Pre-construction real estate presents unique opportunities for both buyers and real estate professionals. Buyers can secure properties at today’s prices with the potential for appreciation before they even take possession, while real estate professionals can access strong commissions and build long-term client relationships. However, navigating this market successfully requires an understanding of the benefits, challenges, and strategies for addressing buyer hesitations.
Benefits for Buyers
Pre-construction real estate offers several key advantages that make it an attractive option for many buyers.
Lower Initial Costs and Flexible Payment Structures
Unlike resale properties, where buyers must provide a full down payment and secure a mortgage immediately, pre-construction purchases allow for staggered deposit payments. Most projects require 15 to 20% down, spread over one to two years, making it easier for buyers to manage their finances.
Some developers even offer extended deposit structures, allowing buyers to enter the market with less financial strain. This is particularly beneficial for first-time buyers who need time to accumulate funds. However, the exact deposit schedule depends on the developer, project timeline, and market demand; some developers may require larger upfront payments, while others offer more gradual installments to attract buyers.
Appreciation Before Completion
One of the biggest advantages of pre-construction is the ability to lock in today’s prices for a property that will be completed in several years. In certain markets, property values may rise significantly while construction is ongoing. This allows buyers to secure a property with a relatively low upfront investment, keeping more of their capital free, while still benefiting from potential appreciation and building equity before taking possession.
Customization and Modern Features
Unlike resale properties, pre-construction homes allow buyers to customize their units by selecting layouts, finishes, and upgrades. New builds also come with modern designs, energy efficiency, and smart home features, reducing maintenance costs and improving resale value.
Warranty Protection
In Canada, pre-construction properties are covered by mandatory new home warranty programs. These programs protect buyers from structural defects, delayed closings, and workmanship issues for several years after completion.
Investment and Assignment Opportunities
Many investors purchase pre-construction properties with the intent to sell them before completion (via an assignment sale) or rent them out upon closing. While not all developers allow assignments, those that do provide an opportunity for buyers to profit before even taking possession. In strong markets, assignment sellers can see gains of 10 to 20% or more, making pre-construction a powerful investment strategy.
Benefits for Real Estate Professionals
It is not just your clients who benefit. Pre-construction properties provide a unique set of opportunities that can lead to increased earnings and client loyalty.
Higher Commission Rates
Developers may incentivize agents with commissions ranging from 4 to 6%, compared to the standard 2.5% in resale. Additionally, some projects offer bonuses for multiple sales within the same development, increasing earning potential.
No Showings or Staging Required
Pre-construction sales eliminate the need for staging, open houses, and multiple showings. Instead, you spend more time educating clients, explaining contracts, and addressing concerns, but the process is often more predictable and less time-consuming than navigating a competitive resale market with multiple showings, bidding wars and other activities.
Long-Term Client Relationships
Real estate professionals are more likely to build long-term relationships with pre-construction clients, creating multiple opportunities for future business. Since these purchases take years to complete, you can stay engaged by assisting with assignment sales, renting the unit upon completion, or reselling it later. Additionally, because pre-construction requires staggered deposits rather than a large upfront investment, buyers often have more liquidity to invest in additional properties – meaning they may return to you for future purchases even before their first unit is completed.
Market Stability
During downturns in the resale market, pre-construction sales can remain strong, as developers continue launching projects. Specializing in pre-construction can maintain steady income even when resale activity slows.
Real estate professionals looking for new opportunities, both for themselves and their clients, pre-construction sales can be a lucrative and stable strategy, especially in competitive urban markets.
