Housing constraints in Canada and the United States have prompted a major growth in the construction of new homes and neighborhoods. When you buy pre-construction, you can enjoy various perks, such as lower deposits and avoiding the real estate market's pricey bidding battles. But it's not all rainbows and sunshine. Buying a property pre-construction has risks, and it's important to examine the pros and downsides before making a decision.
With that in mind, let's take a look at what it takes to buy a pre-construction home and whether it's the right decision for you.
What Exactly Is a Pre-Construction House?
Pre-construction houses, sometimes known as new-build homes, are sold before they are built. In most cases, buyers will acquire a lot directly from the builder or developer. Typically, the lot, i.e. the new home, will be part of a new community or neighborhood. However, you may come across new builds that are to be built in established areas on occasion.
Typically, the builder would develop a model home that potential buyers can visit to get a sense of the build quality, style, and decor. You can generally obtain complete floor plans to study online as well. This enables you to imagine the space and determine whether or not it is a good fit for you.
Because the house hasn't yet been built, you'll frequently be able to change key parts of it. Typically, this entails having the ability to select cosmetic components such as wall colors and kitchen countertop types.
Purchasing a Pre-Construction Home
Purchasing a new house necessitates a different set of considerations than purchasing a resale. Before you go in, you need understand what you're getting yourself into.
Recognize the Timeline
When you purchase a pre-construction property, you are essentially investing in something that does not yet exist. Not only that, but the community in which it will be located may be non-existent when you place your deposit. It all depends on the stage of growth.
It may take several years before you are able to move into your new house. Even then, it could be even longer until the entire community is finished. As a result, it's advisable to think of this type of transaction as an investment rather than a normal resale.
Consider the Long Term
Because many new constructions are in brand-new areas, it is critical to consider the future rather than the here and now. Consider how the region will alter as the project advances. Contacting the city hall to discuss the area's ambitions can give you a solid indication of what the future holds.
What local amenities and facilities are now available, and what are planned for the area? Consider schools, businesses, and cafés, as well as things like utility hookups.
Roadways: how are the roadways in and out of the city, and how will they evolve to connect to the existing infrastructure? Keep in mind that if an area is witnessing significant growth but the roads aren't changing, you're likely to experience poor traffic congestion and long travel times in the future.
Public transportation: Because most new communities are located some distance from the city center, it's crucial to know if public transportation will be available or if you'll have to rely on a car to get around. You can also inquire about the development's walkability and cyclability.
Learn as much as you can about the property.
So far, we've concentrated on the neighborhood, but it's equally crucial to remember to concentrate on the particular property. The ideal practice is to learn as much as possible to ensure that it will fulfill your present and future needs:
What size will the property be when completed?
What is the cost per square foot?
What parking choices are there? Will you have a garage, a driveway, access to a car park, or street parking?
Is the layout editable?
What is the time frame and payment plan?
Investigate the Developer
This is a critical step that can save you tens of thousands of dollars. Many pre-construction horror stories are the result of a developer delivering subpar homes or going bankrupt and abandoning the project entirely. So, look over previous projects and see if you can gather feedback from previous consumers. Finally, ensure that their financial situation is in order.
The Benefits of Purchasing a Pre-Construction Home
When deciding whether to buy a new home or a resale, there are numerous factors to consider. However, the extra effort can pay off well, and there are other advantages to be had.
You are in Command.
One of the best aspects of purchasing a pre-construction home is that you frequently have a major say in the design. In many situations, you'll have a choice of finishes, such as hardwood floors, that can increase the long-term resale value of your property. You may even be able to change the floor plan in some circumstances.
Excellent value for money
Pre-construction homes are far less expensive than finished units, making them a good choice for investors intending to rent or sell in the future. They can, however, be a terrific deal for individuals wishing to live in. Furthermore, the earlier you commit to a project, the higher the discounts will normally be. In addition, unlike a resale property, you'll normally be able to pay a series of smaller deposits over the course of a couple of years or so while the house is being built, rather than a single large investment.
Modern and Eco-Friendly
Pre-construction homes typically benefit from the most recent technical breakthroughs, including energy-efficient appliances, smart devices, and modern building materials. Furthermore, structural elements are usually warrantied, so you're covered for situations like wetness. Another economical benefit of working with a professional developer is that a well-built new home should not require any maintenance or remodeling for many years.
The Drawbacks of Purchasing a Pre-Construction Home
While there are numerous benefits to purchasing pre-construction, it is critical to consider the other side of the coin as well. There are a number of disadvantages to consider before putting any money down.
The End Product Isn't Always What You Expected
When your new home and neighborhood are built, developers will usually show you multiple designs and digital mock-ups. However, it's important to note that developing a full community takes time, so while your property may be finished, the rest of the development may still be under construction.
As a result, you may spend the first several years of your new home living in what is essentially a gigantic building site. Furthermore, the property may alter slightly from the original design.
Your money has been frozen.
Because real estate is a non-liquid investment, any money you put into purchasing a pre-construction property will be absolutely inaccessible until all of the units are built and sold. If your circumstances change during that time and you require cash, it will be nearly impossible to obtain.
Delays and bankruptcy make long-term planning difficult.
Delays are common in the construction industry, and can be caused by anything from bad weather to a lack of dependable craftsmen. If the developer goes bankrupt, there may be substantial delays at best, but at worst, the entire project may be abandoned, and you will almost likely lose all of your money. It's important to remember that there are no certainties, only estimations, so planning ahead can be difficult.
