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Winston, Other/Just Looking in

New construction. Should I buy at pre-construction price?

Asked by Winston, Fri Apr 18, 2008

I'm thinking of buying new construction and there is a developer offering pre-construction prices. Can someone explain to me exactly what pre-construction prices are and if it makes sense to get involved at these prices? I'm worried that I may miss the boat but also curious on if these prices are guaranteed to increase considering the market. Could prices stay the same over the development of the project or go down if there's little interest? The developer has 85 lots to move. I'm really interested but don't know if this is the right time to jump in. I could really use some advice!!! Please note that I'm looking to stay in this home for 10 years.

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Offering pre-construction prices is a sales gimmick to promote their product and entice buyers. With you being worried that you, "may miss the boat", indicates the promotion is working. What you need to find out for certain is, what is being offered at pre-construction? It is a safe bet that any "savings" offered will be recouped later.

Current construction costs and any expected increases in costs for materials, labor, sub-contractors, overhead, and profit have already been factored into the projected selling price. If they are referring to the lots for pre-construction price, that may mean the lot price is being offered as unimproved vacant for what the developer purchased it as rather than residential improved. Again, any discounts or savings to the consumer has already been factored into other costs.

Once you find out exactly what is being offered at pre-construction, you could consult with an appraiser to determine the lot value and/or replacement cost (determined by the cost approach to value) of the improvements (structure and attached improvements) as completed by the specs. Then you should be able to determine if it is a good long or short term investment to "jump in".
0 votes Thank Flag Link Fri Apr 18, 2008
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