Buyer Tips

WHY PRE-CONSTRUCTION

PRICE - When a developer starts a new project, the financial backers want to know what buying interest there is. Consequently, the financiers may require the developer to obtain reservations on a certain number of units before the project gets the official go-ahead. The developer needs these reservations or ‘pre-sales’ to secure financing and to get them, he gives incentives to early buyers.

PRICE APPRECIATION - The ‘first day’ price is usually lower than any subsequent pricing. To stimulate further sales, the developer often schedules price increases at certain intervals. This encourages buyers to buy early on and the pre-increase buying activity stimulates more demand, perhaps even increasing the actual – rather than the perceived – value of the property. Now add in the fact that local real estate has appreciated on average 15% or more for the last five years. By the time you actually close on your new home, it could be ‘worth’ significantly more than you bought it for.

PHASES - Developments completed in phases offer other advantages and historically, the best deals opportunities have involved buying in the earlier phases. Further price appreciation can be created in a situation where a new unit in Phase III is selling for substantially more than the price you paid for your Phase I unit just a year ago.  

LIMITED SUPPLY & INCREASING DEMAND - Many people move to Florida to be on or near the water and we have a finite amount of that, short of creating lakes. The flood of baby boomers to Florida will peak between now and 2012. Compared to the other 49 States, Florida has the third fastest growth rate in the nation. Do the math.

GET ON THE ESCALATOR WITH 10% DOWN - As someone once said, buyers in this market want to buy so that they can get on the escalator of rising prices. But most new-home developers only require you to put down a deposit of 10% of the purchase price to bind the contract. This amount is held in escrow on your behalf by a title company – not by the developer. This means that your deposit is safe and can be returned to you if the developer fails to perform. If you are buying pre-construction early on while construction of the new development is only just starting, your new home may be 12 to 24 months away from completion. This means that you have locked in the purchase price and tied up this new home for one to two years – and with only 10% of its price! Plus you get one or two years of potential appreciation.

HERE’S THE PROOF - If all this leaves you scratching your head, here are some real-world examples.

Rapallo in Estero will be a village-style community of terrace homes, coach homes, luxury carriage homes and courtyard villas and it will be reminiscent of a small coastal town in Liguria, Italy. The developer is the reputable Bonita Bay Group. In 2003, there was no sales center and no real brochure, just an artist’s impression of what the community might look like. And yet within a few months, every single unit in the development had a reservation on it plus a back-up waiting list. The shortest waiting list had six names…… six names on one unit.

VillageWalk in Bonita Springs will be a community of single-family homes, patio homes and town homes where almost every unit has a water view. The developer is highly acclaimed DiVosta Homes. Price increases are so frequent that the sales office does not even print a price list. Batches of ten homes are released for sale at a time and they generally sell each batch within a week.

There are numerous other local examples. One developer takes $1,500 deposits on a credit card and adds your name to a priority list. When you get the call, you choose your unit. A private individual bought a whole street of condos in Hunter’s Ridge in Bonita Springs and another individual bought nine condos at Villagio in Estero. Let’s not beat around the bush: this is a hot and fast-paced market!

10 BIG HOME-BUYING MISTAKES

* Not doing your homework. Knowledge is power. Tremendous information is available on the Internet. There is no excuse for entering the market unprepared.

* Trying to make a shrewd investment. You need to buy based on what fits your family. Don't try to guess what will happen to the market.

* Choosing a poor location and view. Even within a neighborhood, location matters. Is it on the busiest street? Is there a shopping center out the back window?

* Overlooking an inferior floor plan for an attractive exterior. It may have gorgeous curb appeal, but you don't live on the lawn. No matter how attractive the exterior, you need a livable home.

* Overlooking how the house will function for your family. How do you really live? Do you really need a formal dining room and living room? Would you be happier with an eat-in kitchen and a great room, plus a den to use as a home office? The house only needs to fit one family - yours.

* Not having a resale home properly inspected. This is not the time for surprises. Get an inspection from a qualified, respected professional.

* Not checking out the builder's reputation, if it's a new home. This is one of the many reasons you need to be represented by a realtor when you look at new construction. He/she knows the good builders and developers.

* Not getting what you want because you're impatient. This is a big decision. You need time. Impatient decisions can lead to mistakes. But don’t wait too long either!

* Waiting for a better market and interest rates. Warren Buffett says the rear view mirror is always clearer than the windshield.

* Not buying at all. If you can afford a home and you don't make that purchase, you'll lose the benefit of tax deductions, building home equity and the appreciation in value.

Many years ago, President Franklin D. Roosevelt said "Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world."