Buy before construction – Mansion Global
The luxury and second home markets have never been so active. As the pandemic has turned hesitant buyers into certain buyers and caused many city dwellers to flee urban areas, the rush for properties continues to drain real estate inventory in the most sought-after destinations.
In the sunniest, snowiest and wealthiest parts of the Western Hemisphere, high-end developers are building as fast as they can, while battling labor and supply shortages . The result of this expensive housing frenzy is that demand so outstrips supply that more and more buyers are willing to put down their money and never see the property.
According to a survey released in January by HomeLight, a San Francisco-based real estate benchmarking firm, one in five US buyers in the previous 12 months bought a home without seeing it.
Homebuyers competing for a key in prime communities are now scrambling to buy land that will hold a home two or more years down the road. As these eager potential residents hunt for their golden ticket, real estate agents must adapt to the imaginative sale.
In fact, the market is so hot that some buyers are looking for ways to sell their position by buying a future home from another buyer who is also looking to own a home to build.
The resort town of Acre in San Jose del Cabo, deep in Mexico’s Baja Peninsula, is a microcosm of this hot market. The development welcomes an exclusive clientele of guests to escape the noise and rush of the outside world in one of its 12 treehouses. While on the 25-acre property lined with everything from sunflower farms to mango orchards, residents and guests have the opportunity to participate in everything from local dog rescues to planting and harvesting.
There are currently six occupied villas on the property, with seven new homes currently under construction for around $3 million each. Nelson Reichert, Sales Director of Acre Villas, thinks the new builds will be off the market long before they are finished.
“In this market, there is clearly more demand than supply,” Reichert said. “Once people understand that fact, they’re much more open to the idea that the only way [to buy a luxury or second home] is to get what they want before building.
“Buying on faith is about credibility and trust,” he added. “Branded deals make people feel a lot more secure in the process, so these projects have worked really well. If people are confident that the product will be delivered – as described, within the established time frame – they can usually make up their minds. [buying a home that is yet to exist].”
John Fair, managing director of The Strand, a new private development under construction in the Turks and Caicos Islands, believes new buyers should not only get used to buying in the future, but expect it. He confirms that the properties available are not lacking in interest, ranging from a two-bedroom villa for $2.45 million to a three-bedroom house for $3 million, including large residences for $10 million. dollars.
If there is one indication of the current hyperactivity of the luxury or second home market, it is the occasional phenomenon of buyers reselling or flipping their purchase of a future home long before it is built. Although it is not legal in many areas, buyers often find a way.
Myles Newell, director of Waypoint Resort Real Estate, leads sales for The Residences at the St. Regis Los Cabos. While he won’t allow the practice on the project still under construction along the southern Baja Peninsula, he admits other developers do.
“As a rule, contracts are only transferable with the approval of both parties,” Mr. Newell said. “The developer will never want to compete with the resale inventory as they are still trying to sell similar units. However, if the project is sold out or the property is not in competition with their current offerings, they will often grant However, in most cases, the original buyer is still obligated to close if the next buyer does not close on the property.
Mr. Newell reports that this new concept of flipping is made possible by new technology that overcomes buyer complaints such as, “I can’t imagine what it will be like…” or “We want something to use now…”
“With the current level of 3D renderings and animations, it’s very easy for us to show shoppers realistic presentations of what they’re buying,” Newell explained.
Just down the beach from Quivira Los Cabos, a luxury home development tied to the Quivira Golf Club, sales manager Ryan Winegar knows some buyers realizing how active the market is may be looking to sell an “in” at any development.
“I cannot speak for homes with other developers, but in the case of properties in the developments I promote, [flipping] can absolutely happen,” Mr. Winegar said. “There is a clause in our contracts giving the customer the right to transfer their contractual obligation to anyone for a small percentage of their purchase price.”
According to Winegar, this process means: if the property increases in value during construction to the point that the client can benefit from flipping it, they can simply pay the fees and have the name of the new buyer replaced in the agreement. before the delivery.
“Historically it’s only been a small percentage of customers who have exercised this right, but I’d bet we’ll see an increase in this usage as prices rise faster due to changing building material costs” , he explained. . “In fact, I’m sure now more than ever opportunistic investors are looking at this option as yet another reason to buy in today’s market.”