Selling an off-the-plan property before settlement

You can sell an off-the-plan property before the settlement date. Here’s what you need to know.

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Buying a property off-the-plan doesn't mean you're stuck with the property until it's built. You can sell the property before construction is finished. While there is stamp duty, capital gains tax and other costs involved, you can actually make a profit from selling before settlement in the right market.

Selling before settlement is entirely legal, but it’s important that you know the correct process before you decide on this approach.

Why sell an off-the-plan property before settlement?

When you buy off-the-plan you put down a small deposit on a property that hasn't yet been built. While you don't technically own the property until settlement (which happens after it's completed) you are still able to sell the property once you've signed the contract.

A buyer may decide to sell on an off-the-plan property for many reasons. Their circumstances may have changed, leaving them unable to afford mortgage repayments. They may decide they need to buy a bigger place or move somewhere else. A buyer may even decide, if prices are rising fast, to sell the property on at a profit.

What the experts say

Colin Lee Headshot 2Colin Lee, National Sales Director of Australian Properties International, says selling before settlement has the potential to generate high returns for investors. "This can happen when the property value of the project has increased during the construction period and the purchaser is wishing to sell for a profit," he explains.

Given that the construction period can take between one and two years (or even longer), property prices may alter significantly during that time.

"As the purchaser has only paid, typically, a 10% deposit, any profit on re-sale can result in an extremely high return on his investment – e.g. Purchase Price $500,000, Deposit Paid $50,000, Re-Sold for $550,000." In other words, a profit of $50,000.

In other cases, a buyer needs to sell before settlement if they get into financial difficulty.

How to sell an off-the-plan property before settlement

You need to take a close look at the sales contract before you sign it. Some developers place a restriction on re-sales prior to settlement. And you should definitely speak to a conveyancer for legal advice.

"The contract will have special conditions and any restrictions on re-sale will be contained in the special conditions," Lee explains. "Every off-the-plan purchaser should ensure the contract is checked by a suitably qualified lawyer prior to signing."

The good news is that there is generally no penalty for re-selling an off-the-plan property. "Not many developers have their own sales arms, so most re-sales are handled through real estate agents or specialist off-the-plan agents," Lee says.

Other factors to consider when selling an off-the-plan property before settlement

Lee also points out that when looking to re-sell an off-the-plan property, the seller needs to do their financial calculations very carefully and take into account the following:

  • Stamp duty. One of the biggest property buying costs, stamp duty does apply when buying off-the-plan. If you're a first home buyer their may be a concession in place, but this means you will have to pay stamp duty on your next property.
  • Tax. If you sell and make a profit then capital gains tax will likely apply, so talk to an accountant before selling.
  • Agent’s commission. If a real estate agent is involved there will be a commission you have to pay.
  • Conveyancing costs. Your lawyer or conveyancer will charge a fee as well, which can be up to $1,000 or even higher.

Keep in mind that if your sale falls through then you are still bound by the contract. You either have to find a new buyer or settle when construction is completed.

If you’ve decided that you need to get out of an off-the-plan property contract, either to get your finances back in order or to take advantage of a capital gain, make sure you consider your options and obtain expert advice before going through with the sale.

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16 Responses

  1. Default Gravatar
    SamFebruary 19, 2019

    Hi
    I have a land to be settle in May 2019.I want to sell that before settlement ,that i am not in position to get a loan.I have put 10% deposit on that and also advertise on Gum tree website but unfortunately no responds.can you suggest me a options to sell the land before settlement.Thank you

    Regards
    Sam

    • Avatarfinder Customer Care
      JohnFebruary 20, 2019Staff

      Hi Sam,

      Thank you for reaching out to finder.

      You may want to reach out to a real estate agent for assistance in helping you sell the property or you may also opt to publish the property through online selling platforms that could provide better visibility to people regarding your property. Hope this helps!

      Cheers,
      Reggie

  2. Default Gravatar
    NeedaHouseOctober 21, 2017

    Hi,

    I am looking to purchase an off the plan townhouse in the inner east in melbourne as part of a small “mum and dad” development. what is the best way to find these opportunities? often the big projects get marketed through the large real estate agents but the prices are extravagant.

    thanks

    • Default Gravatar
      DanielleOctober 22, 2017

      Hi there!

      Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.

      Here’s an article that you can use as a reference guide with regards to your concern. It is full of tips that you will find useful.

      I hope this helps.

      Cheers,
      Danielle

  3. Default Gravatar
    BuyerOctober 1, 2017

    I am considering buying a unit from someone else’s off-the-plan purchase. The unit is to be completed soon but I can not find a lot of information for this scenario. Obviously I am taking on the first buyer’s contract with the developer and I am putting forward an offer to the on seller, paying them a deposit etc. but what else do I need to consider?

    • Avatarfinder Customer Care
      JoanneOctober 2, 2017Staff

      Hi Buyer,

      Thanks for reaching out.
      The decision to buy-off-the-plan varies depending on your investment purpose, the amount of risk you’re willing to take and your financial situation. It would be best that all advantages and drawbacks of purchasing off-the-plan be thoroughly reviewed before signing on the dotted line.
      You can read further about off the plan purchase on this page and you may also get the right legal help on the same link by filling out the form.

      Cheers,
      Joanne

  4. Default Gravatar
    NeilSeptember 17, 2017

    I bought a town house off the plan almost 3 years ago

    Settlement should occur in Feb or March, however our circumstances have changed considerably since we bought, and we are worried it simply won’t be big enough…

    We anticipate it has grown in value significantly over the period, and are interested to get some advise as to what we should do…. I have a feeling we should sell now and use the benefit (if any) to purchase a bigger place

    Who can I speak to please?

    • Default Gravatar
      GruSeptember 18, 2017

      Hello Neil,

      Thank you for reaching out to us.

      As a friendly reminder, please note that finder is an Australian comparison website and general information service.
      While we do not represent any company we feature on our pages, we can offer you general advice.

      You are actually on the right track (and page), the information here may guide you make a decision on your own.
      Alternatively, you may also consider speaking to an agent to guide you in making the big decision on your property.
      You may find this page helpful: How to Find the Best Real Estate Agent

      Hope this helped.

      Cheers,
      Gru

  5. Default Gravatar
    VCJune 20, 2017

    I have off-the-plan apartment which I need to sell. I tried to contact Colin Lee mentioned in the article but found out that the company’s website is no longer accessible. Do you have any contact I can reach out to sell the apartment?

    • Default Gravatar
      JonathanJune 20, 2017

      Hi VC!

      Thanks for the comment.

      finder is not affiliated with any person or company that we feature in our pages. Should you need to get help in selling your property, you can visit our mortgage broker page for further information.

      Hope this clarifies.

      Cheers,
      Jonathan

  6. Default Gravatar
    KumarJune 18, 2017

    Is it possible to pre-sell the apartments and obtain finance on that grounds before building?

  7. Default Gravatar
    garyJune 5, 2017

    someone was selling their land but she want to make side-line profit like 10k without any paperwork, she told us she paid 10k for second driveway and we were happy with that.

    she nominate that land and we settled but now we know she didn’t pay anything for second drive way, she changed MCP by request and lucky she got second driveway. so we told her we will pay you 10k but now in installment. but she want caveat.

    can she put caveat on land without any written document that we have to pay 10k for anything.

    • Avatarfinder Customer Care
      MayJune 6, 2017Staff

      Hi Gary,

      Thank you for contacting finder.com.au we are a financial comparison website and general information service we are not mortgage brokers and we do not offer home loans so can only offer general advice.

      In a general sense of definition, a caveat is basically a registration on a title of land that claims an “estate or interest” in that land and this can act a security and peace of mind to lay claim on the land and stop dealings. One of the common types of claims that support caveats is a purchaser is under a contract of sale yet to be completed. A lease is another type that supports caveat. The details of the payments whether in cash or instalments should be explained in the caveat. It would be best that you seek a legal advice from a lawyer or speak to a conveyancer if you need a guide on what else can be outlined on the caveat.

      Cheers,
      May

  8. Default Gravatar
    FranklinMay 25, 2017

    I am looking at buying an off the plan property in Parramatta and it is off the plan and going to be completed in 4 years time and need advise on off the plan as I may plan to see it before the settlement.

    • Avatarfinder Customer Care
      DeeMay 29, 2017Staff

      Hi Franklin,

      Thanks for your question.

      We have an off-the-plan buying guide on this page that may help in your decision.

      Alternatively, you may also get in touch with a mortgage broker who can give you advice in regards to your financing options.

      Cheers,
      Anndy

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