ORANGE BEACH ALABAMA - ORANGE BEACH Homes and Real Estate For Sale

Article

GOD BLESS AMERICA

BUYING PRECONSTRUCTION Preconstruction sales are those real estate transactions that are initiated prior to a particular project being constucted. I have many preconstuction value opportunities currently available. This article is intended to explain the different phases of preconstruction sales as well as answer some commonly asked questions. Q. Why do developers sell preconstruction rather than build first? A. Developers sell preconstruction, even at lower prices because they usually need pre-sales in order to secure their construction loans. Lenders sometimes require as much 80% of a project be sold before construction can begin. Q. What is the benefit of buying in the preconstruction phase? A. Prior to construction, proposed developments have historically offered the incentive of lower introductory prices to generate a higher number of sales in a short period of time. Traditionally, prices usually increase several times before the completion of a development. Q. Why do developers discount the prices to those considering buying preconstruction? A. Prices are discounted as a way to give buyers an incentive to buy something they can't see or touch. Sky and paper are harder to sell than being able to walk though a completely furnished, finished unit. Discounts make the difference. Typically there are four phases of Preconstruction sales: 1. RESERVATION AGREEMENT: The developer has site plans, preliminary floorplans and prices. All of which are subject to change. Buyers reserve units with a nominal 'intent to buy' deposit of 5% or less of the purchase price. The deposit is made to an interest bearing bank trust account. It does not go to the developer and can be refunded at any time. There is no risk. 2. RIGHT OF RECISION PERIOD: Also called the 'document examination' period. Developers deliver the state-approved Condominium Documents. These 'condo-docs' contain the final, exact details of the project including site plan, floorplans, amenities, rules, by-laws, budget, etc. A buyer then has 15 days to decide whether to go ahead with the purchase or to get their money back. 3. CONTRACT FOR SALE: Buyers put up the balance of the required earnest money ' usually 20% of the contract price. The contract becomes binding on both parties. Not all of the reservation agreements will convert to a contract for sale. There are always a few people who fail to plan and are caught short of funds. If enough convert a developer gets the construction loan. If the developer comes up short on conversions, he or she will have to obtain more sales before construction can begin. 4. CLOSING THE SALE: The condominium is complete and a Certificate of Occupancy is issued. The buyer does a walk-through inspection and then goes to closing where you put up the balance of the purchase price plus closing costs. This is the day you get to move in. Planning and patience pay off when buying precontruction property. You need to plan so that you have the necessary funds when it comes time to convert. And you will need patience waiting for the documents to be delivered and the condo to be built. Traditionally between the reservation phase and completion there can be significant appreciation. Of course there are no guarantees that all projects will perform as well others. If preconstruction prices continue to compare favorably with existing resales, then there is a good probability you will enjoy substantial appreciation for your patience.