The home buying steps of buying a property under construction are a a little different from buying an existing property, but many parts of the process remain the same.
1. Making an Offer: Instead of submitting a regular contract to purchase real estate and participating in a bid, the pre-construction buyer usually makes a reservation for the property on a first come, first served basis. The developer usually requires a small refundable deposit which ranges from $1000-5000 for the buyer to hold their spot for 7-14 days. If at the end of their reservation period, the buyer decides not to move forward with the transaction, the buyer may withdraw from the transaction and get their deposit back. This means that the price is usually fixed, and the buyer doesn't have to be involved in the stressful bidding war situation the way a non-new construction buyer does. This also means that speed is very important. Due to the high demand for new construction condos in hot locations and extremely low supply, inventory can sell out very quickly even in the early pre-sale stage.
Some developers only release a few condos in each stage to control the sales volume. I have had clients who narrowly missed a condo because someone else made a reservation 10 minutes before her. I also had a client who made a reservation right before someone else walked into the sales center asking to make the reservation for the same condo. Fortunately I was at the sales center with her and already got the heads-up that someone else was also interested, so we were prepared. Buying a new construction condo in hot locations can feel like hunting sometimes. Some of my previous buyers would make a reservation to hold their spot before they make up their mind. Since the reservation period is usually 7-14 days, this strategy buys them time to do the research the property without someone else jumping in to reserve the unit before they do. After all, once someone else makes a reservation, it is no longer possible to reserve the same unit at the same time, even if the buyer is willing to pay more. The reservation price is fixed. In fact, most buyers who make a reservation decide to move forward with the transaction. It is no secret that there is a housing shortage in the Greater Boston, and especially so for new constructions. Because the reservation process can happen so quickly, it is important to discuss the pros and cons of the unit that you are interested in with an experienced agent so you may be fully informed about the property and the potential consequences.
2. Signing the Purchase and Sale Agreement (P&S): At some point during the reservation period, the buyer discusses with their buyer's agent whether they wish to move forward with the transaction. Once they decide to move forward, the buyer's agent connects the buyer to an experienced closing attorney to represent them for the P&S signing. The P&S stands for Purchase and Sale Agreement, which is a detailed document that discusses the terms and conditions of the purchase. The buyer's attorney negotiates with the seller's attorney to draft this document before both parties sign the agreement.
3. The Mortgage commitment and walkthrough: The mortgage commitment and walkthrough usually take place one week before closing. Your lender will issue you a commitment letter verifying that we are clear to close, and you are allowed to conduct a final inspection before we complete the transaction. Since this is a new construction condo, at the walkthrough you will usually receive a punch list that allows you to put down a list of items that you want the seller to improve, if there is any (such as missing paint, defects, or cabinet not working), and they normally have 30 days to complete the items on this punch list.
Also if you want, you can let your buyer's agent know whether you are interested in bringing in an inspector to the property to inspect your condo professionally. They usually charge about $250-400 (higher if they give you a written report instead of oral report) to walk through a condo or higher if it's a larger unit or building. The inspector can give you helpful information about the home you are buying, and tell you what you need to watch out for about this property. Many of my new construction buyers in the past didn't do a professional inspection and just check the condo themselves because they didn't find an inspection necessary for a brand-new property, but the ones that did do an inspection found it helpful. Home inspections are completely optional for the buyer. If you want to bring an inspector to your walkthrough, be sure to inform your agent so they could make good recommendations for you.
4. Closing: At the closing, please make sure to bring your ID. Your remaining down payment will be due on the day of closing, so be sure to prepare in advance. The attorney will go through all the legal and mortgage fees and explain all the paperwork. The closing usually takes about an hour.