Key Considerations for Buying a Pre-Sale Home: A Smart Guide for Savvy Investors
To ensure a safe investment, check out our brief guide on the key points to consider before purchasing a home in pre-sale.
The pre-sale model, meaning buying during the construction of the property, started becoming very successful about 15 years ago. Developers find this method very practical to finance construction through the people interested in purchasing the properties. For buyers, the advantage is that since the property is in the development stage, the price is lower, so everyone wins.
Here are some key points to review before signing any contract to ensure you make the best investment.
Reputation of the Developer and Progress
One of the key aspects to carefully review before signing any contract is the land, or if applicable, the progress of the construction and the reputation of the developer or construction company. You can check out other properties that are already finished to get an idea of what it would be like if you decided to buy a pre-sale home with them.
Contracts
One of the things you should pay special attention to, apart from the contract itself, is the schedule for the project’s completion dates, the features with which it will be delivered, and when.
The PROFECO (Federal Consumer Protection Agency) stipulates that in a purchase agreement, there may be penalties if the property is not delivered on time or as agreed. This is why having a calendar signed by both parties is important.
Some of the key points that should be included in the contract are:
- Size, square meters, and floor plans.
- Whether the property has a garden, terrace, balcony, pool, etc.
- How many parking spaces and their dimensions.
- Specify the type of finishes with which the kitchen, bathrooms, closets, floors, carpets (if applicable), and windows will be delivered.
- What amenities the complex offers and when you’ll be able to start using them.
The National Chamber of the Housing Development and Promotion Industry offers access to contracts that clients have used for property sales, so you can review them and get a clearer picture.
It’s always a good idea to seek advice from a trusted lawyer in matters of contracts and legal issues and have them review the contracts before you sign them.
Services and Utilities
Sometimes, services may seem like an obvious part of the construction, but technology has advanced a lot, and modern systems allow for savings and a reduced environmental impact. You can request a review of permits and authorizations and ask the developer about the following basic services:
- Electricity.
- Drinking water.
- Drainage and sewage.
Financing
Not all banks offer mortgages for pre-sale homes, so it’s best to check with your trusted bank to ensure you can access this product.
It’s also important to keep in mind that bank mortgage loans in Mexico offer a much higher interest rate than in Canada. The average mortgage rate in Mexico is around 11.5%. If you’re not a Mexican citizen and don’t have income generated in Mexico, it’s difficult to obtain a mortgage from a bank.
This explains why many homebuyers in Mexico opt to use financing offered by the developer, which is often offered at zero interest. A common financing model is as follows:
- 20% down payment.
- 30% of the property price paid in installments at zero interest.
- 50% of the total property value paid upon delivery of the property.
There are variations of this model, and developers tend to be flexible.
Other Expenses Related to Buying Real Estate
There are some additional expenses you should consider, such as the appraisal and work verification, which generally amount to 1% of the property’s price.
Final Thoughts
Buying a home in pre-sale can be an excellent opportunity to consolidate your wealth and make a smart investment. You just need to carefully review the most important points to make the best decision and enjoy your new home in the future.
