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O. Kheir, CDPE , REALTOR®
Multi-Million Dollar Producer
RE/MAX Signature,Inc.
3340 South Atlantic Avenue
Daytona Beach Shores, FL 32118
Cell: 386.527.8492
Fax:
425.955.2959
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There are
several exciting opportunities in our area ranging in price from the
low $500's to several million.
I am the
one of the area's Top Producers in preconstruction sales in the Daytona
Beach area
Received Top Producer
Award and Bonus,
May 2006 for being #1 out of 2,200 REALTOR®S
Pre-Construction
Explained
What
is Pre-Construction?
Pre-Construction
is an opportunity to purchase a condominium that has not been built,
but
has been proposed.
How do
you reserve a condominium?
A
Pre-Construction
condo can be reserved two ways. First a simple reservation agreement
can
be signed with a deposit required of usually 10% to 20% or it could be
as low
as $5,000 or $10,000.
Who holds the
deposit monies?
An
escrow agent
of the developer. It can be a law firm, a title company, or a real
estate
agency. RE/MAX Signature has handled numerous transcations
utilizing esrow accounts, but usually the developer has an escrow
account for each transaction.
Do I earn interest
on my cash deposit?
Yes.
The funds are
invested in a low interest pass book account. Any interest paid on the
account is applied to the purchase price. When the developer sells
enough
units, and is applying to go to hard contract for his construction
loan,
you will be asked to go to hard contract.
What is a hard
contract?
A hard
contract
is the binding agreement that converts the reservation to a sale. When
the contract is signed, generally you have 15 days to review the
contract and the condo docs,
and make your decision on proceeding with the purchase, or cancel.
(Note:) There
will come a time, during the offering, that you will go directly to
hard
contract. This usually happens after some short time during the selling
process. Note:
Some developers
go immediately to hard contract. It depends on the developer, and the
stage of their project.
When does the
construction start?
Construction
will
commence once the developer has sold a number of units 80-90%, and will
fund the construction loan.
Why does the
construction
lender require so many sales?
The
loan to build
a project is substantial. The construction lender usually requires
binding
contracts, with deposits, in order to fund the construction loan.
How much deposit
money is required?
It
depends on the
developer and the construction lender. Usually it's 15 to 20% of the
purchase
price.
Do I have to put
a cash deposit down, or can I use a letter of credit?
It
depends on the
developer. Usually a two year irrevocable letter of credit can be used
to secure the deposit placed with the developers escrow agent, and with
the approval of the construction lender.
What does the
letter of credit cost?
All
banks and lending
institutions vary, however, 1 to 2% per year of the deposit amount is
charged.
Check with your local bank for rates.
What format of
the letter of credit is used?
The
developer usually
provides the type of letter that needs to be used. This letter has been
pre approved by the construction lender, and normally cannot be changed.
Can I lose my
deposit?
The
only way you
will lose your deposit, whether it is a letter of credit or cash, is if
the building is built according to the contract, and you fail to close
when asked.
What happens if
the building is not built, and it was no fault of the purchaser?
Your
cash deposit
will be refunded with interest. Your letter of credit will expire and
it
will not be called.
How long does
it take to build a new condominium?
Generally
it takes
1.5 to 2 years to complete, depending on weather and other factors.
What are the
benefits
of buying Pre-Construction?
You
take advantage
of being in on the "Ground Floor". As the condo is being built, it is
hopefully
appreciating over time. Remember that you purchased at the
Pre-Construction
price. If appreciation takes place, then at completion you unit is
worth
more than what you originally paid for it, thus a profit is created.
How much profit
can be made at or near completion?
It
depends on the
general market conditions, interest rates, and competition. There is no
guarantee of profit, however, a substantial gain can be realized. In
the
past few years, profits have run from 10,000 to as much as 400,000. We
cannot
guarantee how much is made, but based on past sales and history profits
have been realized.
Note: Remember
you have reserved a unit probably with a letter of credit, so any
profit
realized could be substantial. On the other side, if the unit is not
sold
before closing, you will be expected to close. At that time, at your
option,
you may then want to furnish the unit, put it on the rental program,
and
continue to have the unit marketed until sold.
Can I sell before
closing?
Generally
you can
if the developer allows a new purchaser to take over your contract. The
new purchaser must come under the same Pre-Construction purchase and
escrow
agreement as the first buyer. Ask me about Assignable Contracts
sometimes available on a few buildings.
What happens if
I sell my unit prior to closing?
The
developer will
collect 15 to 20% cash or letter of credit, at that time, from the new
buyer. The new buyer then steps into place to close. Your cash deposit
will be returned with any interest paid on your account, or your letter
of credit will be returned.
When do I receive
my profit on the pre-sale?
When
the new buyer
goes to closing, your profit will be paid at that time.
Are there any
risks in selling before closing?
The
only risk is
if the new buyer fails to close in such an event, the developer will
keep
the new buyers cash deposit or call the letter of credit. Any profit
realized
would be lost. The unit would then be back on the market for sale at
the
current selling price.
Note:
It is unlikely
but possible, that the new buyer will forfeit such a large deposit or
letter
of credit, especially when the hard contracts are in place.
Do I have to close
on the unit if I have not sold it prior to closing?
Yes.
If you do not
sell your unit, you are expected to close, otherwise you will forfeit
your
cash deposit or your letter of credit will be called, and you could be
sued to perform under the terms of the contract.
Are there other
costs related to the sale?
Yes.
You will be
responsible for some closing expenses such as title insurance, funding
of the association, insurance, reserves, etc. These charges will be
outlined
in a "Good Faith Estimate" provided by the selling agency, and in the
developers
offering statement.
Are there any
other contingencies, such as financing?
No.
This sale is
treated like a cash sale. However you are welcome to obtain financing,
and agree to pay the additional costs related thereto. I repeat, this
sale
is not subject to financing.
I hope this
helps
to explain Pre-Construction purchasing and how it works. Do not miss
out
on an opportunity that could provide a substantial profit. For further
information or available projects and offerings contact me today!
CALL
O. KHEIR NOW
(386) 527-8492
TO GET STARTED IN PRECONSTRUCTION
