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by Chris Anderson, PhD
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permissions and has the legal authority to sell the units, you can enter into a hard contract. At the time of signing the hard contract, you have to make balance up-front payment. Usually, the upfront payment is 20% of the total cost of completed unit but can be more or less. You can pay by a direct deposit with the builder or through a letter of credit. After signing the contract and making an up-front payment, you do not have to make any other payment until the unit is ready and you close the deal and take possession.
However, before signing a hard contract you must be careful because by signing it, you are entering into a binding commitment to purchase the unit, failing which the builder can forfeit your deposit. In some states like Florida, you have a 15-day rescission period during which you can withdraw from the hard-contract without any obligations. Before signing the hard contract, you should check to see if you have the rights to assign the property to a qualified intermediary. If you would like to play safe, take a professional opinion on the terms and conditions of hard-contract for preconstruction purchase.
The construction phase normally lasts for 6 months to 2 years (depending on project type) and you have an expiration date on the hard-contract. If the builder fails to complete the construction and handover the possession, you can claim for refunds and will have no legal obligation to buy the unit. During the construction period as the building would move towards completion, there is typically several price increases but of course, you cannot absolutely count on that happening. If you are able to find a suitable buyer prior to closing, you can resell the unit and claim your profits on closing of the deal.
If you have not assigned the contract until th |
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