Are you in a cross road to decide whether you should buy an existing property in the resale market or a pre-construction unit that may not be completed until 2-3 years later. There are plenty pros and cons between these options. Presales (Pros) – Brand new, never live-in condition upon completion of the project – Ample time of working in space planning, interior furnishings during pre-construction period – No immediate mortgage loan is needed – that means, you are not financing interests and principal of the loan until the unit is ready for closing – There is a chance market value appreciation happened when the real estate market is adjusted upwards – flip-for-quick-profit which leads to speculation activity Presales (Cons) – During contract period, a large lump sum of cash must be held by developer’s escrow – therefore, one may forgo the opportunity to use the same amount of money on other investment vehicles. – All floor plans, amenities, renderings are subject to change with or without notice – please note, developer’s presale contract is not a standard Purchase Agreement template that was used in resale purchase. Developer’s presale contract is a highly customized legal documents that always spell out the Developer’s exclusive rights in many area – so please read the FINE PRINT before you sign the paperwork! – Since everything is subject to change, as a buyer, you must prepare the worst scenario where the tower may not get built on time, the unit may have other environmental elements that the floor plan did not include (such as trash chute location, elevator’s rotary engine, main pipes shut off valve, etc.) – The unit is still not ready for move-in – so you either are being a renter or trying to sell your own property – hoping that you can liquidate your asset just in-time for the pre-construction completion. In the latter case, unless you know very well how fast you can get your property sold in the resale marketplace, it’s not recommended to buy down a presale contract while trying to figure out how to get your current property sold firm. There are many occasions that, buyers were over-confident how fast their own properties can get sold – in reality, I saw a handful of examples that, buyers end up having 2 properties, 2 mortgages and they force to sell one of the units at rock-bottom-price to avoid foreclosure by the lenders – only purchase presale project if you have the ample financial cash reserve to meet up the financial obligations; otherwise, your lump-sum cash will be forfeited to the developer if you fail to close according to their timeline. Resales (Pro) – You can conduct home inspection, touch, feel, hear, smell the property & environmental elements during your contingency removal period – most defects and surprises will be uncovered during buyer’s due diligence period. – You can move-in once the title and funding were all well settled by the escrow. – Purchase Contract template is a standard form that was drafted, approved and published by Hawaii Association of Realtors – this means to protect both buyer and seller interests during the purchase process – any issue that is arising during contingency period, buyer can cancel the transaction according to timeline’s due date. Resales (Con) – The unit may not be brand-new, so appliances may be used and interior may require additional money to fix-up before moving-in. – The moment title was recorded, mortgage loan re-payment is ticking – any mishap of mortgage payment may lead to foreclosure – You may not be able to find your perfect home as supply of resale properties are subject to owners’ timeline – so you may not be able to get your perfect ocean view corner unit or penthouse with private roof-deck assess (though, in all current pre-construction with additional features like this, developer may charge 5 – 10 times premium of the list price of those special penthouses or villas)
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Jason Wong, MBA REALTOR®-Broker License RB-22819
E: realty@jasonwong.us M: +1 (808) 343-9526
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