What to consider when buying a preconstruction condo

Purchasing a condo unit during the pre-construction phase may seem like an easy proposition. The future unit is purchased from the architectural plans on the developer’s sales site. However, in real life, buying a unit before it’s built can be anything but easy.

Developers often redesign units as they go along, as a result of changes required during construction. In addition, they draw up purchase contracts in your favor. For example, if they are late in completing the complex, the buyer is forced to accept delays or occupy the unit while the complex is still waiting for occupancy permits for units that may still be under construction.

Unsuspecting buyers could also become victims of developers selling them units in the early stages where they still own more than 51 percent of the condominium project. Over time, the developers may not be able to sell the rest of the units.

A condominium unable to attract new buyers may experience a rapid decline in the value of its units. Realizing that there was no longer a demand for their units, developers may resort to renting out unsold units, reducing overall unit values.

Buyers are advised to consult a knowledgeable lawyer and insert their own terms into purchase contracts. By specifying a fixed completion date, buyers can position themselves to get their deposits back in the event the developer miscalculates the timing of completion. Completion time is to be determined by the buyer. I strongly suggest another contingency in which the developer’s attorney holds the proceeds from the sale of the unit, along with your deed, on escrow until such time as the developer sells at least 51 percent of the units to individual unit buyers. .

Until that time, the buyer of the unit must pay occupancy fees to the developers, equal to the monthly maintenance fees plus the monthly advance mortgage payment. Said arrangement would establish that after the expiration of the specific time, buyers would be entitled to a refund of their deposits and/or proceeds from the sale, in cases where the complexes were not completed on time, or respectively, when 51 percent percent of the complex is not finished. t sold to the other participants. Such an arrangement would help protect the values ​​of units already sold. Avoid any purchase where the developer is not willing to agree to their terms, otherwise you may be putting yourself at the developer’s mercy.

Another thing to keep in mind is the condominium maintenance fees. They are guaranteed only for the first year of operation from the time the unit owners take control of the complex. Developers often price their initial budget on the low end to make condo units more attractive to buyers.

Almost as a rule, in the second and third years after the majority of unit owners take over the complex from the developer, unit owners are hit with substantially higher monthly maintenance fees to cover cost overruns from the developer. developer. Buyers should assume and expect that there will be an increase in maintenance fees from the first year onward after the completion of a new condo.

• Beware of contracts that force you to purchase the condo unit even if completion of the entire complex is delayed.
• By purchasing during pre-construction, expect higher maintenance fees than originally calculated by the developer.
• Check the reputation and track record of the developer and builder before you buy.