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By this time every one has heard of the real estate term “Pre Construction”. However many people may not know exactly what it is. Many people here this as in
“preconstruction Investing”. What buy preconstruction mean is you are buying real estate before it is built in hopes that it will be worth more when it is finished being built.
Pre-construction is normally a time period planned by the developer when sales are going on but nothing has been built yet. Normally you re putting down money before
construction begin.
Buying pre construction can be a great opportunity, especially in areas that are appreciating rapidly or if it is something you are planning to buy and use for yourself.
Buying preconstruction you are normally allowed to pick out color and options that fit your taste and you are able to personalize your condo.
The Main benefit is often developers will offer steep discounts and other incentives if you buy before construction starts. This is because in most cases the developer will need a
certain number reserved before the banks will fund the construction loans.
Of course buying this early can often be risky but if you understand the process you can avoid these difficulties and come out on top.
Step 1. The Reservation Agreement
The reservation reserves you pre-construction condo at a specific price and usually a specific floor plan. Usually with the Reservation agreement you will have to make a small
deposit that varies project to project.
The deposit is held in escrow and you can cancel the reservation at anytime and receive a full refund.
In the first phase condos are usually sold at a big discount and the developer may plan scheduled increases.
Step 2. Contract
After the Pre construction reservation, if you decide to stay in you will normally have to provide the balance of the required down payment. Normally this is between 10% and
20% of the purchase price depending on the project and you will have to sign a “hard contract”.
During this time you will normally have time to review the condominium documents which includes community rules, budgets, unit descriptions and other important information.
This is normally your last chance to if you want to proceed or you want to back out. It is up to the developer but some projects will allow you to “flip” your contract, which is
that they basically allow you to sell you condo on paper before it is even built.
Step 3. Closing
When construction is finishing up the developer will obtain a Certificate of Occupancy on your behalf. Once this is obtained a closing date will be set if all goes according to plan
your closing date will correspond with your move in date.
Of course you also want to do you final walk through before closing and make a punch out list if needed incase there are some unfinished things.
Sometimes there can be Delays – Pre Construction delays can have an effect on
- You Interest Rate
- The Market Value of you home
- Your move in date
However preconstruction condos can get your into an investment opportunity early that can often appreciate in value before it is even ready for you to step foot in.
For More Information on buying Preconstruction Contact Us Today
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