A pre-construction condo is exactly what it sounds like: it’s a condo that has yet to be built. Pre-construction condos are a popular choice with homebuyers who want to live in a brand new condominium that can still be customized to their specifications.
Developers sell pre-construction condos very early in the development process to help finance the rest of the project. Sometimes, the condo development is still in the planning stages, at other times, the developer has a broad vision or concept for the development, but not a lot of details. In other developments, the plan is in place, the concept has been approved by the local governing body, and floorplans are available. It just depends on the time at which you first approach the developer.
The Advantages of Buying Pre-Construction
The advantages of buying a pre-construction condo are similar to the advantages of buying a new construction or custom single-family home.
Other Advantages of Buying a Pre-Construction Condo Include:
Developers want these condo units to sell! Selling them ahead of time helps drum up interest and demand for the project. It’s not unusual for developers to offer exceptional deals for pre-construction units, and they usually cost less than existing/resale condos.
One thing to note:
The price for pre-construction condos will increase the closer the development is to being completed.
New, New, New!
New condo, new everything. The entire development is new, not just your unit. That means new appliances, new flooring, freshly painted walls, new heating and cooling systems. You won’t have to worry about needing to replace anything in the building for, on average, 10 years! For added peace of mind, most developers offer a warranty plan for anywhere from 1-7 years after move-in.
The earlier you get in on a pre-construction sale, the more choice you’ll have as to which unit you can purchase. You will get to choose your unit’s location, square footage, floorplan, flooring, countertops, cabinets, and add any upgrades that you want. Miami Real Estate Broker, Carlo Dipasquale, advises getting in as early as possible:
“Signing early typically allows you to get the deepest discounts that the developer will offer, often referred to as ‘first tier pricing’. Deposit requirements are low and you have the ability to cancel without penalty during the earliest stage of development. You will also have a wider selection of units when you get involved early, giving you the opportunity to choose the condo that fits your needs.”
New condo developments are often located in areas of high demand, providing you an opportunity to live in these areas for less. Before you commit to a pre-construction condo, research the location and any additional development plans to make sure you will be happy living there.
Possible Disadvantages of Buying Pre-Construction
As exciting as pre-construction condos are, they aren’t for everyone. Keep these points in mind as you explore pre-construction condo offers.
It’s Not Built Yet
Some people have a hard time visualizing a development once completed. If this is you, you may be better off waiting until the development is more built out before buying in. If you understand conceptual plans and realize that the plans may be tweaked as the project goes along and are okay with that, a pre-construction condo may be right for you.
All the Usual Condo Fees Apply
In addition to the purchase price, you’ll also have to commit to paying maintenance and upkeep fees, as well as fees for your Condo homeowners association, but these fees are present even if you bought an existing condo. Don’t be surprised if these fees rise over time as the condo association learns how much it actually costs to maintain the development.
You’ll Need 20% Down
Developers want serious buyers for pre-construction units. They typically ask for 20% down to ensure your commitment to the project. The good news is, this 20% down payment can sometimes be paid in installments, but in almost every situation, the money will be tied up throughout the construction period. If you do change your mind during that time, you may not be able to get your money back until the development is complete.
At closing, you will still have to pay closing costs, but again, you’d have to pay closing costs if you bought an existing property as well.
Anytime you build new, there’s a risk of construction delays. If you are dead-set on a specific move-in date, or don’t handle delays very well, a pre-construction condo is not a good choice. Ask the builder about completion dates and make sure they work for you, but leave yourself some wiggle room if construction gets off schedule.
Advice to Follow When Shopping for a Pre-Construction Condo
You definitely want to do your homework if you are considering buying a pre-construction condo. Remember, that the sales office is there to sell. It’s on you to ask the questions you need answers to in order to make an informed decision about making a pre-construction purchase.
Research the Developer
Research past projects by the same developer to see how the project progressed, if there were any issues that cropped up during the project, and where the project stands today.
Even though the development isn’t built yet, you can still research comparables to see if you are getting a good price. Look at new and existing condos and compare their prices based on square footage, amenities, and location to the offer you’re considering.
Buying a pre-construction condo isn’t right for everyone, but for those who willing to wait through the construction process and can handle the ups and downs that come with creating a new development, they can be an excellent way to buy a new condo for a lower price.
Liyya Hassanali is a Project Manager and Content Strategist for Kinship Design Marketing, a boutique agency that provides marketing strategies and content for architects, interior designers, and landscape designers. She is a 15+ year veteran of the marketing and advertising industry, working closely with her clients to provide written content that meets their marketing goals and gets results.
Liyya is passionate about home design and décor and is a confessed HGTV and Pinterest addict. When not providing content writing services for her clients, she can be found browsing home décor sites or spending time with her family.