Before we get into what the pros and cons are of preconstruction real estate, it’s immensely helpful to know what the term actually means.
Preconstruction real estate is simply a property that is sold before it has actually finished being built.
With that in mind, purchasing a home in this way comes with its own benefits and drawbacks so it may not be for everyone.
Pro: Preconstruction Real Estate Is More Affordable
Because there’s an inherent risk with preconstruction real estate, it’s is accordingly more affordable. You may even get additional perks like being able to customize your unit even more or even combine units in some cases.
Pro: You Get a Warranty on the Home
That’s right, unlike buying a completed home you can actually get a warranty on preconstruction property. The standard warranty covers your home in the event something happens to it so you can be compensated in the event something goes wrong.
Pro: You May Be Able to Move in Earlier
This one is highly dependent on the construction of the unit itself, but you may be able to move in earlier if your unit has been completed and it has been deemed safe to do so. That being said, you will need to pay a developer occupancy fee if you want to move in for each month you live there until you take ownership.
Con: You Can’t Be Sure of Its Market Value
Unfortunately, while you may be purchasing the home for less, it might not be worth more than what you paid for at that time. While you will pay the according price to the developer, you don’t receive any kind of guarantee that the market value of the home you purchased will be equal to (or higher) than the pre-agreed purchase price.
Con: Your Home May Take Longer to Build
While dates are set roughly for the completion of the preconstructed units, they aren’t final. In fact, depending on the contractor or developer it may take many more months before the units are fully built. This is one of the core parts of the risk you’re taking on when you buy this kind of real estate.
Con: You May Not Get Exactly What You Paid For
Depending on when you buy preconstructed property, there may be aspects that end up changing the look and feel of the home once it’s completed. Legally, a unit can actually be 5% smaller than what was described in the marketing materials or draft strata plan. In addition, developers are also allowed to make small changes to the floorplan (like the inclusion of load-bearing columns) during construction.
While preconstruction real estate does come with many useful perks, it also comes with drawbacks too that doesn’t make it a natural choice for everyone.