Pre-construction Prices are generally lower than those of existing condominium resales. This brings up two obvious questions: 1) Why do developers discount the units for pre-construction buyers? and 2) Why do they sell pre-construction rather than build first? The answer to both questions is the same--they have to.

The prices are discounted to give buyers the incentive to buy something they can't see, touch or feel. Sky and paper are harder to sell than concrete and steel. Discounts make the difference. Developers sell pre-construction, even at the lower prices, because they must have pre-sales to get their construction loan. Lenders may require 50-80% of a project to be sold before construction can begin.

The Preconstruction Purchasing Process  

Step one- The Reservation Period

• Sign a Non-Binding Reservation Agreement
• Provide a refundable Down Payment

Preconstruction property is offered by developers as a ground floor opportunity for buyers to reserve a condominium at an initial offering price. A deposit, usually between $5,000 to $10,000 is held in escrow with a title company and is fully refundable.

Step two- Purchase Agreement

• Sign Binding Purchase and Sale Contract and Provide Deposit.

The Developer provides a set of document to the State for approval which outlines everything about the project. Once the state has approved the Condominium Documents, they are delivered to the buyer along with the Purchase and Sale Contract. The Buyer commits to purchasing the condominium and provides the balance of the deposit, typically 20% of the purchase price less the initial deposit. Often the deposit can be paid with 10% cash and a 10% Letter of Credit from an approval bank.

Step Three- Right of Rescission Period

• For 15 days after signing the Purchase and Sale Contract, the Purchaser may carefully review the condominium documents. If the Purchaser is not fully satisfied with those documents, he/she has the right to rescind the contract and receive a FULL REFUND of their deposit.

The buyer will have 15 days to review the documents and either choose to commit to the condominium reserved or the buyer may request all reservation fees be refunded.

Final step- Closing (Typically 18 to 24 months after the construction begins)

• Walk Through, Close and Take Ownership

When the project is completed, a Certificate of Occupancy (CO) is issued. The buyer will then inspect their new condominium to make sure everything is in satisfactory order. Following the inspection, the Purchaser will proceed to closing with cash or a secured mortgage.

NOTE: While there is no guarantee of appreciation, with developer approval the original purchaser can often assign his contract to a second purchaser for a higher price prior to closing. It is much like the purchase of a new home. The Buyer will inspect their new home or condo(s) and create a

Many knowledge buyers and investors have chosen this as a viable way to save thousands of dollars by purchasing at pre-construction prices. With only 10%-20% capital outlay until completion there is potential to sell at a profit before closing. It’s as easy as one, two, three, four.

In any investment, it is important to plan and remain patient. Plan to have the necessary funds when it's time to close and the patience for the building to be completed. A recently completed beachfront condominium shows just how well planning and patience pay off. In the pre-construction phase, units were selling in the $200,000 range. Once the project was completed, the units were selling in the $300,000 range. There is a great probability that you too will enjoy such a substantial appreciation for your patience.