One of the most attractive properties is condos or housing units under a pre-selling offer. That’s because they feature minimal down payment and interest rates, attractive location, and low monthly amortization.
The only catch is that when you visit the address, construction is often nowhere near completion. So now you’d probably understand why the offers are irresistible.
In real estate, pre-selling condo or subdivision housing units are residential properties sold before construction, under construction, and just right after the developer launched the groundbreaking ceremony or even during the planning stages when the area doesn’t have any construction activity. So depending on your research, a pre-sale offer can be hugely advantageous to snagging an excellent property acquisition or an offer you must avoid at all costs.
As a cautious buyer who doesn’t want to take high risks, especially when investment involves millions, you can make a judicious decision once you have done your homework.
As a guide, here are things to look for:
Advantages of pre-sell properties
1. Promising investment with cheaper prices
If you look at advertisements of well-appointed residential units ready for occupancy, whether from renowned or obscure developers, prices are often out of reach for most buyers. That is why they settle with a pre-selling unit as its attractive, sometimes even seductive, low introductory price which can be as much as 30% cheaper than a finished unit. Additional sweeteners include up to a 15% discount depending on the mode of payment. Downpayments of 10% payable within three years aren’t uncommon, with the remainder payable through manageable terms under Pag-IBIG loans or bank financing.
If you are into property investment, this offer can be very tempting; once your property is ready for occupation, favorable conditions — infrastructure and accessibility development within the area — finished units can fetch much higher value than your initial investment.
2. More options and flexibility
Since the condo unit isn’t finished yet, you, as a buyer, have more options at the construction stage. You can pick the location, floor plan, and interior design. This depends on the contract you’ll sign, so one thing to bargain with your agent is the ability to make such leverage. You can even arrange to inspect your unit at certain project milestones and notify the developer of defects or adjustments. It gives you plenty of freedom to design and customize your future home or investment.
Risks of pre-sell properties
With all the advantages of pricing and flexibility, there must be disadvantages of pre-sale condo housing units. Otherwise, it becomes the only acceptable payment option.
1. Unexpected finished product
Unlike advertised properties that are more pricy yet ready for occupancy, those offered on pre-selling are a long way before the owner can take over and use them. Having terms such as “more or less” and “subject to change without prior notice,” pre-sale contracts can reasonably make buyers feel jittery as the other side of flexibility sets in a change in unit sizes, features, and floor plans can occur outside of a buyer’s knowledge. Ultimately, a buyer could end up paying for a property whose characteristics fall way below his or her expectations.
2. Delay in delivery
In addition to clauses that allow vague practices within pre-sale contracts, there may also be clauses that allow developers to delay the delivery of properties for up to a year or even more. Flexibility options and revisions from the original plan could alter delivery timelines, leaving a buyer uncertain when he or she will get the keys.
3. No refunds for failed projects
Some pre-sale housing projects went bust as developers could not find additional funding to continue the project and went bankrupt. Buyers who made earlier financial commitments were left to write off their investments as losses as they could not get refunds.
4. Corrupt agents
Some agents target vulnerable clients such as overseas Filipino workers who cannot personally visit the location, inspect their pre-sale property on offer, and are given a false representation of the properties they buy. These agents add more layers of fees that normally are not included in the list of things buyers need to pay. Even though the project is progressing well, rogue agents don’t forward buyers’ money to developers.
What the public needs to do when planning to buy pre-selling properties
While buying a pre-sale property is an attractive prospect, it’s also a risky business that only those who perform due diligence should accept or reject a certain offer. Here are a few tips one can follow:
1. Get to know the developer behind the project. If you are unfamiliar with it, check its background online, such as past projects, possible involvement in scams, and how it’s generally portrayed on social media. Best of all, check the status of this developer with the Housing and Land Use Regulatory Board.
2. Only transact with licensed agents and do not engage in people not permitted to engage as agents, even if you know them personally, such as friends or family members.
3. Once presented with a contract on a pre-selling property offer, consult a lawyer with experience in handling real estate business to help you navigate through the legal jargon to ensure it’s not onerous and disadvantageous on your part.
4. Calculate expenses incurred when committing to buy the property and balance it with your financial capacity, including your monthly income, assets, and properties you own. It would also be advantageous to know the trends — infrastructure projects in the area, the country’s fiscal health that may impact interest rates, and so on — to determine the property’s future value.
