After several years of diligently saving money, I’m nearly ready to purchase my first home. Because I’ve been thinking about buying a home for so long, I know exactly what I want my house to look like. I desire a place that has three bedrooms and three bathrooms. I also need a quiet space to set up my home office in. I want a massive, walk-in closet in my master bedroom. My master bathroom needs to have double vanities, a tiled, walk-in shower, and a Jacuzzi tub. On this blog, I hope you will discover how to set priorities during your new home search. Enjoy!
If you are looking for a condo in a popular location or want to get a home at a low price, purchasing a condo off-plan is one way of doing it. Since these homes are sold before or during the construction phase, there is a lot of opportunity for you to get a (somewhat) customized condo at a significant price reduction while earning equity in the home as its value increases during development. To maximize the benefits and minimize the risk of loss, here are two things you should be aware of with this type of purchase.
You Might Lose Money
While buying an off-plan condo can help you make a lot of money—especially as an investment property—you can also lose money just as easily. One common way this happens is the market value decreases during construction rather than increases as expected. This can happen for a variety of reasons, such as loss of major employers, deterioration of the surrounding community, or the developer fails to implement planned amenities (e.g. pool, golf course). The longer the developer takes to construct the building, the higher the risk you may run into these issues.
Another reason why you may lose money is the developer fails to complete the project at all. The company may lose its funding, go out of business altogether, or run into issues getting government approval to build. In these cases, it may not be possible to recover any money you paid simply because the company just doesn't have the cash. At the very least, if the developer doesn't meet the deadlines it set for construction, your lender may cancel your loan, forcing you to either trying again with another bank or pull-out completely and lose any money you already invested.
This is why it's important to do due diligence on any off-plan condo project before investing your hard-earned money. In addition to checking the developer has the property paperwork (e.g. deeds, licenses), is financially fit, and the company has a good reputation for completing projects as planned, you need to survey the surrounding area to ensure it is stable enough to support the new building. If the community is showing signs housing prices may drop (e.g. the supply of homes in the area outpaces the demand for them), you might want to see if you can build in a discount that's tied to housing prices to minimize your losses.
It May Not Be Up To Your Standards
The second issue is actually something that affects all new homes, and that is the finished product may not meet your standards or expectations. An off-plan home can have as many as 80 defects. Although that number is based on condos built in the UK, it's an issue that affects all new buildings regardless of where they are constructed.
These defects can affect the market value of the condo building and your specific home. Additionally, it can result in you spending money repairing problems in your condo that result from those defects (e.g. add support to structural materials) as well as increase your condo fees (e.g. the association has to pay for repairs to the roof right away).
In addition to visiting the building site on a regular basis, you should have your home inspected by a professional before moving in and have the developer fix problems uncovered by the report. You should also ask about whether warranties are available, what's covered if they are and length of time the warranties are good for.
For more information about purchasing a condo off plan, feel free to contact a local real estate agent.