Should You Buy Pre-Construction Condos? Here's My Advice

By: Tracy Phelan

Should You Buy Pre-Construction Condos? Here's My Advice

Tags: Pre-Construction

Should You Buy Pre-Construction Condos? Here’s Our Advice

The Risks and Rewards of Buying Pre-Construction Condos

Buying into pre-construction condos can be a great way to make a buck, but as with any investment, there’s a certain level of risk involved. While you can usually acquire these properties on the cheap, there’s still a lot of money on the line should the development fail. So, should you buy into pre-construction condos? Here’s our advice.

The Rewards of Buying Pre-Construction

The old adage about the early bird and the worm holds true in pre-construction condo purchase. The earlier you can sign on the dotted line, the more likely you’ll get the lowest prices and best pick of the floor plan. For some people, this is enough to make purchasing basically sight-unseen worth it. For other people, however, waiting until construction begins is a smarter move. This gives them visual confirmation that the developer has obtained financing to begin construction.

The Risks of Buying Pre-Construction

Buying in the pre-construction phase means you’re purchasing something that isn’t built yet. You are basing your buying decision on floor plans, and those floor plans can change without notice. It’s not uncommon for builders to alter the floor plans as they go, making the finished unit different from the one you thought you were purchasing in the beginning. In some instances, there may be recourse if this happens, but in many cases, there is not. Another downside to buying pre-construction has to do with the developer. When the market is hot, new developers with little experience like to throw their hats into the ring. Their inexperience can have devastating results for the buyers as it often leads to the failure of the development. Your best bet to avoid this is to research the builder to find out if he has a good track record or not.

Helpful Questions to Ask the Developer

1. Where are you building? Look for builders active in your target area.

2. How much experience do you have? Find out how long he’s been building condos, how many condos he builds each year, and ask for references.

3. Are you licensed?

4. Can I tour a model? Bring along someone who’s knowledgeable about constructions and make notes of what you like and dislike as you tour the model.

5. Can I see the master plan? The community will look different in the future than it does now, so ask for the master plans from the builder and the municipality.

Final Thoughts

Buying a pre-construction condo is exciting, especially if you get in on the literal ground-floor and get a really good price. Just be aware that buying during this phase carries substantial risk should the development fail. Always do your homework before committing to anything to reduce your risk.

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