Pre-construction Prices are generally lower than those of existing condominium resales. This brings up two obvious questions: 1) Why do developers discount the units for pre-construction buyers? and 2) Why do they sell pre-construction rather than build first? The answer to both questions is the same--they have to.

The prices are discounted to give buyers the incentive to buy something they can't see, touch or feel. Sky and paper are harder to sell than concrete and steel. Discounts make the difference. Developers sell pre-construction, even at the lower prices, because they must have pre-sales to get their construction loan. Lenders may require 50-80% of a project to be sold before construction can begin.

Four Phases of Pre-construction Sales:

1) Reservation Agreement--The developer has preliminary plans for the project that are subject to change and buyers can make "intent to buy" reservations with a deposit of $5,000-$7,500. This deposit goes into an interest bearing bank trust account, and the buyers can get a refund plus interest at anytime. There is no risk.

2) Right-of-Rescission Period (15 days)--The buyer receives the state approved finalized condominium documents and hard contract to review for fifteen days. The buyer then needs to decide whether to go ahead with the purchase or get a refund.

3) Contract for Sale--This is when the hard contract is signed and becomes binding for both parties. The buyer pays the balance of the required earnest money, which is usually 20%. This can be paid with 10% cash and 10% Letter of Credit from the individual's bank. If enough of the Reservation Agreements convert into hard contracts, the Developer will then be able to get the construction loan.

4) Closing--The condominium is completed and a Certificate of Occupancy is issued. The buyer performs a walk-through inspection and goes to closing. This is when the remaining balance and closing costs are paid. This is the happy day when the buyer gets to move in.

In any investment, it is important to plan and remain patient. Plan to have the necessary funds when it's time to close and the patience for the building to be completed. A recently completed beachfront condominium shows just how well planning and patience pay off. In the pre-construction phase, units were selling in the $200,000 range. Once the project was completed, the units were selling in the $300,000 range. There is a great probability that you too will enjoy such a substantial appreciation for your patience.

Questions & Answers:

Below you'll find answers to common questions regarding Pre-Construction Opportunities. Should you have a specific question not listed, please contact us and we'll be glad to assist you.

Q. How do these prices compare to other condominiums in other areas?
A. According to the 1999 "Hutchinson Condominium Report", the average cost per square foot for new construction more than doubled from 1990 to 1998. Yet, Destin area waterfront prices remain up to 60% or more below comparable new construction on (in many cases less attractive) property in Ft. Lauderdale, Miami, Naples, and the Cayman Islands, to name only a few of the more prominent resort beach areas. These figures are also true when compared to condominium properties in the prime ski areas of Colorado, Utah, Montana, or California. The comparatively low prices in our area have driven the demand for waterfront condominiums through the roof and drawn buyers from all over the world.

Q. Why is buying a condominium a solid investment?
A. Federal tax laws are the most favorable for treatment of primary homes than perhaps they have ever been. Profits on the sale of your primary residence are tax free up to $500,000.00 for a married couple filing jointly and $250,000.00 for a single taxpayer. Second homes and residential investment properties receive the best treatment since the mid-eighties. Sec. 1031 Tax Deferred Exchanges are becoming commonplace when buying and selling investment properties. What better, more secure investment can you make than in quality water front property?

We firmly believe over the long haul, since the supply of quality buildable water front property is so low (and there will not be any more) and the demand is already so high, that water front property should be among the leading investments in the portfolio of conservative and speculative investors alike.

The Jerry Wallace Company
151 Regions Way, Suite 6A
Destin, FL 32541

Toll-Free: 877-892-4389
Fax: 850-837-7981
info@jerrywallacedevelopments.com