The process of Buying New Construction is completely different from Buying already existing property (re-sales). The main reason to that is that with pre-construction there is nothing yet built so there is nothing to view for the Buyer and to get that “home feeling” before choosing one property over the others. So that sounds a bit scary for some Buyers
But there are some advantages that over cross the negative part.
First of all you are getting brand new home or condominium unit, with no maintenance issues or previous owner problems and stories behind the real estate. Second, is that when you are Buying on pre-construction stage the developers are giving substantial discount to the price over the unit, so normally you can get your unit 10% to 30% cheaper than the similar unit will be sold by the same Developer after the building is complete . Third, Developers are trying to be competitive and for their pre-construction projects they are using the most courageous ideas, advanced technologies and newest materials in the industry. Buyers are getting not just new product, but last generation real estate which is nearly impossible to find on secondary market.
1.Choose the project and the unit
2.Sign Reservation Agreement (normally 10% deposit required)
3.Sign the Purchase Contract (normally additional 10% deposit required)
4.Constriction Start. Groundbreaking (normally additional 15% deposit required)
5.Roof Top reached (normally additional 15% deposit required). 1 year after Ground break.
6.Closing. The balance to close (normally 50% deposit) should be delivered. Approximately 1 year after Roof Top.
Most of the developers are using bank loans to build a new development. In order to receive construction loan builders will usually have to find buyers for about 50% of their future units. That is one of the reasons Developers are pricing their units cheaper at the pre-sale reservation stage and early stage of selling. As long as building is getting sold out the pricing in the building will normally goes up.
When developers reach the sale thread required by their bank – the construction loan is issued by the lender and construction starts.
Pre-sale reservation stage is most popular between the investors and savvy buyers. Those Buyers that like more security in the process prefer to get in to the purchasing process when the constriction already started and project is actively being built. Some Buyers Do not Buy new constructions until the building is built and they can actually see the property they are about to Buy. So there are possibilities for any kind of Buyers in pre-construction of real estate.
AskGrand.com Team is ready to help any kind of purchaser of pre-construction of the condominium unit or new home. We are dedicated to walk you through the entire procedure, explain you every stage of the process and help you to avoid any possible pitfall during the purchase while helping you to find the right property that will meet your needs.
The information about new project is limited at the stage of pre-sale reservations in most of the cases. This is mostly because Developers start to collect reservation agreements even before they get final approvals from the state and city authorities for their projects. Reservation agreement itself is basically agreement between the Buyer and Developer to intend to buy the unit in specific development. Buyers normally have to wire initial deposit (about 10%-20% from the purchase price of the property) to the Developer’s Title company escrow account in order to reserve the unit. But the Reservation agreements are normally voidable by the future Buyers at any time before signing the Purchase Contract as well as its voidable by the developer if the project will not sell out or developer fails to obtain financing or any construction permits or approvals. If any party cancels on the reservation stage all the deposits a returned. Basically no obligations agreement. Buyers are not obligated to Buyer and the Developer is not obligated to sell at that stage. Everybody is expressing their intensions only.
Developers go to the next stage normally when:
A. Pre-construction project is approved by the government and city authorities
B. Developer sales of the project are going well and he is sure that it will be profitable
C. The project is approved for construction loan from the bank.
At this stage Developer notifies all his potential Buyers that signed reservation agreements that they will be turning into contracts. The contract itself is legally binding document 30-50 page long. It describes the future property, its price and schedule of payments as well as rights and obligations of the parties of the agreement. With the signing of the purchase contract Buyers normally have to deliver additional deposit (about 10%-20% from the purchase price). At this point Buyer Deposits are normally become non-refundable if he simply changes his mind, so sometimes some of the Buyers that signed reservation agreement back out.
As per Florida Law Even after the Contract is signed there is a 15 days rescission period for the Buyer to change his mind and cancel the contract. After the period expires – the Buyer is completely locked into the contract and has to continue with the purchase.
After reaching certain amount of executed contracts and collecting deposits from the Buyers at the same time obtaining all the necessary building permits and construction loan developer moves his project to building stage. It normally happens 2-4 month after contract signing begins. At this stage Developers traditionally collect 3rd portion of the deposit from the Buyers (10%-20%). Construction starts. At this stage more particular information about the project becomes available as the project and its details already approved by the city.
Construction Top Off
After Groundbreaking stage and construction moving forward - collection of additional deposits from the Buyers varies very much. The most popular is that next deposit payment due will be at the roof top (or Top Off) of the building (about 1 year after Groundbreaking). But sometimes Developers collect the next portion of deposits when the building reaches the floor of the future Buyer’s unit or the floor of some building amenities (for example the floor of Fitness Center). So that deposit should normally complete 50% (sometimes 60%) of the total purchase price before the closing.
Some of the Developers prefer to set up number of days after the execution of the contract when additional deposits are due (for example in 120 days after execution or 150 days and 180 days and so on).
When developer finishes the roof of the building some of the interior works on the lower floors are already done as well. Developer continues with the interior work and sometimes Buyers are asked to pick the interior finishes to install by the Developer if that is an option in the project. If those interior upgrades are additional do the price the Buyer is asked to pay for them at this point.
When the Building is complete inside and out and Developer receives certificate of occupancy from the City the Closing on the units starts. Buyers are informed in advance about their intended closing date so they can prepare. There is a walk-through inspection performed by the Buyer and the Developers representative to make sure that the unit is delivered according to the contract and all required finishes are installed. Buyers are encouraged to check their units thoroughly. If there anything that does not work property in the unit or installed incorrectly – developer should fix it.
After the inspection Buyer should wire the rest of the purchase price or obtain financing for the rest of the purchase price (normally the remaining 40%-50%) together with all closing costs and fees to the Developers Title Company from closing. At this stage all paperwork gets signed by parties, the money wired to the Developer and the keys are handed over to the Buyer. The deal is closed.