Nomination Blocks Explained: A Guide for New Home Buyers

8th April 2024

Finance & Budgeting Pre-Construction Legal & Contracts

Nomination blocks offer a unique way to buy land below market value by taking over someone else’s contract. This article explains how the process works, the benefits of securing an older price, and the risks to watch out for.

Nomination Blocks Explained: A Guide for New Home Buyers

Thinking about buying land but looking for a better deal or faster timeline? You may have come across the term "nomination block" and wondered what it means. In this article, we break it down in simple terms to help you understand how nomination blocks work, the benefits they offer, and the potential risks involved.

What is a Nomination Block?

A nomination block refers to land that has already been purchased by someone else but hasn’t yet settled (i.e. title has not transferred to them). They are selling their rights to the land contract to someone else – in this case, possibly you. You take over the contract as-is, including price and terms, and you step into their shoes as the buyer.

Why Would Someone Sell a Nomination Block?

There are many reasons:

• They can no longer finance the purchase

• Their circumstances have changed

• They’re looking to liquidate the block before settlement

Benefits of Buying a Nomination Block

• Great price advantage: You're securing the original contract price, which can be substantially lower than today’s value

• Faster settlement: Often, the block is close to title, meaning you can start your build much sooner

Risks to Watch Out For

• Contract is often unconditional: Most finance clauses have expired, so you need finance sorted

• You take on all original contract terms: No renegotiation allowed

• Developer approval needed: Some contracts only allow nomination to family members

• Potential costs: Missing pegs, re-surveys, and developer fees for original design approvals may apply

• Greedy vendors: Avoid any under-the-table cash payments outside the contract – it’s illegal and high risk

Real World Example

Someone buys a block in 2022 for $290,000. In 2024, they can’t settle. You step in via nomination, pay their $10,000 deposit, and take over their $290,000 contract. If the current land value is $350,000, you’ve saved $60,000 and avoided a 12-month wait.

The 4-Step Process for Buying a Nomination Block

1. Get a builder to assess the block

2. • Can they build on it?

   • Are the site costs known?

   • Does the house design fit?

3. Speak to your finance broker

4. • Can you afford the full package?

   • Can you settle in the timeframe required?

5. Engage a conveyancer

6. • Ensure the contract allows nomination

   • Review the terms and risks

7. Move quickly

8. • Good nominations are snapped up fast

   • Once the first three steps are ticked off, act fast to sign the nomination and pay the deposit

Common Questions

Q: Can I nominate a block to someone else in future? Yes, provided the developer allows it and you settle the contract first.

Q: Is a nomination block suitable for first home buyers? It can be, but only if you have a solid team (broker, conveyancer, builder) and understand the risks.

Q: Where can I find nomination blocks? Look on:

• Facebook Marketplace

• Gumtree

• Realestate.com.au

• Builder or agent networks

Glossary of Terms

• Nomination: The process of assigning a contract to a new buyer

• Settlement: The final step where legal ownership transfers

• Title: When the land is officially registered and ready for building

• Conveyancer: A legal expert who manages the contract and transfer process

Key Takeaways

• Nomination blocks could save you tens of thousands on land

• Ensure you fully understand the original contract terms

• Avoid illegal cash deals – always go through a conveyancer

• Move quickly once your builder, broker, and conveyancer give the green light

Listen to the full episode for more insights: Nomination Blocks Explained - Episode 46

About the Home Building Hub Podcast

The Home Building Hub podcast, hosted by industry experts Colin Bischof and Darren Brennan, is Australia’s premier resource for new home buyers. With weekly episodes featuring special guests, the podcast provides objective, high-quality insights into the home building process - completely free and without sales pitches. From understanding financing options to navigating the complexities of building a new home, each episode is packed with actionable advice and tips.

Explore more episodes at www.homebuildinghub.com.au and join our growing community of informed home buyers.

Disclaimer

Whilst we’re all about providing value to you, this article should not be considered as legal or financial advice. It contains general information only and is based on the content discussed during the podcast episode. This information is relevant to the episode’s release date and may not be applicable at the time of reading. Always seek independent professional advice tailored to your personal situation before making any legal or financial decisions.