist yet?

When the apartment or house you want to buy has not yet been built, it gives you a lot of leeway to customize it according to your tastes and needs. This allows the owner to choose the first choice of the lot within the condominium ownership. Indeed, the future owner no longer chooses "what's left", but exactly what he wants. One can choose the color and equipment of the kitchen, the floor coverings or the type of shower. The buyer can be even more ambitious and choose to intervene in the interior design of the property. If the project has three bedrooms and he only wants two, he can redesign the floor plan of the house to remove one. Similarly, one can choose to remove the central kitchen island to provide more space for the living room.

How can I be sure that my choices will be respected?

Before construction begins, a construction description is drawn up and signed at the notary's office by the person responsible for the project and the buyer. This document mentions in detail the budget for each trade (kitchen, bathroom, electricity, floor coverings) as well as the choices and modifications made by the future owner. If these result in an overrun of the allocated budgets that are included in the sale price, the buyer will have to bear these additional costs himself.

What are the terms of payment?

There are two ways to proceed with a plan sale. The first, called a forward purchase or turnkey, involves the payment of a deposit corresponding to at least 10 or 20% of the price of the property. The balance will be paid at the time of final delivery, usually by means of a mortgage loan obtained beforehand. The second solution, called acquisition in land share, consists in taking a construction loan from the bank to buy only the land on which the construction will take place. The price of the land usually amounts to between 20% and 30% of the total cost of the real estate project. Once the house is built, the construction credit will be consolidated, i.e. it will be converted into a traditional mortgage.

Which method should I choose?

In terms of land acquisition, the buyer partially substitutes himself to the property developer, taking over the risks inherent to such a project. If the company in charge of the construction fails or accumulates costly delays and unforeseen events, the future owner is left alone to assume the financial consequences. On the other hand, the future owner benefits from a reduced rate of transfer tax - the tax paid by the purchaser on any real estate transaction - since it is calculated only on the basis of the value of the land and not on the value of the entire real estate project. Knowing that this tax burden varies between 1.5% in the canton of Fribourg and 3.3% in the canton of Vaud, this can represent a significant saving. On the other side, the buyer who chooses to go through a forward sale or turnkey sale will be obliged to pay transfer tax on the total value of his property. On the other hand, he will avoid having to assume the additional costs related to the construction of the property. As a general rule, we advise you to choose rather this solution. Although a little more expensive, it remains safer for the buyer.

Can I still change my mind along the way?

Once the deal is closed, I can't be changed. Deciding to give up the purchase will therefore be difficult, even if the property still exists only on paper. But if the buyer is unable or unwilling to go ahead because of a serious financial problem or an unexpected event, a solution  needs to be found in collaboration with the agent, this often consists in another buyer's proposal.

What if I don't like the end result?

You have just moved into your new home and discover some lacks like a scratched shower, a stove that doesn't work or the flooring does not match the one you had chosen. How can this be solved? Legally, the buyer is entitled to demand that his property corresponds to what was agreed before the start of the work during an inventory of fixtures and fittings. The company in charge of the construction must make the necessary modifications to achieve this. The deed of sale often includes the mention of deadlines: these are precisely intended for this type of property.

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