Risks with a House and Land

When making a significant purchase such as a house and land it is important to obtain a pre-approval for finance. That does not mean a high level chat with a lender, it means lodging a full application with a lender of your choice and obtaining formal finance approval.

If you fail to do that before signing a purchase contract then at the very least you will need to sign a contract “subject to finance”. This is where you will need to take care.

Many House and Land deals involve you purchasing the block of land first and some months later commencing construction on that block. The land purchase contract is only for the land component of the transaction but commits the buyer to commence construction within 6-30 months of the land purchase. It is critical that any subject to finance contract that you sign includes the value of both the land and the construction. We have seen contracts give to consumers for the land component only. Buyers who are unaware of these will obtain finance approval to purchase land but when it comes to approval for a construction loan, they may fail to qualify – creating a problem for themselves and a possible financial loss as they will need to divest themselves of the land purchased if they will be unable to qualify for a construction loan.

This is why you should never sign a purchase contract for house and land without showing it to a solicitor and obtaining legal advice on your rights and responsibilities.

Small Blocks

New house and land developments are generally built on smaller blocks than existing homes. As a buyer you really need to be aware of this and be careful in selecting your block.

Lack of infrastructure

While the new house may be everything that you are looking for  Рwhat about its surroundings? Quite often new land subdivisions are found in outer suburbs with limited infrastructure. Before committing to a purchase its important to check for the location of local shopping, schools, transport etc.

Quality of Construction

Many new constructions lack the quality and stability of existing homes. Be careful in committing to a purchase before checking the quality of previously constructed homes by this builder. Have a look at homes completed 5-10 years previously and that will give you a likely picture of what you can expect from your home.


Make sure that you understand fully what is included and what will be extra. We have seen many court cases resulting from disputes on this matter between builders and clients. Legal Advise should help you identify these matters before signing the contract.

Construction Loan

Have you considered what will happen if you are unable to qualify for the construction loan when one is required. It is not uncommon for there to be a difference of 24 months from settlement on land to commencement of construction. If your personal circumstances change due to a pregnancy, loss of work or simply a change in the property market you may be stuck with the land being unable to build the home of your dreams. Make sure that you understand all the risks before you commit to an off-the-plan house and land purchase.