1. Do the houses actually belong to the developer?
Some developers collect money from homebuyers to acquire a property. Buyers are shown the property, they seal a deal but ownership has not been changed.
This is a common practice among developers of off-plan houses who avoid bank loans to keep the costs low.
These details are not disclosed to homebuyers and if an investor fails to acquire the property, the buyers are caught up in the mess. A clause can be put in the contract to protect the buyer in case of any eventuality.
2. Property charged as security to acquire a loan
Lawyers do due diligence to ensure the property has not been used to secure loans, and if that is the case they ensure the contract protects the buyer in case of default.
3. Get payment plan and default clearly
A contract must clearly provide for the timeline for payment, penalties in case of default and guard against hidden charges.
4. Land use
Many homebuyers start making payments without ascertaining the land use. Most real estate investors are acquiring land reserved for agricultural use and some are building apartments on a land whose approval is for single unit dwelling.
5. Finer details on the brochures or in the showroom should be included in the contract
If you look at most brochures, there is a tiny disclaimer noting ‘particulars not warranted’ or similar words. This means that those exquisite details in a show house are not guaranteed, if you want them, insist they are included in the contract.
If a buyer wants the finishes to be exactly as what is in the show house, it should be written in the contract.
Most buyers get shocked when the complete house is nothing close to what they saw in the show house. The floor plan and site layout should also be attached to a contract.
6. Avoid using the developer’s lawyer
The developer’s lawyer protects the interests of his client, the developer, not your interest as a buyer. Many buyers settle on this option because it is cost-effective.
In the event of dispute, this lawyer will not represent you. It is important to pick an independent lawyer to handle the deal.
It is more expensive out of a bad deal than to pay a lawyer, because it means losing a property and still engaging a lawyer to fight the case in court.
7. Defect liabilities
Yes you have a house, it’s a newly constructed house, no one has lived in. You have no way to know the defects. The contract should be clear who will pay for defects and for what period.