Why
Pre-Construction?
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Should
a buyer use the services of a realtor when purchasing pre
construction properties?
Yes, a realtor has relationships with developers that can
be quite beneficial to the buyer. He/she can negotiate
the terms of the contract for you and advise you on the
best course of action depending on your needs; (the developer
may not since it’s not always in their best interest
to do so), the realtor may know some vital information regarding
the financial status of the developer. The realtor
is also in a position to inform you when new pre construction
opportunities arise before they are even made public. This
means the buyer may have an exclusive opportunity to get
in on the ground floor of pre construction prices. Your
realtor will find out information about the pricing in similar
buildings being built in the neighborhood along with information
about civic and cultural developments. Furthermore the developer
compensates the realtor, so in effect you are getting the
services of the realtor for free. Since the purchase price
of the property is the same with or without a realtor it
makes sense to have a person who is not just a real estate
agent advise you, but a real estate consultant.
Why Pre-sell?
Most developers are unwilling or unable to place all their
funds into construction of a development that is not assured
of success. Also most construction lenders (Banks)
feel the same way and want to be assured the construction
loans can be repaid in a timely manor. The answer for the
developer is pre-selling the development. If for some reason
it does not sell then the developer is out only a small
investment. Pre-selling of buildings and resort condominiums
has become a standard process, and virtually every condominium
is pre-sold today. Once the required pre-sales have been
reached and construction has begun it is a sure sign of
a successful development.
How do I know
which project to pick in an area with multiple projects
being built at the same time?
You pick the building with the least amount of units. Why?
For an investor it means less competition from other investors
within the building looking to resell at the same time as
you. You should also pick one of the first projects to be
finished in the same price range as your building. Why?
It is the same concept as above but on a larger scale.
Other investors in other buildings in the area will also
be looking to resell as soon as they can. By minimizing
your competition you increase your profit and minimize your
time in the property.
Should I buy on a low or
high floor?
That depends on your objective. If you are looking to resell
for a profit as soon as possible the best unit to purchase
is the least expensive on a low floor (view optional). Why?
These units show the highest percentage of return based
on previous resale figures thus having the widest margin
of profit. On the other hand if you are looking to rent
the unit to a tenant, you should consider a more expensive
unit with a nice view. Why? Put yourself in the shoes of
the renter. A renter expects a nice view in an area like
Florida. Renters are on vacation and they want to see water,
parks, boats, etc.
What does "need not
be built" mean?
This is a question we get quite often and I will attempt
to explain. During the marketing period of a pre-sale
and before the developer knows if the project will be successful
the "need not be built" disclaimer gives the developer
protection from suits of nonperformance if he does not proceed
with the construction. A very small protection for what
sometimes is a very large investment risk.
As a purchaser what protection
do I have buying a pre-sale?
While I can't speak for every location in the country, here
in Florida the purchaser of a pre-sale condominium is protected
in several ways. The most important protection under
Florida law is your money or deposit is held in escrow until
the condominium is completed and only released at a proper
real estate closing where the unit is transferred to you
unless the developer specifically indicates in the contract
that a portion on the deposits will be used for construction.
What is a Public Offering
Statement?
A Public Offering Statement includes condominium documents,
association by-laws, and the pre-construction purchase and
escrow agreement. Under Florida law, purchasers have
fifteen (15) days from receipt to review and complete or
rescind any pre-sale purchase and escrow agreement.
Why buy a pre-sale when
I can buy one already completed?
Two basic reasons:
(1) Limited location and availability.
(2) By purchasing at pre-sale you are able to buy at a reduced
price, and coupling this with the appreciative expectations
upon completion makes it a very wise investment.
Many people have purchased pre-sales for reason number 2,
and many of these people have sold their units even before
the building is completed.
How much money do I need
to contract a pre-sale condominium?
With most pre-sale developments all you need is a 10% deposit
of the pre-sale price at contract time, a second 10% deposit
when the developer breaks ground to hold the unit until
completion. Some developers require that you act as
the construction lender and pay the entire purchase price
over predetermined construction stages (this is very rare
in Florida), which can be somewhat limiting for some people.
Irrevocable Letter of Credit or ILOC is sometimes utilized
to contract a pre-sale condominium. The ILOC enables a purchaser
to keep his money working in other investments during the
marketing and construction period.
Can I sell my pre-sale purchase
before completion?
In most cases, yes! You must have written permission
from the developer, which is not a problem in most cases.
There are two basic ways
to re-sell. (Depending
on the developer)
(1) Selling your rights to the condominium unit by transferring
or assigning the contract to a subsequent purchaser. This
in reality is not selling real estate, you are selling contractual
rights. In some cases profits may be smaller than
the second option, but it has the same results!
(2) Selling your unit under a real estate contract to be
consummated upon completion of the condominium. Two real
estate closings will occur simultaneously, your purchase,
and the sale to the subsequent purchaser.
Who may resell my condo?
You have two options in
most cases:
(1) The developer may resell the
unit for you for a commission.
(2) The realtor
may sell your unit for a commission.
In most cases this is solely up to the client discretion
who they feel more comfortable with.
What are the current pre construction price ranges in the
Miami/Ft. Lauderdale areas?
$200 - $275 per sq. foot Terrific
buy
$275 - $325 per sq. foot Great
buy
$325 - $375 per sq. foot Depending
on the project location and the amenities it could stil
be a good buy.
$375 - $450 per sq. foot Luxury
building
$610 - $1,000 per sq. foot Ultra luxury
building
Thank your for your time, and we look forward to a long
and profitable relationship with all of our clients.
For more information on upcoming pre construction projects
and how to invest in them, please feel free to contact us.
Click here to Preconstruction deals |
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