As an aspiring homebuyer, you probably heard of the many wonders of investing in or buying pre-selling properties.
Also regarded as off-plan properties, residential properties at their pre-selling stage have been making waves in the Philippines as one of the best investment options because of their below-market value.
More importantly, an affordable pre-selling house and lot makes an attractive option to prospective homebuyers who are on a budget.
Given all these, you might have asked yourself what are pre-selling properties, and are there certain advantages to buying them at their pre-selling stage?
Succinctly put, pre-selling units—whether they may be townhouses, condominium units, or house and lots—are residential properties sold by a developer before their completion.
These same properties are released to the general public at a time where the property is still under construction or may not even exist yet.
To sell pre-selling properties, prospective homebuyers are presented with either blueprint plans or a showroom of model units. That said, potential homeowners may find that the unconventional manner of buying residential properties before their completion can sound like they are buying an idea.
As a result, many are not so keen to acquire or invest in pre-selling homes. However, as with any property investment option, buying pre-selling properties has its own benefits as well as risks. It is still recommended that you research and explore the pros and cons of investing in pre-selling properties thoroughly before you dive into this venture.
Pros and cons of investing in a pre-selling property
In this article, we discuss the merits as well as the potential pitfalls of buying properties at their pre-selling stage below:
1) Below market value
In order to entice would-be buyers to invest or buy a property that does not exist yet or is still under construction, pre-selling properties come with an affordable introductory price.
Typically, developers reduce the asking price by 30-50 percent compared to the price of a completed unit. They may even offer discounts on down payments for as low as 0% or even waive reservation fees should the buyer sign the contract and pay in-house.
Apart from generous discounts, developers also provide flexible payment methods should the buyer fail to qualify for a bank loan. In this regard, affordable pre-selling house and lots are within the reach of most prospective homebuyers considering their flexible payment schemes.
That said, developers offer various incentives to make sure that their properties have high occupancy rates by the turnover rate as the lower their vacancy is, the higher their earners will be.
2) Steady cash flow
An investor pursuing affordable pre-selling house and lots or properties as a potential pool for rental revenues will find that they can choose the best units to attract future tenants. That said, investors can earn a steady cash flow from the monthly rent.
Similarly, buyers who bought the property at below market value can sell it for a higher price seeing as the property will have appreciated over time.
3) Possibility of customization
One of the disadvantages of buying ready-for-occupancy (RFO) units is that these properties do not offer buyers much leeway or leverage as to customization. Moreover, it does not leave buyers much choice as to which units to choose as most units are no longer vacant.
An affordable pre-selling house and lot’s main selling point apart from its below market value prices is customization. From an early phase of construction, buyers can already select the size, location, outdoor view, distance to amenities, level, etc. They are given the liberty to customize floor plans and unit layouts according to their preferences.
Moreover, it allows them to be involved in the construction, inspect the progress, and ask for adjustments as necessary and in advance.
4) Perfect investment
It might be a tired saying but real estate remains one of the best options for investment. That said, buying residential properties during their pre-selling stage gives you a lot of room for profit.
As pre-sold properties are typically sold at a cheaper price, you can expect the price to increase once the project reaches completion. Together with the value in the market, real estate appreciates over time. That said, you actually earn more than what you initially paid for.
As an investor, this is a profitable venture. Regardless of whether you choose to rent out or sell the property, investing in pre-selling real estate guarantees you a definite gain in the future.
1) Unforeseen changes
The worst scenario a buyer can find themselves in is being unable to get a refund for an incomplete project. Considering that this might be a possibility, it is highly recommended that you choose a reputable developer with a good track record.
These are the developers you can trust to stay true to their word and deliver on their expected timeframe—with little to no delays at all during the turnover. In other cases, projects may be mismanaged which results in slow progress and delays that can take up to years to resolve.
As buyers are typically required to sign a contract, changes can potentially be done without prior notice, Changes such as unit sizes or floor plans are things that may turn out differently than what you initially expected. Having said that, prospective buyers might feel like they get cheated out of what they paid for.
2) Corrupted real estate service
As unfortunate it may sound, even the real estate industry is plagued with swindling issues such as scams and the like. In fact, more than 85 cases of pre-selling scams have been reported to HLURB in 2009 alone.
As a result, stricter policies are imposed on pre-selling properties. It is not at all uncommon to find potentially corrupt real estate brokers and agents in the country. There may even be cases wherein charlatans would pose or claim to be agents or brokers, collecting deposits and payments from buyers only to disappear later. This is even riskier for OFWs who invest in pre-selling properties without a representative acting on their behalf. That said, you need to be extra vigilant as to who you are transacting with.
Always do your research and do not be afraid to ask for credentials. If you are having second thoughts, it is best to act on what your gut tells you. Keep in mind that just like anything in the world, if it is too good to be true then it probably is. Caveat Emptor!
3) Potential illegal activity
The Philippines has a law in place to ensure that the interests of homebuyers are protected.
Presidential Decree 957, also known as the “Subdivision and Condominium Buyer’s Protective Decree” is a law that requires owners, developers, and dealers to secure a license from the Housing and land Use Regulatory Board (HLURB) before pre-selling property. This ensures that developers and the like would adequately comply with government requirements and avoid any pre-selling scams.
However, know that scams still run rampant even with this law in place. As said above, it is your duty and responsibility as a buyer to do all the necessary research and thorough background checks before committing to buy any pre-selling property.
Buying affordable pre-selling house and lots or properties comes with its own set of perks as well as its drawbacks. As a smart homebuyer, the responsibility of vigilant buying falls on your shoulders. To ensure that you know what you are walking into, it is recommended that you consult an attorney and ask for legal advice before signing anything to avoid being taken advantage of.
Similarly, your lawyer’s legal advice will clear up anything that you might not fully understand. Also, it is advised to have a trusted and licensed real estate broker to walk you through every transaction of buying a property during its pre-sale stage.
BRIA Homes is a subsidiary of GOLDEN MV Holdings, Inc., .one of the largest real estate companies in the country. BRIA Homes is primed to bring quality and affordable house and lot packages and condominium units closer to ordinary Filipino families. This is the goal that drives every single employee in the company, for which the ultimate fulfillment is seeing a client happily moving into BRIA’s homes.
To know more, visit their website at www.bria.com.ph, like and follow “Bria Homes, Inc.” on Facebook, Twitter, Instagram, YouTube, Pinterest, Spotify, Viber Community, Telegram Channel, Kakao Talk, LINE and WhatsApp, or call 0939-887-9637.