Should
a buyer use the services of a realtor
when purchasing pre construction properties?
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Yes,
a realtor has relationships with developers that can be
quite beneficial to the buyer. The realtor is also in a
position to inform you when new pre construction opportunities
arise before they are even made public. This means the buyer
may have an exclusive opportunity to get in on the ground
floor of pre construction prices. Your realtor will find
out information about the pricing in similar buildings being
built in the neighborhood along with information about civic
and cultural developments. Furthermore the developer compensates
the realtor, so in effect you are getting the services of
the realtor for FREE. Since the purchase price of the property
is the same with or without a realtor it makes sense to
have a person who is not just a real estate agent advise
you, but a real estate consultant. |
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Most
developers are unwilling or unable to place all their funds
into construction of a development that is not assured of
success. Also most construction lenders (Banks) feel the
same way and want to be assured the construction loans can
be repaid in a timely manor. The answer for the developer
is pre-selling the development. If for some reason it does
not sell then the developer is out only a small investment.
Pre-selling of buildings and resort condominiums has become
a standard process, and virtually every condominium is pre-sold
today. Once the required pre-sales have been reached and
construction has begun it is a sure sign of a successful
development. |
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How
do I know which project to pick in an area
with multiple projects being built at the same time?
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You
pick the building with the least amount of units. Why? For
an investor it means less competition from other investors
within the building looking to resell at the same time as
you. You should also pick one of the first projects to be
finished in the same price range as your building. Why?
It is the same concept as above but on a larger scale. Other
investors in other buildings in the area will also be looking
to resell as soon as they can. By minimizing your competition
you increase your profit and minimize your time in the property.
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Should
I buy on a low or high floor? |
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You
pick the building with the least amount of units. Why? For
an investor it means less competition from other investors
within the building looking to resell at the same time as
you. You should also pick one of the first projects to be
finished in the same price range as your building. Why?
It is the same concept as above but on a larger scale. Other
investors in other buildings in the area will also be looking
to resell as soon as they can. By minimizing your competition
you increase your profit and minimize your time in the property.
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As
a purchaser what protection
do I have buying a pre-sale? |
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That
depends on your objective. If you are looking to resell
for a profit as soon as possible the best unit to purchase
is the least expensive on a low floor (view optional). Why?
These units show the highest percentage of return based
on previous resale figures thus having the widest margin
of profit. On the other hand if you are looking to rent
the unit to a tenant, you should consider a more expensive
unit with a nice view. Why? Put yourself in the shoes of
the renter. A renter expects a nice view in an area like
Florida. Renters are on vacation and they want to see water,
parks, boats, etc. |
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As
a purchaser what protection
do I have buying a pre-sale? |
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While
I can't speak for every location in the country, here in
Florida the purchaser of a pre-sale condominium is protected
in several ways. The most important protection under Florida
law is your money or deposit is held in escrow until the
condominium is completed and only released at a proper real
estate closing where the unit is transferred to you unless
the developer specifically indicates in the contract that
a portion on the deposits will be used for construction.
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What
is a Public Offering Statement? |
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A
Public Offering Statement
includes condominium documents, association by-laws, and
the pre-construction purchase and escrow agreement. Under
Florida law, purchasers have fifteen (15) days from receipt
to review and complete or rescind any pre-sale purchase
and escrow agreement. |
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buy a pre-sale when I can
buy one already completed? |
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Two
basic reasons:
(1) Limited location and availability.
(2) By purchasing at pre-sale you are able
to buy at a reduced price, and coupling this with the appreciative
expectations upon completion makes it a very wise investment.
Many people have purchased pre-sales for reason number 2,
and many of these people have sold their units even before
the building is completed. |
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How
much money do I need to
contract a pre-sale condominium? |
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With
most pre-sale developments all you need is a 10% deposit
of the pre-sale price at contract time. |
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Can
I sell my pre-sale purchase before completion? |
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In
most cases, yes! You must have written permission from the
developer, which is not a problem in most cases.
There are two basic ways to re-sell. (Depending on the developer)
(1) Selling your rights to the condominium
unit by transferring or assigning the contract to a subsequent
purchaser. This in reality is not selling real estate instead
you are selling contractual rights. In some cases profits
may be smaller than the second option, but it has the same
results!
(2) Selling your unit under a real estate
contract to be consummated upon completion of the condominium.
Two real estate closings will occur simultaneously, your
purchase, and the sale to the subsequent purchaser. |
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You
have two options in most cases:
(1) The developer may resell the unit for
you for a commission.
(2) The realtor may sell your unit for
a commission. |
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