Buying Pre-Construction
What you need to know!
Buying pre-construction condominiums is a great opportunity to get in on the ground floor. One of the best advantages of buying pre-construction is the low price in the beginning as generally compared to the prices when the building is completed. Also, you get to make some personal choices on floor coverings and other available options included in the purchase price. Upgrades are usually offered and remember you are buying new furniture selected to your own taste. Following are the steps of buying pre-construction.
The Reservation Agreement - The developer(s) have secured land or are in the process of securing land to develop their project. There are numerous local, state & federal requirements that have to be investigated and completed prior to actually building. Site plans & floor plans are designed followed by applications to the proper offices for review, hearings (if any) and permitting. At this time the BUYERS are offered an opportunity to buy PRE-CONSTRUCTION. A brochure will contain floor plans, site plans, interior/exterior amenities & PRE-CONSTRUCTION prices. Reservation agreements are written with the “intent” to buy a unit based on the preliminary information received. Buyers reserve a unit with a deposit between $7,500 & $10,000 to be held in an interest bearing trust account. The reservation agreement can be canceled at anytime with the deposit returned in full up until such time as the developer offers the buyer a purchase agreement.
PURCHASE AGREEMENT- HARD CONTRACT: After plans have been permitted for the project and the condominium documents are approved by the state, the developer will mail the buyer a copy of the documents. This will take approximately 4-6 months from the time of reserving. “Condo Docs”, as they are referred to, contain the budget, association dues, rules & restrictions, articles of incorporation, closing costs and other final details that make a condominium a condominium. The buyer will have 15 days after receipt of documents to review them & decide whether or not to enter into a purchase agreement or cancel. Buyers converting from a reservation agreement to a purchase agreement (hard contract) will need to submit the balance of the required earnest money, usually 20% of the purchase price. Ten 10%, of the earnest money will go toward building costs and the other 10% will be held in an interest bearing trust account until closing.
CLOSING: Construction will start after the developer obtains enough sales (hard contracts) to secure a construction loan. Completion of construction takes approximately 12 to 18 months, but not longer than 24 months as stated in the condo docs. Closing will be scheduled when the developer is issued a Certificate of Occupancy. Buyers will perform an inspection of their unit a week prior to closing. Most items on the inspection form will be corrected immediately but some items will take up to 30 days to correct. The time for closing will be set, whereby the balances of the purchase price plus closing costs are paid. This is the happy day when buyers move in.
Planning pays off when buying pre-construction property. Buyers need to plan so that the necessary funds are available when the time comes to convert the reservation to hard contract.
A recently completed gulf front condominium shows just how well you can do by buying pre-construction. Some of the condos were selling in the $250’s at the reservation stage. By the time the condos were completed, the same units were selling in the 340’s and up. Of course there is no guarantee that other developments will perform as well. But if the pre-construction prices compare favorable with existing re-sales, then there is a good probability that you will enjoy substantial appreciation between reservation and move-in.
For more details on Pre-construction opportunities, please contact:
White Sands Development Realty, Inc 800-858-2483 , 850-837-5788 or