How do House and Land Packages Work
You’ve decided to purchase a home. In Sydney, like many in-demand cities, those plans might be dashed when you realize the cost involved with buying a home and the amenities and features you get in return. Usually, you won’t get as much as you hoped for, which can be rather discouraging. While an apartment in the CBD may be appealing to an investor who plans on renting it to young professionals, for those who want to buy a traditional family home, a house and land package is a suitable – and affordable – alternative.
We discuss how house and land packages work in the steps below.
1: Get Pre Approval
Similarly to how purchasing a home begins by getting pre-approval from a lender, house and land packages start by doing the same. Usually, you will be required to take out two loans: a mortgage for the land and a construction loan, bundled together in a fixed price loan. Once you receive pre-approval, you need to find a solicitor or conveyancer to complete the process. You can then continue on the journey to find your ideal house and land package.
Completing this process isn’t necessary if you’re still browsing. However, it is convenient to do this first, in case you find your ideal property and don’t want to forego the opportunity.
2: Find Your House and Land Specialist
This step is crucial. After you receive pre-approval – and have a conveyancer – you’ll have an idea of what you can afford and will be able to partner with a house and land specialist. When selecting a specialist, choose one with considerable inventory, so you have extensive options for house and land packages.
3: Pay A Non-Refundable Reservation Fee
The technical steps of buying a house and land package begin now, as the next few steps differ tremendously from what it would be like when purchasing a home. After finding a package that meets your preferences, you will be required to pay a reservation fee to secure the property. This can range from $500 to $5000 and guarantees no other buyers can purchase the land.
4: Pay A Deposit and Sign The Unconditional Exchange
After you pay the reservation fee, the clock starts ticking. The following fourteen days after you pay the reservation fee, you will need to pay a 10% deposit on the property and build to avoid losing your reservation fee and the property. This cost includes the reservation fee. You will also sign the unconditional exchange that states the cooling-off period has expired and the contract becomes legally binding on both parties.
5: Pay The Remaining Cost and Settle The Amount
Once your home has been built, also known as practical completion – and according to the terms set out in the agreement, which usually stipulates you pay remaining costs within ten days of practical completion – you will need to pay the settlement costs. You’ll now own the home and the land.
Regarding the technical elements of how house and land packages work, the primary differences between buying a home and buying a house and land package are that you don’t need to pay all expenses up-front. You pay 10% to secure the property and enter into the agreement and the remainder 90% during the closing, which can be a few months – sometimes even a year – later. You also don’t need to send in any offers or compete with buyers at an auction. Your costs are laid out in the initial phases, and you have the options to customize your home according to your tastes. All elements that are missing when you purchase a resale.