Tips for Buying a Preconstruction Condo
Buying a condo when it’s in the pre-construction period may seem too rushed. In that scenario, it would appear that the unit is being purchased based on the architectural drawings on the developer’s sales site. The reality, however, is that buying a unit before construction is complete is not that easy.
Developers tend to modify layouts of a unit layout as work progresses. This is a necessity given the large number of changes that occur during construction. Purchase contracts are written to be advantageous. For example, a late completion of a complex will force buyers into delays. They may even be put in the position to occupy your unit while the proper permits are still being processed, as well as certain aspects of the construction itself.
Buyers can also fall victim to developers trying to sell early-stage units that still own more than 51 percent of the condominium project. As time passes, the developers may not be able to sell the remaining units.
A condominium that is unable to attract new buyers is likely to experience a large decline in the total value of its units. After realizing that there is not a high demand, the developers will decide to rent any unsold units. The overall unit value falls even lower.
It is recommended that buyers consult with an experienced attorney to include their own conditions in any purchase contract. By determining a fixed completion date, the buyer can ensure that they will get their deposits back if a developer gives an inaccurate time estimate. These types of arrangements can even help protect the existing value of previously sold units.
The timing of completion should be in the hands of the buyer. It is strongly recommended that the proceeds from the sale of a unit, as well as its deed, remain in escrow under the supervision of the developer’s attorney. Only once the developer has sold up to 51 percent of their units will this cease. Whoever buys the unit will have to pay occupancy fees to the developer, equal to a combination of the monthly maintenance fees and the advance mortgage, as long as their agreement goes according to plan. Many developers will try to push them without sticking to the terms you’ve set, so be aware of how your dealings with them proceed.
You should also take into account the maintenance fees of the condo. Only for the first year of operation after unit owners take over the complex are they guaranteed. Developers tend to calculate an initial budget based on the lower end so that condos attract more buyers overall.
Over the years, most unit owners will assume control of a complex. It’s almost like it’s a rule. Subsequently, they are hit with a noticeably higher monthly maintenance fee that is meant to take care of excess developer costs. Starting in the first year, buyers will assume and expect to see higher maintenance fees. Naturally, this comes after the completion of the condo.
