Dear customers
I have been asked by many client that are new to Pre Construction to explain the step by step process of Pre Construction: Below you will find all the information you need to understand the fundamentals of Pre Construction.
RESELL LETTER GIVEN BY THE DEVELOPER ALLOWING YOU TO RESELL
Attached is a letter that I Jiany M (A Real Estate Agent, and Investor) have received 7-8 months after purchasing (Putting 20% down) a unit at The Plaza in Brickell, Downtown Miami. This letter is from the developer (Related Group). It gives me the ability to RE-SELL my unit prior to closing. This is what the developer mails you " the buyer" that ALLOWS YOU to RE SELL your unit.
CLICK HERE TO ENLARGE
Re-sell is it allowed why, and why not? Pre construction is a process by which the developers offer certain clients the opportunity to buy units in a building that is being developed before the construction begins. As a result buying at a pre construction stage can offer substantial savings over what buyers will pay when the building is completed.
A new condominium/apartment building is a major project and construction lenders/Banks want to see that a project will attract enough interest (buyers) before deciding to finance it. By selling a certain percentage of units in the building during the pre construction phase the developers are able to secure the best financing from construction lenders and can usually move the project forward far more fater than if no pre construction commitments had been made. The pre construction process results in a substantial advantage for the developer because he can acquire necessary funding and gauge the prospects for the success of the project without investing too much capital. The developers realize that the buyers are making a commitment without even seeing a physical unit, and they will offer a very attractive pre construction pricing to lure interested buyers .
The pre construction process also results in several advantages to the buyer of pre construction units whether they are buying for themselves or for investment purposes. The developers offers the ability to reserve a particular unit in the building about 1-2 years before the project is completed for only about 10-20% deposit on the total preconstruction price of the unit . This money is held in an escrow account and is not transferred to the developer until the official closing upon the completion of the project. Once the building is completed, the buyers that reserved at the preconstruction prices, will close on their purchase of the unit at the original preconstruction price. Much like buying at today at the prices of two years ago! Most of the time this results in further profits for the buyer because the prices in a building almost always appreciate from the time construction begins. In the hottest markets such as South Florida and Las Vegas yearly appreciation averages over 20%. That is a sizeable 40% return on investment over a two year period. Very few investments, if any, can match that kind of return. Actually, your able to buy with 20% down, and appreciate 100% of the total worth of the property.
Basically, purchasing or investing in preconstruction real estate can be an extraordinary opportunity for those who are patient and knowledgeable enough to take advantage of it.
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 directly at: 954 274 1015 or
Think once choose
Jiany with FloridaRealtyFinder Group.
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