There are several steps to buying a pre-construction home, townhome, or condominium. They can vary from developer to developer, but the basic components are:
1. Reservation Agreement
You give a 3%-10%deposit to reserve the unit and secure the price (although the builder can reserve the right to change the price in the contract). The deposit is held in escrow and you can cancel the agreement at any time with a full refund.
2. Covenants and Restrictions/Condominium Documents
When a development is approved for construction, the developer submits covenants & restrictions/condominium documents (including budgets, association rules, unit descriptions, materials and other important information) for approval by the state. Once the documents are approved, they are sent to you for review. Read them carefully to make sure that you will be comfortable living by the association rules.
3. Right of Rescission
In some states, once you receive the covenants/condominium documents, you may have a specified period (e.g., 3 days for single-family homes and townhomes; 15 days for condos) to decide whether you would like to proceed into a binding contract. If you don't want to proceed, you can exercise your right of rescission and withdraw with a full refund. Consult a REALTOR® or an attorney to find out if the right of rescission applies to you.
4. Hard Contract
If you don't withdraw, you'll provide the balance of the required down payment and sign a binding contract agreeing to purchase the property. You generally have seven days after that to cancel. This is your last chance to walk away with no penalty.
When construction is nearly finished, the developer will obtain a Certificate of Occupancy on your behalf. A closing date is set when you will hand over the balance of the purchase price and sign the final documents. If all goes according to plan, your closing will coincide with your move-in date and you will be ready to enjoy your home.
I do not provide legal advice. Buyers should always consult with legal and investment/finance professionals before making a decision.