How to Buy Pre-Construction Properties
This is a guide on how to buy pre-construction properties in the right time and what to do to eliminate the risks associated with such transactions. In this article, we discuss the differences between the two major contracts; the Builders Contract and the Real Estate Purchase and Sale Contracts and when to use Realtors or real estate attorneys.
Real Estate Sales and Purchase Contracts vs Builders’ Contracts
While the Real Estate Sales and Purchase Contracts used for resale of existing homes, almost all new and pre-construction sales contracts are “Builders’ Contracts”. The typical real estate sales contracts for resale transactions are normally sanctioned by a real estate association. The most significant difference between the two contracts is the fact that the real estate sales contracts are drafted to protect the buyers, however, the builder’s contracts drafted with the developers benefits in mind.
Hiring a real estate professional who is familiar with both types of contracts is beneficial to the homebuyers in many ways. Such professionals could easily identify any pitfalls in the Builders’ Contracts that might work against the buyers’ interests. The scope of a Real Estate Brokers work varies based on the state the property is located. In some states, Realtors cannot become involved in the writing of real estate purchase contracts and their role is limited to finding and showing properties while in others, like Florida, any Realtor is capable of drafting the purchase contract and follow up with the process till the closing. There are other entities to assist the buyers such as real estate attorneys who normally do not get involved in finding and showing properties until the draft of the initial purchase offer becomes necessary.
There are many reasons to use either a Realtor or an attorney or both. Most simple purchase contracts are easily handled by Realtors and title companies. Most of the brokers and real estate professionals are compensated by sellers while attorneys might charge the buyers for their services. Use of attorneys in more complicated real estate transactions such as estates and trusts are beneficial to the sellers. An experienced and educated Realtor could even help you with specialized transactions such as 1031 exchange without any additional costs to you.
No matter which state or what type of service applies to you, just make sure to use the assistance of a real estate professional and don’t walk unarmed to the developer’s office and start checking out the models. This makes even more sense when, as a buyer, the help you’re getting from the real estate broker is not costing you a dime. Just think, if the builders have their attorneys on their side to protect their benefits, who will look after yours?
We hope these series of articles serve as a useful guide to buying preconstruction properties and aid the home buyers and investors in reducing the risks associated with purchasing of pre-construction properties. This is a follow-up to our other articles in advising buyers in how to buy pre-construction properties and what to look into when it comes to choosing a developer including the purchase contract and other terms and conditions set by developers. The recently published articles on the importance of due diligence and other facts about preconstruction acquisitions were intended to assist and educate potential home buyers and investors in the market for the purchase of pre-construction properties.