One of your most important decisions as a potential buyer is whether to go with a pre-construction property or an existing home. Pre-construction homes are properties that have been proposed by a developer, but have not yet been built. When you purchase a pre-construction home, you are putting money down before construction begins.
The main advantage to buying into a new development before construction starts is that you often get a lower price than if you buy when construction is complete. The reason for this is that developers typically need pre-construction sales of 50 percent to 90 percent of the units in a development before they can borrow funds to begin construction.
Pre-construction homes and condos can also get you in on the ground floor of an investment that will appreciate. The market value of pre-construction units generally increases during the one to three years it takes to build a development, so your unit may be worth more than you've paid for it before you set foot in the place. In addition, you can often choose from a variety of finishes and flooring options, allowing you to customize your home.
Seasoned pre-conconstruction investors have been known to more than double their money in a short period of time. Even newcomers have witnessed a 15 to 30 percent appreciation in Jacksonville with pre-construction.
Advantages of Buying Pre-Construction with Will Vasana
As a top local area expert in Jacksonville real estate and pre-construction investments, I can put my experience to work for you and can benefit you measurably. For my complete credentials, click here.
Since I'm an independent REALTOR®, and not affiliated with any developer, I can help you navigate all your choices, and make an unbiased and well-informed decision that never compromises your objectives. The developer pays my commission, so your purchase price is the same whether you use me or not. In fact, the developer will not reduce the price of your home even if you are not represented by a REALTOR®. The developer pays the commission to REALTORS® as part of their anticipated marketing expenses as we provide valuable services and make the site agents's jobs easier by assisting the customers with community information, financing, short-term rental during the construction, home inspection, walk-through, and closing.
I have an excellent reputation and relationship with Jacksonville's developers, which can provide you a marked advantage. I can be privy to a wider selection of desirable homes and condo units before they're made available to the public, and before they sell out.
I can help you accurately assess the many variables that determine the potential of a pre-construction investment: location, type, the track record of the developer, the reputation of the architect, true re-sale or rental possibilities and the right timing for your investment home.
I can also help you understand the developer's contract. Developer contracts are very developer oriented and vary by developer. I can help explain the things you need to watch for: assignability, transfer fee, marketing your unit prior to closing, restrictions and policies, financing and payment schedule, taxes, contributions to working capital, maintenances fees, walk-throughs and punch lists, your options and responsibilities at closing, the developer's warranty, and more.
Buying a pre-construction home, townhome or condo can be a great opportunity, but there are potential risks associated with it. Because you are buying into something that does not yet exist, there could be unforeseen problems and setbacks before you move into your home. By understanding the risks and planning carefully, you can avoid complications and come out a winner.
Use my checklist to help cover the bases:
- Consult with a real estate professional to review your contract closely and ensure that the terms are reasonable. Is there a clear timeline listed for the construction process? Can the developer change the finishes you've chosen without notifying you? Keep in mind that contracts prepared by or for the developer will generally favor its interests, not yours.
- Research the developer. Find out what the company's track record is with big residential projects. Has it had any disputes? Has it cancelled any projects? What is its reputation with the Better Business Bureau?
- Understand your exit points. Because there are several steps to buying pre-construction, make sure you know the "drop dead" date, or the point after which you can't back out. This point is often before construction is complete, so make sure you're comfortable with your commitment
- If you are buying a house, inspect it before you close. You should consider bringing along a qualified home inspector to make sure that the construction is sound and the home meets your expectations
- Visit the site regularly. Is construction progressing on schedule? Make sure the developer is comfortable with your visits.
- Know your rights. Find out what your home warranty covers you from major structural flaws in your home for a specified period of time.
- Prepare for construction delays. Developments fall behind schedule for reasons as varied as strikes, material shortages, regulation changes and bad weather. While delays may not be the fault of the developer, they should make a good faith effort to rectify the problems.
Delays can have an effect on:
- The interest rate of your loan. As your closing date approaches, you may want to lock in an interest rate. If a construction delay affects your closing date, find out whether your lender is willing to extend the lock-in period.
- The market value of your home. Check your contract to ensure that you pay the presale price even if your home increases in value before closing. While developers can reserve the right to raise the price, it's considered unethical.
- Your move-in date . A delay in occupancy can affect the money you spend on an interim rental property, the date your children change schools and more. Try to remain flexible about your exact move-in date. Also, make sure that the delay of your occupancy date is reflected in your closing date, and notify your lender of the change. You don't want to start making mortgage payments before your home is completed.
The best way to mitigate these potential risks, as remote as some may be, is to work with an authority on Jacksonville real estate like me, whose specialty is pre-construction investing. I can help you carefully measure the risk-reward ratio, so you optimize your ownership.
I do not provide legal advice. Buyers should always consult with legal and investment/finance professionals before making a decision.