Advantages and Disadvantages of Pre-Selling Properties in Philippines

One of the most attractive property offers are condo or housing units under pre-selling offer. That’s because they feature minimal down payment and interest rates, attractive location and low monthly amortization. The only catch is that when you visit the address, construction is often nowhere near completion stage. So now you’d probably understand why the offers are irresistible.

In real estate, a pre-selling condo or subdivision housing units are residential properties sold before construction, while it’s under construction and just right after the developer launched the groundbreaking ceremony, or even during the planning stages when the area doesn’t have any construction activity. So depending on your research, a pre-salel offer can be hugely advantageous route to snagging a great property acquisition or an offer you must avoid at all costs.

As a cautious buyer who doesn’t want to take high risks especially when investment involves millions, you can make a judicious decision once you have done your homework.

As a guide, here are things to look for:

Advantages of pre-sell properties

1. Promising investment with cheaper prices
If you look advertisement of well-appointed residential units ready for occupancy, whether from renowned or obscure developers, prices are often out of reach for most buyers. That is why they settle with pre-selling unit as its attractive, sometimes even seductive, low introductory price which can be as much as 30% cheaper than a finished unit. Additional sweeteners include up to 15% discount depending on mode of payment. Downpayments of 10% payable within three years isn’t uncommon with remainder payable through manageable terms under Pag-IBIG loans or bank financing.

If you are into property investment, this offer can be very tempting; once your property is ready for occupation, favorable conditions — infrastructure and accessibility development within the area — finished units can fetch much higher value than your initial investment.

2. More options and flexibility
Since condo unit isn’t completely finished yet, you as a buyer have more options at the construction stage. You can pick the location, floor plan and interior design. This depends on the contract you’ll sign so one thing to bargain with your agent is the ability to make such leverage. You can even arrange to inspect your unit at certain project milestones and notify developer for defects or adjustments. Needless to say, it gives you plenty of freedom to design and customize your future home or investment.

Risks of pre-sell properties
With all the advantages of pricing and flexibility, there must be disadvantages of pre-sale condo housing units. Otherwise, it becomes the only acceptable payment option.

1. Unexpected finished product
Unlike advertised properties that are more pricy yet ready for occupancy, those that are offered on pre-selling are a long way before the owner can take over and make use of them. Having terms such as “more or less” and “subject to change without prior notice,” pre-sale contracts can reasonably make buyers feel jittery as the other side of flexibility sets in: change in unit sizes, features and floor plans can occur outside of a buyer’s knowledge. In the end, a buyer could end up paying for a property whose characteristics fall way below his or her expectations.

2. Delay in delivery
In addition to clauses that allow vague practices within pre-sale contracts, there may also be clauses that allow developers to delay delivery of properties for up to a year or even more. Flexibility options and revisions from the original plan could alter timelines of delivery, leaving a buyer uncertain when he or she will get the keys.

3. No refunds for failed projects
Some pre-sale housing projects went bust as developer were unable to find additional finding to continue the project and went bankrupt. Buyers who made earlier financial commitment were left to write off their investment as losses as they were unable to get refunds.

4. Corrupt agents
Some agents target vulnerable clients such as overseas Filipino workers who are unable to personally visit the location and inspect their pre-sale property on offer and were given false representation of the properties they actually buy. These agents add more layers of fees that normally are not included in list of things buyers need to pay. Even though the project is progressing well, rogue agents don’t forward buyer’s money to developers.

What the public needs to do when planning to buy pre-selling properties
While buying a pre-sale property is an attractive prospect, it’s also a risky business that only those who perform due diligence should accept or reject a certain offer. Here are a few tips one can follow:

1. Get to know the developer behind the project. If you are not familiar with it, check online its background such as past projects, possible involvement in scams and how it’s generally portrayed on social media. Best of all, check the status of this developer with Housing and Land Use Regulatory Board.

2. Only transact with licensed agents and do not engage in people not permitted to engage as agents even if you know them personally such as friends or family members.

3. Once presented with a contract on a pre-selling property offer, consult a lawyer with experience in handling real estate business to help you navigate through the legal jargons to ensure it’s not onerous and disadvantageous on your part.

4. Calculate expenses incurred when committing to buy the property and balance it with your financial capacity, including your monthly income, assets and properties you own. It would be advantageous as well to know the trends — infrastructure projects in the area, fiscal health of the country that may impact interest rates, and so on — to determine the property’s future value.