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June 30, 2011

Questions You Should Ask Before Investing In Pre-selling Condos

Fliar Towers Site
Investing in pre-selling condos can be very risky to some people. I remember one client of mine who got disappointed upon learning that the projects that he’s inquiring about are all at pre-selling stage. He told me that he has low risk tolerance in such investments and that he considers it a gamble because you'll never know what may happen in the 2-3 years development period. This was the time when the news about Globe Asiatique’s PAG-IBIG loans scam was at large.

Like any other investments, risks can be minimized if not avoided if we make an effort to get ourselves more knowledgeable not just on the pros and cons but more importantly on the integrity and track record of the developer offering the investment. Ask yourself? What assurances do I have that they can deliver my unit in the future?

I have listed below what I think are the vital questions that will help you measure the risks involved in buying a pre-selling condo unit. Here they are:

1. How many years in operation is the developer? It is important to know this because you wouldn’t want to invest in a developer’s first project do you? It’s okay if it’s ready for occupancy but if it’s pre-selling, you are facing a greater risk because there is a strong possibility that  most of their funding  rely on pre-selling sales to complete the project. What if there are not enough sales to fund the construction? The time of delivery will be delayed or even worst, it might not be delivered at all.

2. What is the reputation of the developer? Businesses create an identity in the marketplace as time goes by and you can easily know this by visiting related forums or searching news or write-ups about them. Do they deliver on time? Have they violated development rules and regulations in the past? Are they customer oriented? Do they properly maintain their projects prior to turning over to the condominium corporation? If they do business ethically then they deserve your trust.

3. How many projects have they completed in the past? Having a portfolio of past projects gives you a better assurance that they can deliver your unit in the future because this means that they have learned the ropes and that they have an effective system in place to successfully deliver their projects. Another advantage of this is that you can research on forums what people say about them or their projects and get to know them better.

4. Are they part of a bigger corporation or holding? I would say that it is safer to invest in a developer that is part of a bigger corporation like for example, Ayala Land – Ayala Group of Companies, SMDC – SM Investment Corporation and of course DMCI Project Developers Inc. or more commonly known as DMCI Homes -  DMCI Holdings Inc. These developers provide better assurance as to the delivery of their projects because they have diverse sources of funds and they don’t rely on pre-selling sales alone to fund its construction.

5. Do they have a license to sell? A developer must have a license to sell before they can offer their projects for sale. Every project launched corresponds to one license to sell. This is issued by the Housing and Land Use Regulatory Board (HLURB). The developer must submit all plans, details, schematics, marketing materials, permits and etc before they are issued a license. This is an assurance that what is presented to you will be delivered accordingly because the developer cannot alter the plans without the approval of HLURB. You can verify with HLURB if the project that you are looking to buy was issued a license to sell. If not, be warned!

There might be other helpful questions other than these. Feel free to comment below if you  have something to share.

Live a beautiful Life!

Ryan Rillorta
Real Estate Broker
PRC Reg # 5578

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