Is it worth buying an off-plan property? Check out the risks and benefits

See if it's truly a smart way to buy a property. Understand the INCC adjustment, stalled construction, and other factors that could impact your investment.

When walking through your city's neighborhoods, it's common to come across land where new buildings are being built. Often, you can even visit the mock-up, a mock-up of the finished property, to get a feel for what you'll be buying. But is it worth buying a property off-plan?

Let's explore this topic in detail. Stay with us.

What does it mean to buy a property off-plan?

Buying an off-plan property means acquiring a property that hasn't yet been built. In this purchase model, the buyer signs a promissory purchase and sale agreement, believing that the construction company will deliver the property within the stipulated timeframe and with the promised quality.

Risks of buying off-plan property

According to lawyer John, a specialist in contract termination , investing in an off-plan property can be riskier than it seems. Contrary to popular belief, the cost of an off-plan property may not be lower than that of a finished property. The main risk lies in the uncertainty of delivery, as the buyer is paying for something that doesn't yet physically exist.

John emphasizes that if the construction company faces financial difficulties and ends up going bankrupt, the buyer could lose much, or even all, of their investment without receiving the promised property. This is because the buyer assumes the full risk of the project, unlike the company, which has its guarantees secured.

Stalled works and judicial recovery

The scenario of halted construction projects and construction companies undergoing judicial reorganization is not uncommon. According to John, thousands of companies face financial problems, resulting in construction halts and, in some cases, bankruptcy. For the buyer, this means the risk of not receiving the property is significant.

Furthermore, if the buyer is unable to continue paying the mortgage payments, they could lose more than half of their investment, even without ever having used the property . This situation is especially concerning, as the buyer bears all the risks, while the developer faces no direct losses.

Correction by INCC and the impact on the final cost

Another factor that can make buying an off-plan property disadvantageous is the monetary correction applied during construction. The property's outstanding balance is adjusted monthly by the National Civil Construction Index (INCC) , which is generally higher than inflation. This means that, upon completion, the property's value may be significantly higher than initially anticipated, forcing the buyer to pay more than the agreed-upon price.

In many cases, when it comes time to finance the outstanding balance with the bank, the buyer may find himself with a debt greater than the property's market value, making the purchase even more expensive. For John, this is an excellent deal, but only for the developers, who transfer all the risks and additional costs to the buyer.

Is it worth buying a property off-plan?

The decision to purchase an off-plan property should be made carefully. It's crucial that the buyer evaluates all the risks involved, such as the possibility of delayed delivery, the solvency of the construction company, and the impact of the INCC adjustment on the property's final value . It's also important to consider whether the buyer's financial security allows them to assume the risks associated with this type of purchase.

Before making a decision, buyers are advised to consult experts, such as lawyers and real estate consultants, to gain a clear understanding of the risks and benefits involved. While purchasing an off-plan property may seem attractive due to the ease of payment and customization options, it's essential to be well-informed to avoid unpleasant surprises down the road.

Tips for buying an off-plan property

Search for the construction company

1. History and reputation : Check the construction company's experience and reputation in the market. Research other projects they've completed and evaluate their deadlines, quality of work, and customer satisfaction.
2. Certifications and registrations : Check if the construction company has the necessary certifications and registrations, such as Habite-se and real estate incorporation.

Analyze the location

1. Area appreciation : Choose a location with potential for appreciation. Consider nearby infrastructure, such as schools, hospitals, public transportation, and shopping areas.
2. Urban planning : Check for urban improvement projects in the area, such as the construction of new roads, parks, or shopping centers, which could increase the value of the property in the future.

Understand the descriptive memorial

• Technical specifications : The descriptive memorial details the materials and finishes that will be used in the construction. Make sure what's in the contract matches what you expect.
• Possibility of modifications : Some construction companies allow minor changes to the property's layout or finishes. Check this out.

Evaluate payment conditions

Down Payment and Installments : Negotiate payment terms, such as the down payment amount and the number of installments during construction. Keep in mind that, in some cases, the outstanding balance will be adjusted based on the INCC (National Construction Cost Index).

Bank financing : Check the financing options available after handing over the keys. Consider interest rates and installment amounts.

Follow the work

1. Regular site visits : Whenever possible, visit the construction site to monitor construction progress. This helps ensure that the schedule is being followed.
2. Construction company reports : Ask the construction company for regular updates on the progress of the project. Many offer periodic reports or even online platforms to track progress.

By following these tips and paying attention to the details, you can make a good deal when purchasing a property off-plan, taking advantage of the benefits this type of purchase offers.