How to Buy Preselling Property Part 1

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Preselling property. If you’re not from the Philippines you’re probably not familiar with this common practice, but the basic idea is that you can “call dibs” on a property before it has even been built by a developer. In many other countries you might call it buying “off the plan”. There are of course greater risks that come with intending to own a property before it exists, but it can be a very beneficial method of fundraising by developers as well as a great way for you to secure something in an area of high demand or growing demand before it becomes unaffordable, with attractive terms of payment. It’s a win-win on both sides.

But how about those risks? What are they exactly and how do you protect yourself?

Step One: Do your background checks

This should be a no brainer, but it is surprising how many people forget to do this: check the developer’s website. A reputable developer should have a portfolio of previous projects you can peruse. If it’s a smaller developer you may have to ask them directly for that information.

It is also valuable to check their HLURB permit and license to sell via the Housing Land Use Regulatory Board, whether they are still valid and whether there has been any stop work orders placed on the project and how they were resolved.

A wide ranging Google search is also a valuable way to find information about past projects listed by agents and brokers.

Once you have at information look through forums and blogs. Are there any unhappy buyers? Were the problems merely superficial or more serious and systemic?

Finally run this information by your agent or broker. The best agents and brokers will always be upfront and honest about the problems developers have had in the past, but they also possess knowledge of how they were resolved, which isn’t often posted online.

Step Two: Location, location, location

Location will always be a factor when it comes to real estate purchases, but for preselling properties it is even more crucial to do the research because what you will be purchasing won’t exist for at least another year or two.

The first location to understand is the barangay.

Is it in a prime location with lots of sustainable demand from sectors such as BPOs (for example, a barangay that is booming because the construction of a major project has brought a lot of workers in from elsewhere is not sustainable)?

Is there adequate infrastructure already existing or already being developed?

And, finally, what will the place look like when you finally get your property in terms of supply and zoning? It is no good getting a property for investment if it is going to be hard to find a renter because thousands of nearby  properties are also turned over at the same time. Similarly, it is useless to buy for lifestyle if the area becomes an industrial hub during the time your property is being built.

This is where your broker’s and agent’s experience and market knowledge is invaluable.

The next location to understand is the location of the property itself within the development. Some questions you need to ask are:

What direction is it facing? Is it high enough? What sort of view are you getting? Typically high ocean and city views are more desirable, hence retain capital value and yield better.

Are there any obstructions? Facing the city or ocean is useless if there’s another building in the way.

Is it near any noisy or high traffic areas? Such as busy roads or next to amenities like the pool or lift area.

Finally, is the car park, if you are driving, located in a convenient and flood free area?

In part 2 of this series we will be discussing the legal rights and contractual things you need to know about preselling.

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