Pre-Construction real estate Qs

[Missing Sock]

Thought I would tap the real estate people here and whoever with any helpful experiences. I'm looking into a pre-construction loft/condo unit in downtown Denver. I'm generally curious what the positives/negatives are of purchasing pre-construction.

Just a couple things first, I realize building delays are probably the biggest negative but not really an issue for me as I have a steady job and am not in any real rush. My understanding has always been you actually close on the place after construction is complete, but after reading the docs it looks like your deposit is only good for 21 days....could I be misreading? Sent an email to the broker for clarification but am curious what the norm is. Also, what kind of price negotiation is there if any? The units are selling but they don;t look like they are flying off the shelves.

Thanks in advance for all help

[mcsquared]

Man, the world works in mysterious ways. I am embroiled in a similar situation, although from the other side. I am building a duplex. I have a buyer interested in one of the units. And in my typical sink of swim approach to life I have no idea on how to go about handling this without seeming like a bumbling idiot, although that is actually what I am. I am eagerly hoping many many smart mags respond to this thread.

I guess that doesn't help you any. But what I am thinking about how it works is just like any other real estate deal. But with a bunch of milestones and stipulation that must be met. And there are a few stages along the way when the buyer can get out with their deposit. What these milestones are, I am not sure.

[snow_slider]

Be careful when visiting the model. If you plan to use an agent, and already visited the model (and signed their little book) without your agent with you, they might not let you use an agent. Remember, the seller pays for the agents on both sides of the negotiation, so a builder doesn't want buyers to have agents.

[SKISC]

Generally you will not close before construction is complete. SC state law will not allow that until a certificate of occupancy has been given by the Building and Codes department. Your deposit should be good throughout the building and should be held in a escrow account.

If you are required to pay before construction is complete you will more than likely be getting a construction loan in which you pay only interest and nothing towards the principal. When the construction is complete you have another closing for your final loan.

[RootSkier]

Be careful when visiting the model. If you plan to use an agent, and already visited the model (and signed their little book) without your agent with you, they might not let you use an agent.

Hmm...so you are saying lots of builders put buyer/broker type language in their sign in book?

That is some pretty weak sauce, but I guess in a smoking hot market you can pretty much do whatever you want. I bet that in a slowing market, they might take an offer that another agent wrote, anyways.

[heelbilly]

Pre construction contracts are almost always stilted in the favor of the developer. They can inlcude non refundable deposits, developers right to change/subustitute items at builders discretion, as well as other thorny clauses that need to be read carefully.

Clsosing on pre-contruction properties is most often after the developers gain a certificate of occupancy. Essentially, this certificate means the property is complete and habitable. It does not mean that the property has been finished to the buyers liking, but enough to get a govt stamp.

I sell RE in Summit County and live in Frisco. I sold a mil+ condo on a pre construct contract on the lake last summer. In a hot market there is little to mostly no negotiation on the price, but maybe you can get an upgrade package or a changeout for a discount if you negotiate up front.

In a slower market, I believe you could negotiate a few percent on the deal, but it may work better to get upgrades/bonus rooms or some other improvement instead. Good luck and read the paperwork slowly!

[cascadianwarrior]

Up here in WA you can't get final approval from the lender until the construction and appraisal are complete. After all, the bank isn't just going to give you $$$ for a projected home.

If you're not working with an agent, do so. A developer will nearly always tilt the odds in their favor. Without the knowledge and understanding of the way the deal is structured it could leave you forfeiting your earnest money or worse. A Realtor will know the ins and outs of contracts and should be able to help get the price down (or gain upgrades) if the market allows.

Best of luck!

[Pow4Brains]

FWIW - A friend of mine put a down payment (5k) on a condo in Steamboat and the project was delayed 1 1/2 years from the original completion date. By the time it was done it appreciated 130k. The original sale price was 210k.