How does Preconstruction work?

Buying a Preconstruction unit simply means buying a unit before construction begins. Many Real Estate professionals often refer to PreConstruction sales as a "market within a market". Bargain hunters have long been drawn to the Preconstruction market because prices are lowest for those who commit the fastest. Preconstruction pricing typically advances rapidly after the opening is announced, which gives the average purchaser of a popular project very little time to reserve a unit at an early pricing stage. In many cases prices change rapidly even before the project is announced and opened to the public which makes it impossible for some buyers to participate at an ideal time.

In order to obtain the debt portion of their financing, developers must prove to the lending institutions that a demand exists for their project. Sales offices, Architectural renderings, floor plans, etc. are created to pre-sell units at a reduced proposed price. During these phases incentives are given by developers by offering various pricing levels that usually graduate upward as units are reserved. From the reservation phases to the time of contract, or shortly thereafter a total of 10-20 percent of the purchase price is usually due. Time frames and down payments differ from developer to developer. After the total down payment, there is usually no other payment required until the completion of construction which is typically 1-3 years later. If the buyer still has the unit at this point, he or she must close on the property through a mortgage or another payoff method. Some buyers keep properties for the long term and others decide to sell prior to completion of the construction, before the first mortgage payment is due. A buyer's purchase agreement will specify whether or not a buyer can sell before closing. It is important for a buyer to know all aspects of a development prior to purchasing a unit.

Preconstruction Networks LLC (PCN) specializes in assisting its clients in participating in early pricing opportunities in the preconstruction market. PCN.s Developer contacts and market knowledge will help members get into desired projects when timing is critical.

For more information on Preconstruction projects in your area, please contact a PCN specialist today.