Buying Pre-Construction

The real estate market in Puerto Vallarta is solidly into recovery and consolidation, and the natural outcome for developers is to bring new projects onto the market.

Notwithstanding a global pandemic, (investors think in decades, not quarters), construction activities are at levels unseen in this market in a long time.

New projects make economic sense for developers and buyers when an active market is in progress. Once again, it is an active market!  Some developers are initiating projects on a property they have held in inventory, others are actively buying developable land. It’s a refreshing change after almost 8 years in which few new projects were launched.

It is common to offer preconstruction discounts as an incentive to buyers. Although there are numerous payment plans available, typically the buyer makes a down payment, and then through the course of construction, they make monthly payments, with a final lump sum at delivery.  It is a win-win for buyer and seller.  The buyer gets a condo secured at a predetermined price and the seller benefits with a cash flow and secured sales.

Investing in a foreign country feels risky to some buyers, so it is important to consider risk management as a part of the buying decision. The trick is to ask the right questions and assess the answers you receive.  The fact is that thousands of condos have been successfully purchased under the preconstruction formula.  However, there have been a few cases wherein the buyer has ended up unsatisfied for a number of different reasons.

So how do you maximize your opportunity to win in a preconstruction purchase and lower the risk to a minimum?

Eight Steps to maximize your opportunity to win in a preconstruction purchase and lower the risk to a minimum

1. Look for an AMPI agency-listed development. If the project is listed through FLEX MLS as a preconstruction project, it will have already met a rigorous standard of scrutiny, including much of the following. (If it not listed as development through FLEX MLS, choose an AMPI affiliated agent to help you to scrutinize said development) Ask for agent credentials and references.

2. Legal due diligence: Confirm that the Seller is the legal owner of the property, or has a legal contract of sale or transfer from the owner. Insist on seeing the deed (escritura) for the property on which the construction is to take place.

3. Building permits: Confirm that the Seller has current/paid-up construction permits in place for the project contemplated. Also ensure that the developer has contracts in place, or at least provisions made, for all required services, such as potable water and sanitary services, electricity, internet connectivity, etc.

4. Confirm the reputation of the developer. Ask for references of happy previous clients, and check them out.

5. The same goes for the master broker/marketing entity. Confirm his track record, reputation and experience in pre-construction projects.

6. If the project is in or adjacent to the Federal Zone (this usually means oceanfront) be sure that the seller has an appropriate Concession in place which permits the contemplated project. An environmental impact study is generally required as part of this.

7. Finally, be sure you are happy with the sales agent who you are dealing with directly. Do they understand, and can they explain to you the legal structure on which the development is based?

8. Have the sales contract fully reviewed and explained to you by a competent individual. This can be your agent, though a real estate lawyer should also be considered.

 

At the end of the day, the Developer’s reputation (for having successfully delivered projects of a similar scope in the same region), and your AMPI agent’s references (of satisfied past preconstruction project customers) will combine to give you the peace of mind you are looking for.

 

If you would like further information on this topic or help, please find the link to our agency page here.  Our agents will be happy to assist you.