Buying a home before it is developed/built
Buying a home before it is built/developed, also known in Spain as buying off plan, can have some potential drawbacks. Here are some points to consider:
Uncertainty as to the final result: When buying a home in the early stages of construction, you are not absolutely certain what the final result will be like. Although detailed drawings and descriptions are provided, there is always the possibility of changes during the construction process. This could affect the design, the quality of the materials or the specific characteristics of the house.
Delivery delays: The construction of a home may be subject to various factors that may cause delivery delays. Unfavorable weather conditions, material supply problems, technical difficulties or delays in municipal permits are just a few examples. These delays could affect your plans and timing, especially if you have a deadline to move.
Developer or Builder Risk: When you buy a home that has not yet been built, you assume a certain level of risk associated with the developer or builder. It is important to research and evaluate their reputation, experience and track record on previous projects. If the developer faces financial difficulties or has management problems, there is a risk that the construction will not be completed as planned or that the quality will not meet your expectations.
Changes in market conditions: The real estate market can fluctuate during the construction period. If property prices fall, you could find yourself in a situation where the value of the home is less than the price you initially paid. This could create difficulties if you need to sell or obtain additional financing in the future.
Limitations on customization: If you want to personalize your home or make changes to the original design, you may encounter limitations when buying off-plan. The developer may offer predefined customization options or enhancement packs, but you may not be able to make significant modifications based on your individual preferences.
Risks of Unobtained Licenses: During the construction process of a home, the developer must obtain all the necessary licenses and permits from the local authorities. These include construction permits, land use licenses, design approvals, among others. If the developer does not comply with all legal requirements or faces bureaucratic obstacles, there could be delays in obtaining the necessary licenses. In some extreme cases, it could even happen that the licenses are denied, which would prevent the construction and affect your purchase. In order to mitigate this risk, it is essential to ensure that the developer has all the required permits and licenses before signing the purchase agreement. You can request copies of the relevant documents and, if possible, consult with a specialized real estate attorney to verify their existence and validity. Also, research the developer's reputation and track record in terms of tax compliance, project compliance, licensing, etc. can give you a clearer idea of its reliability in this regard.
It is key to minimize all these inconveniences, therefore it is important to do your research and obtain all the relevant information before making a purchase decision. Consult with real estate lawyers, review the developer's history and carefully review the purchase contract to understand the specific terms and conditions, covering also contractually all the scenarios that the aforementioned points can generate. And we insist, be sure to verify that the developer has all the necessary licenses and permissions before signing that contract.