How do you sell a property that doesn’t yet exist?
This question hints at the contrasts between selling an off the plan apartment (otherwise known as project sales) and an established property (residential sales). While both concern the sale of property, the processes involved are understandably very different.
Today we’ll be looking at the less common of the two – the off the plan sales process.
The off the plan sales process: An overview
No matter the project, the buyer of an off the plan property will follow the same three step process to secure their apartment:
- Register an expression of interest (EOI): This ensures that the buyer will be notified when properties are released for sale.
- Reserve an apartment: Once properties are released a buyer can then reserve an apartment by paying a holding deposit.
- Pay the remaining deposit: Once the appropriate contracts are exchanged, the buyer will then need to pay the remainder of the 10% deposit (sometimes lower, depending on the developer) to secure the apartment.
- Settlement: Most developments take around two years to be completed, at which time a buyer will finalise their finance, inspect the property (and lodge any defects), and have the title transferred to their name.
It’s the agent’s job to generate interest, sell properties, and guide their buyers through these steps. So let’s take a deeper look at the process in its entirety, this time from an agent’s point of view.
Establishing the development
Before a buyer can purchase a property – indeed before an agent is even made aware of a new development – the developer will have likely taken the following steps:
- Acquired the land
- Worked through a feasibility analysis
- Architected a design
- Gained development approval
- Developed marketing materials
The developer may have even started construction before agents are brought in to sell the properties, although it’s more common for a number of properties to be sold first to gauge demand and to lock in funding for construction. Sometimes a developer may press pause on a project, leaving it to simmer for years, until the market conditions are just right.
Whether a mega-development of 10 different buildings or a single apartment block, developers will release properties in stages so as not to flood the market. Perhaps a single building will be released in the mega-development, or handful of select properties will be released in the apartment block. This will see sales retaining momentum, as each release (hopefully) sells out in good time. It also allows developers to adjust pricing in line with market conditions, making the first apartments almost always the best value.
Once the above steps have been taken and the developer is ready, they’ll bring the agents in to sell.
The pre-launch campaign
With marketing materials ready to go, the developer will usually kick things off with an expression of interest (EOI) campaign. This will include a launch event and an ongoing campaign that will generally last 4–6 weeks. This is where the agents enter the fold. They are tasked with building hype around the project, so are briefed in with a preview and given presentations, floor plans, videos, brochures and sales books that they can share with their clients.
The excitement of a brand new development makes this stage the most active for enquiries, and can be a reason in itself to reach out to your clients – “Have you heard about the new riverfront development? I feel like it’s just what you’ve been looking for, and I can get you on the VIP list for the pre-launch preview!”
During this time agents and their clients can lodge an EOI but cannot reserve an apartment, and may not have access to exact pricing. No money is exchanged at this time.
Most large projects will have an official ‘sales day’ for each staged release, where reservations are made officially open, and buyers can reserve their preferred apartment by putting down a holding deposit. Some buyers choose to be represented by their agents on these days, giving them Power of Attorney.
While the release may not entirely sell out on sales day (although it often does), the best apartments will certainly be snapped up first. This makes it vital that you do the groundwork and understand your clients’ wants and needs before the sales day, and act quickly when the day comes. Remember, you don’t have a monopoly on the listings when it comes to project sales – you’ll be competing with plenty of other agents and their clients.
The reservation process
How exactly is a property reserved? This depends on the developer. More and more projects are sold through secure digital portals, where agents can log in as soon as a project becomes available and reserve a property for their clients. Other developers are more traditional, holding in-person sales days where stickers are placed on floor plates at the event to indicate a property has been snapped up.
Some developers work through the expressions of interest one by one, inviting buyers and agents to look at the apartments in the order that they submitted, while others may open the floor to everyone at the same time. The process will be clearly explained by the developer before the event.
The reservation or holding fee due at the sales day is generally around $5000. This helps to separate the serious buyers from the browsers, although the fee is generally fully refundable should the purchase not go ahead.
Securing the apartment
Contracts are then formed by the developer’s lawyer from the details gained when reserving the property. These documents ensure everything that was promised during the reservation process will be delivered upon, so an agent should recommend that their client source a solicitor to look it over.
Once both the developer and the buyer are happy, the contracts are signed and a 10% deposit (less the holding fee) is paid. This all happens relatively quickly after the reservation is made – commonly 10, 21 or 30 days. If a developer is targeting a particular demographic, first home buyers for example, the terms of the deposit may be a little more gentle or flexible (a 5% deposit, or 5% upfront/5% after a year).
In the 4-6 weeks before construction of the project is complete (which can be 24 months or more after the deposit is paid), the buyer is asked to arrange their finance, obtain a valuation, inspect the apartment (and report any defects), and finalise the settlement.
The agent’s role in this is to ensure that the process runs smoothly. They should be on hand to make sure the buyer meets their deadlines, knows what to look for during the inspection, has no issues with finance and organises a valuer to visit the completed building. The agent is helped by the developer, who will continue to update both agent and buyer on the completion schedule and other key dates.
While both residential and project sales deal in matching the perfect buyer to the perfect property, they have very different means to this common end. And that’s what draws many sales professionals to projects – the challenge of learning a totally new way of selling, and doing so for something that the buyer can’t yet touch, only imagine.
These insights were drawn from Selling The Invisible, a course by LEAP Academy, Australia’s only accredited project sales training academy. You can learn more about the course here.