Buying pre-construction: builder, assignment, resale options
Lots of people love that feel of stepping into a brand new home. There are three ways to buy a brand new, never-lived-in-before property, and here is how to snag the good deals.
Buying from builder
A pre-construction story usually starts with a concept, floor plans and renderings ideated and sold by a builder. They may have a presentation center where you can go with your agent and physically see models, features and finishes. This gives the buyer a more tangible idea of what they are buying.
Best units are purchased at launch date. That’s when you will have the option to purchase at the lowest prices and with the most amount of units to choose from.
Why work with an agent? Because agents can get access to units before the general public does, which means the best units and the best prices. Secondly an agent that is solely representing the buyer will properly advise the buyer of what to be cautious about, negotiate for the buyer and guide them through the purchase process with the buyers best interests at heart.
Builders typically launch to the public in stages. Rounds of releases typically gives access first to “Family/Friends” then to “VIP Agents” then to the “General Public”. And more often, once it releases the general public stage, prices have gone up.
Another tip, is when a builder releases phases, for example a second phase building, the following phases are typically more expensive than the previous ones.
The main benefit of buying pre-construction is you don’t have to obtain a mortgage until closing, and you may put your down payment over time. This is good for someone who is looking to invest deposits over time, and doesn’t need anything tangible right away.
Misconception — “Pre-construction is cheaper” may have been the case many years ago, which is why it has earned such a good reputation amongst investors, but today, with a growing number of demand for new housing, the demand outweighs the supply. The second big reason is the cost to build is more expensive: Development fees, cost of land, cost of materials, labor, inflation.
Buying assignment
When a purchaser who has bought a property from a developer no longer wants to continue their purchase, they may have the option to assign that contract to a new purchaser. This is called an assignment sale.
Depending on the market, the assignor may be selling at a profit or loss. The new buyer typically need to come up with the deposits that were owed to the builder, and any profit that the assignor may be earning. While this may still be cheaper than buying from a builder at that point of time, but the main disadvantage is you lose out on the extended deposit structure that a builder might offer. You also have less flexibility in picking your interior finishes.
The benefit is you may be able to get assignments at a very good price, and with a sooner closing than buying from a builder who hasn’t started construction yet.
Buying resale
For some buyers who have bought from a builder, they may have not had the option to assign their contract. This forces them to close before selling to another buyer. These sellers with the intent to maximize profits may never occupy the unit so they can sell brand new.
One of the major benefits purchasing resale is that the property will now be considered like all other resale properties, and minimum 5% downpayment would be acceptable depending on your mortgage situation.
