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Purchasing a pre-construction condo typically involves four phases. The particular details of each phase will vary from project to project, but these are the basics.
1. Reservation Stage:
- Developer may offer buyer a discounted unit price
- Reserving a unit requires a reservation deposit, normally $5,000 - $10,000
- Reserving a unit typically secures your unit at today’s price
- Reservations are not binding, you can elect not to move forward, and get a full refund at any point during this stage
2. Contract Stage:
- The binding contracts will be delivered to all persons with reservation deposits
- The official condominium documents will be delivered with the contract
- The buyer will have 15 days to review these documents
- To move forward with the purchase, 20% of the purchase price is due
- Your reservation fee comes off of the deposit
- In some cases, the deposit can consist of 10% cash, 10% letter of credit
- Contracts are binding this point. You must move forward with the purchase of your unit
3. Construction Stage:
- At this point you own equitable interest in the property
- You can sell it at this point, also referred to as “flipping”
- Depending on the size of the project, construction generally take about 2-3 years
- The public becomes interested in the property as they see it being built
- Your unit can start to gain value quickly
- In most cases you will have no other fees to pay during construction; the only out of pocket money is the 20% deposit
4. Closing Period:
- A final walk through of your unit will be scheduled
- The closing attorney will schedule the time & date for your closing
- You will close on your unit, in the same manner as a typical residential property
That is the pre-construction process in a nutshell. Each project has its own set of guidelines. If you are interested in learning more about pre-construction real estate, we are here to help.
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