It may look like a dream come true – a beautiful new home for you and your family in an up-and-coming suburb with parks, schools, transportation and other amenities, nice neighbours, soon to be an everything new, add-water-and-mix community – all for a shockingly reasonable price.  Bring cake.

The dream is sold as a “house and land package,” and it can be as good as it seems. But it isn’t always.

There are different types of house and land packages and different types of financing options that you and your attorney should review. A buyer should always know exactly what is covered in the contract, and how responsibilities are divided between the buyer and seller. Finally, of course, there are dodgy property developers. Everyone should stay away from those guys.

What does it mean to buy property as a “house and land package”?

Most new home construction, especially in the undeveloped outer suburbs, is done by property developers who acquire land when it is released by the government. The developers build basic infrastructures, like roads, utilities, water and sewage. Then, often through a marketing agent, they may either build homes or offer buyers a variety of customisable home designs.

Either way, the house and the land are marketed together for a fixed price. Although the phrase “turn-key” can have many different meanings, the heart of the understanding tends to be about the single fee.

The details of the deal are a bit more complicated, however. First of all, the house is not built until it is sold. Secondly, the buyer actually signs and finances two deals. Hopefully, they total no more than the promised fee.

The first agreement, for the land, is usually financed by means of a mortgage, which often requires a 10 per cent deposit and may be subject to stamp duty. The second, for the house, is financed by means of a construction loan, which often requires only a 5 per cent deposit. The construction loan is drawn down in stages as the home is built – a set portion is due when the slab is poured, another when framing is completed, etc.  

Pros and cons

Some of the advantages of a house and land package have simply to do with the benefits of new construction. Maintenance and repair costs will likely be low for the near and mid-future. The standards for modern construction are better for the environment. It may be possible to select a neighbourhood that suits your family’s needs. The staged financing of the two-part deal may also allow you to budget with greater confidence.

On the other hand, the disadvantages of a house and land package are similar to those of any off-the-plan purchase. Buyers have been startled to discover extra costs for items they believed were included, such as fencing or a driveway. Even worse, some have been left with little more than a mortgage, a concrete slab and potential lawsuit against a property developer who has become mysteriously unavailable.

How to make it work for you

First of all, you and your attorney should review the sales contract to ensure that you know exactly what is included in the deal and what would be considered an “upgrade.” If the granite countertops and brushed steel in the kitchen are essential, make sure that they are included. The same is true of the garage, the letterbox and the clothesline.

Second, make sure that you are taking advantage of all financing options. These include first-time home buyer options that may be available, even in the deceptively complicated case of house and land packages. If you are considering an investment property, get good advice about how the timing of cash flow may affect the early and later months of your investment.

Finally, remember that reputation is everything. Advertisements promising the dream that you have dreamed of are still advertisements. Please consult a sceptic before committing.

Whether you are looking to buy your first home or an investment property, as a house and land package or through more traditional forms of purchase, the attorneys at Owen Hodge Lawyers are here to help you. Please call us to schedule a consultation at 1800 770 780. We look forward to hearing from you.