Buying Preconstruction

Preconstruction Condominiums have made many people very wealthy in Destin real estate. Some owners have even made millions. But the preconstruction real estate market has changed.

Condo developments use to take from a year to a year and half to complete. But following the series of Hurricanes to hit Florida projects are now expected to take from 3 to 4 years to complete.

Developers use to discount units for preconstruction buyers. Some still do. Prices were discounted to give buyers the incentive to buy a unit that had not yet been constructed. Some developers now take the lion's share of the potential profits. Lenders require 70% to 80% of a project to be sold before construction begins.

But with the overwhelming onslaught of preconsturction buyers in the market place, developers feel very confident there projects will be financed. So many are not concerned -- opting to keep the lion's share of profit themselves.

There are Three Phases of buying preconstruction condos. The First is the Reservation Agreement. The developer has preliminary building plans, which are subject to change and buyers make reservations with a deposit of generally $10,000. Buyers can get a refund at anytime.

The Second is when the purchaser receives the Florida State approved finalized condominium documents and "hard contract." The buyer then needs to decide whether to go ahead with the purchase or cancel. After a contract is sigend it becomes binding. The buyer pays the down payment, which is usually 20% and the developer uses these funds to help build the project.

Finally, after waiting for years, the Third and Final Phase is when the condominium development is completed and a Certificate of Occupancy is issued. This is when the remaining balance and closing costs are paid, the purchaser signs the final closing papers, and the buyer becomes the owner. So what's the catch?

There are many. Prices have been raised as much as 50% now by some developers from registration to "hard contract." Some projects are never completed. Others are left in limbo for years. Some are involved in legal battles that hang up construction for years. After all, there are two sides to every negotiation, and dealing with developers is no small thing. We've been doing it for years.

The Mike Colpitts Real Estate Selling Team is not tied to one developer. We represent purchasers who are buying pre-construction units. Buying pre-construction, as you see can be a bit of a tricky business. The condominium boom has historically been strewn with traps. Many buildings appreciate greatly in a short period of time. Others do not.

If you'd like more information on condo developments and preconstruction just contact us.