How to Buy Pre-Selling Property
Buying a pre-selling property can be trickier than a regular purchase, but thousands of Filipinos do it every year.
Buying off the plan, ie. pre-selling, is when you sign a contract to buy a property before it is finished being built. If you do it correctly it can provide great rewards, primarily in terms of price.
But, as you could imagine from a process that involves buying an item that does not exist yet, it is also not without its problems. That is why it’s important that you do your homework before signing the contract.
Here is the Nook step-by-step guide to buying pre-selling.
1. Is It Right For You?
Before deciding to buy a pre-selling property you need to make sure it’s the right option for you and your family.
It can often takes 12 or more months before you actually move into the property, especially if there are construction delays. So you need to decide if you can wait that long.
For example, if you may be starting a family in the future, buying a pre-selling condo may not be a best idea as you might want a little more room for your child to play in.
You also need to consider important risks such as:
A. Falling market. this is when property prices are dropping and your property is no longer worth as much as you agreed to in the contract.
B. Poor quality construction. The end product might not meet your expectations.
C. Interest Rate Increases. Bank loan rates can go up before you settle, so plan for a buffer of at least two per cent when doing your budget.
2. Talk to Your Bank
Every bank has different policies on pre-selling properties so it is important to find out what these policies are early.
Typically, lenders want a 20% deposit which can be cash or rent-to-own. But, with potential oversupply of properties in the market, some banks consider pre-selling developments higher-risk investments, and may require larger deposits in certain situations. Or they may not finance specific developers.
Get to know their policies, and remember to stay up to date on any changes in the lead up to your settlement.
3. Research the Developer
The risks of buying pre-selling properties are significantly reduced if you choose from a company that has a proven track record of delivering preselling developments to a high standard.
Be sure to visit previous constructions to see their work. Where ever possible, always speak with previous buyers to find out about their experience and satisfaction.
4. Do the Work
If you are pushing forward with a pre-selling property, you will need to put your laptop down and get off your sofa.
Display suites offer an idea of what you can get from a developer, but they don’t really give a the full picture. For that, you need to visit the site where your property is being built and go on a tour, if possible.
Also check the local area. Find out what amenities already exist and work out whether any new developments may impact your new property. For example, sometimes people purchase a condo not knowing that another building is planned for construction next door that will eliminate the great view you thought you were getting.
5. Get What You Paid For
Before you sign a pre-selling contract, it is important you know all the features you want are included in your contract because the developer is not obliged to include them in your property if they haven’t been confirmed in writing. This extends to floor plan changes, colours, material specifications and extras such as air conditioning and appliances.
Be aware that inclusions are not always factored into the price and may actually cost more.
6. Legal Advice
Before signing a pre-selling contract it is advisable to have your contact reviewed by a lawyer.
Hire an expert with proven experience in real estate. They will be able to guide you through clauses and offer advice on what would happen in the event your developer went into liquidation.
7. Sign the Contract
Review the contract to know exactly what you are buying before locking it in.
Once you sign, you will be required to pay a deposit. The balance will be due at a future date, with buyers advised to organise the remaining balance before this date.