Ensuring Success When Buying Pre-Construction
It’s the perfect location! Oceans views… or rainforest retreat… or urban condo. Either way, you’re extremely excited and it’s going to be the ideal place for you to escape to. But, therein lies the rub, you’ve bought your piece of paradise but it won’t actually be built for another few years.
But, you are getting a great deal by buying now, and with rising real estate markets all over Latin America; you’ll no doubt have built excellent appreciation by the time you live there.
It’s easy to allow the excitement to take over and cloud your judgment though. Just remember that you’re buying pre-construction, and there are some key items to keep in mind to ensure a successful transaction with your developer.
Never Pay Full Price Up Front – Reputable developers will offer you payment terms that may include 30% upfront, with the remainder due upon completion. You can also see about correlating payments with completion deadlines.
Hold off final payment until the home is completely finished and ready to move into. You also want to ensure you can shift the title into your name. As long as the home is completely finished, the builder will be able to obtain an occupancy permit, a necessity in order to have the title transferred.
The same rules apply to vacant lots. Final payment should only be transferred when you can get title. Many countries won’t transfer title until certain infrastructure is in place (water, electricity, roads, etc), but see about including a clause in the sale contract ensuring you receive title once these systems are in place.
Communicate – If you were having a home built in your home country, you’d likely stop by to have a peek at the progress and speak with your builder. The same should apply in a foreign country. Ask for progress updates, photos and estimated completion times as well as deposit and payment receipts.
Detail Specifications – Leaving finishing details up to the developer can result in you being unhappy with the finished product. Add as much detail into the contract as possible, right down to the exact size and color that you’d like for your kitchen backsplash.
Include room sizes for each area of the house, patio specifications, storage areas and hallways/stairways. You also want to be sure to include the exact location of your home on the lot and specifications of views – very important if you’ve paid extra for ocean views.
Don’t forget to include all of your specifics into the contract. Dimensions, floor plans, photos and finish samples should all be added as appendix to the final contract.
Timing – Make sure you have a clear outline of when your home is to be finished. There are almost always delays with new builds, but confirm that your contract includes a clause that doesn’t allow them to be unreasonably overdue. There should be penalties if your developer is significantly overdue.
Cover Yourself – Contracts are in place to protect people – both the buyer and the seller. Ensure that your contract includes a clause covering you in the event that things take a turn for the worst with your developer. You also want to cover yourself in the event that your developer doesn’t finish your home – will you get some of your money back? You should also be entitled to some kind of builder’s warranty. Go over the contract with your attorney and be sure to ask questions if you’re not 100% sure of something, including what happens in a worst-case scenario situation.
Pricing Adjustments – Most, if not all, contracts will include an adjustment clause stating that the developer can increase the closing price by a fixed percentage in the event of rising costs. If you’re financing through the developer, these cost adjustments will be made monthly and added to your payment. Make sure you understand the contract and what the maximum amount they can add on is.
A pre-construction purchase is a good decision in the right area. If you follow the above tips, you can feel rest-assured that you will end up with the dream home you always hoped for and avoid surprises along the way.
All of the developers we work with offer the option to purchase pre-construction. Visit on a Discovery Weekend to get your pick of beautiful lots just waiting for your personal dream home to be built!