Everything You Need to Know About Buying an Under Construction or Pre-Construction Home
When it comes to the home-buying process, many people are often intimidated and overwhelmed. After all, this is likely the biggest purchase you’ll ever make in your life.
And with the current state of the housing market, it can feel like an impossible task to find your dream home. What used to be non-negotiables like location and price are now up for debate as many people are forced to reconsider their must-haves.
So, if you’re feeling lost in the shuffle, you’re not alone. In fact, you’re in luck because there’s an alternative option that has become increasingly popular in recent years: buying under construction or pre-construction homes.
Before we dive into the nitty-gritty of how to buy an under construction or pre-construction home, let's take a closer look at the similarities and differences between the two:
What is an Under Construction Home?
As the name suggests, an under construction home is a property that is currently in the process of being built. This could mean that the foundation has been laid and the frame is up, or it could be that construction has yet to begin.
Why would an under construction home be for sale? Well, to finance the building of a home, developers will often sell units before construction is complete. This ensures they have the money necessary to cover the costs and continue the project. In other instances, the developer may be looking to generate interest in the property before it is completed in order to sell all the units. This is often the case with larger developments like condos and apartments.
Some new construction buyers end up leaving their contract, and those in-progress homes are turned into resale listings. If this happens, you can negotiate with the developer for a better price since they’ll be eager to sell.
Buying an under construction home has a few advantages.
You have more control over the final product.
When you buy an under construction home, you often have the opportunity to select certain features and finishes that you want. For instance, you may be able to choose the tile for your bathroom or the cabinets for your kitchen.
You may be able to get a property that better suits your needs.
If you’re looking for a specific type of home in a particular location but can’t seem to find anything on the market, an under construction home may be the perfect solution.
What is a Pre-Construction Home?
A pre-construction home is a property that has not yet begun to be built. Developers will often release renderings and floor plans of the units in order to generate interest.
Buying a pre-construction home is riskier than buying an under construction home since there’s no guarantee that the development will actually be built. In some cases, the developer may not be able to secure the financing needed to move forward with the project. However, in most cases, a reputable developer will not begin selling units until they have the financing in place.
Why consider buying a pre-construction home? There are a few reasons:
You may be able to get a property that better suits your needs.
When looking to meet a specific set of criteria, a pre-construction home may be your best bet since you’ll have more control over the final product.
You’ll be one of the first to live in the development.
When you buy a pre-construction home, you’re often one of the first people to move into the development once it’s completed. This can be a great perk if you enjoy having the newest and latest things.
What are the Cons of Buying an Under Construction or Pre-Construction Home?
Buying a home that is still in the process of being sounds excellent! You get to pick your finishes, it’s usually cheaper than buying a completed unit, and you may even get the first dibs on the property. So what’s the catch?
Well, there are a few things to consider before making an offer on an under construction or pre-construction home:
Risk 1: The Developer May Not Be able to Finish the Property
The most significant risk when buying an under construction or pre-construction home is that the developer may need help to finish the project. In some cases, the developer may not be able to secure the financing needed to complete the construction.
In other instances, construction may be delayed due to unforeseen circumstances like bad weather or construction errors. If the developer isn’t able to complete the property, you may be left without a home and out of your earnest money deposit.
To protect yourself, it’s essential to do your research on the developer before making an offer. Make sure that they have a good track record of completing projects on time and within budget. It’s also a good idea to ask for a list of references that you can speak to about their experience working with the developer.
Risk 2: The Property May Not Be Built as Promised
Another risk is that the property may not be built as promised. The developer may make changes to the floor plans or finishes without informing the buyers. In some cases, the units may be downsized in order to cut costs.
To avoid this, make sure that you review the contract carefully before signing anything. Pay close attention to the section on changes and amendments. The contract should outline what types of changes can be made and how they’ll be communicated to the buyers.
It’s also a good idea to visit the sales office regularly during construction to see the progress for yourself. This way, you can catch any changes that may have been made.
Risk 3: You May Have to Wait a Long Time for the Property to Be Completed
Another thing to keep in mind is that you may have to wait a long time for the property to be completed. Construction delays are not uncommon, so it’s important to be patient. In some cases, the construction process may take longer than expected due to unforeseen circumstances.
To avoid surprises, make sure you ask the developer for a realistic completion date before making an offer. It’s also a good idea to build in a buffer of time into your contract in case there are any delays.
What Should You Consider Before Making an Offer on an Under Construction or Pre-Construction Home?
Now that you know the risks, what should you consider before making an offer on an under construction or pre-construction home?
1. Do Your Research
The first step is to do your research. This includes researching the developer, the location, and the project itself. Knowing what you want in a home is key to finding the right property. You should have a good idea of the must-haves and nice-to-haves on your list before you start your search. This will help narrow down your options and make decision-making easier.
Next, you'll want to research the potential locations. Consider the commute, the schools in the area, the amenities, and the overall quality of life. Once you've narrowed down your search to a few potential locations, you can start looking at specific properties.
When you find a property you're interested in, make sure to do your due diligence on the developer. Different developers will offer different levels of quality and service. It's crucial to find a developer that you can trust to build a high-quality home that meets your expectations.
2. Get Your Finances in Order
The next step is to get your finances in order. Much like buying a home that is already built, you'll need to get a mortgage to finance the purchase of your under construction or pre-construction home.
Speak to a mortgage broker to find out how much you'll be able to borrow. They’ll also be able to tell you what type of mortgage products are available and which one would be the best for your situation.
It's also a good idea to get pre-approved for a mortgage. This will give you a better idea of how much you can afford to spend on your new home. It will also show the developer that you're serious about buying and make the negotiation process easier.
3. Negotiate the Purchase Price
Once you've done your research and gotten your finances in order, it's time to start negotiating the purchase price. The price of an under construction or pre-construction home will often have a starting price point, but there’s usually some room for negotiation.
When negotiating the purchase price, it's important to remember that you're also negotiating the contract terms. This includes the completion date, the warranty, and any other stipulations that are included in the agreement.
To get the best deal possible, having a real estate agent or lawyer on your side is a good idea. They’ll be able to help you navigate the negotiation process and make sure that you're getting a fair deal.
4. Make Sure That You Have a Solid Contract
Once you've reached an agreement with the developer, it's time to sign the contract. But before you do, it's important to make sure that the contract is solid.
The contract should include all of the agreement's details, including the purchase price, the completion date, and any stipulations that have been agreed upon. It's important to have a lawyer review the contract before you sign it so that you understand everything that you agree to.
5. Be Prepared for the Unknown
When you're buying an under construction or pre-construction home, it's important to remember that there are always going to be some unknowns. No matter how much research you do or how solid your contract is, there's always a chance that something could go wrong.
The best way to deal with the unknown is to be prepared for it. Make sure that you have a contingency fund set aside in case there are any delays or unforeseen problems. This will help to minimize the financial impact if something does go wrong.
Buying an under construction or pre-construction home can be a great way to get into the home of your dreams. But it's important to remember that there are some risks involved. By researching and being prepared for the unknown, you can minimize those risks and make the process as smooth as possible.
Find Your Next Home with Llano Real Estate Group
An under construction or pre-construction home can be a great way to get into the home of your dreams. Not only can you avoid some of the competition of the market and potentially being outbid, but you can also gain greater control over the design process.
Llano Real Estate Group offers the best options in Amarillo, TX, and the surrounding area. We have years of experience helping people buy and sell homes, and we can help you find the perfect property for your needs.
Not only will our team of designers and developers help you build your dream home, but we'll also be there every step of the way to make sure that everything goes according to plan.
Are you ready to take your next step towards homeownership?
Contact Llano Real Estate Group today and let us help you find your next house – and turn it into your dream home.
