Reply
Regular Contributor
Mtndude
Posts: 61
Registered: ‎11-14-2011
0

What does a pre-sale mean?

I have seen a few houses listed and some that actually say sold.  They are just drawings/renderings.  Does the developer typically have everything done and is just waiting for a buyer?  Are they going to build it without a buyer lined up?  One of them didn't eloop sound like they had permiting competed yet..

Regular Contributor
Mtndude
Posts: 61
Registered: ‎11-14-2011
0

Re: What does a pre-sale mean?

Redfin Agent
KathiKB
Posts: 527
Registered: ‎04-01-2009
0

Re: What does a pre-sale mean?

Hi Mtndude,

 

Pre-Sale means the builder has permits pulled for the home but the home is in the very early stages of being built, if at all. Sometimes it is just bare earth, sometimes, just a foundation. At some point the builder may start building the home and once the home gets further in the process they should change this status to 'Under Construction'.

 

You can go under contract on a pre-sale and we often do. Buyers can sometimes (but not all of the time) see the floor plan on a different lot, like it and make an offer. Once in a while a buyer goes under contract on a home that they have never been inside a similar home of the home they are purchasing. This always astounds me but happens once in a while.

Kathi Kelly-Billings | Redfin Seattle Senior Agent

See all my deals and reviews
Redfin Agent
KathiKB
Posts: 527
Registered: ‎04-01-2009
0

Re: What does a pre-sale mean?

Btw, this home looks like a custom home, just one being built...

Kathi Kelly-Billings | Redfin Seattle Senior Agent

See all my deals and reviews
Regular Contributor
Mtndude
Posts: 61
Registered: ‎11-14-2011
0

Re: What does a pre-sale mean?

But how can they have permits without plans?  The above listing states "Zero setback may be possible from the property slope. Seller financing available."  That implys that they don't know yet..

 

Here is another one, but it looks like they have permtis (the foundation is in)

http://www.redfin.com/WA/Kirkland/12028-72nd-Ave-NE-98034/home/28928257

 

 

 

Super Contributor
ardell
Posts: 345
Registered: ‎08-27-2011
0

Re: What does a pre-sale mean?

Sometimes an owner who wants to sell a piece of land will "hook up" with a builder who demonstrates with plans and a drawing what could be built on the property, and they price the combination as "a pre-sale". However the land owner is not making any improvements. He is simply offering that house and that builder as an option for people who don't want to do the legwork to find their own plans and builder. The option is still open however for the buyer to deal directly with the landowner with their own plans and builder, and then the "pre-sale" turns into a vacant land purchase.

 

This is done because it is easier to sell a "new home" than a piece of vacant land. It also gets more eyes looking at it on the internet if you show a home with "reasonable facsimile" photos of interior finishes vs listing it in the vacant land section of the mls where it will get many fewer views. So at times "pre-sale" it is a marketing strategy.

 

You ask: "Are they going to build it without a buyer lined up?"

 

If it is part of a major development and the builder can afford to do it as a "spec" house, then yes. But then it turns from a "pre-sale" to a "spec house", built on the speculation that the builder will recoup the monies he has put into it. Often they still hope to sell it at half way into the process at which point you will see verbiage like "still time to choose your colors!". It gets risky when the builder is choosing their own granite colors, cabinet colors, hardwood floor vs carpet areas, tile selections. Even on a spec house they like the buyer to be in the process before the millwork style, exterior color and personal taste items are put into the house.

 

Another reason they prefer "pre-sale" to "spec" is the buyer usually has to pay for all upgrades they choose on a non-refundable basis. Without this the builder has to either stick with Plain Jane finishes or fork out the extra bucks for upgrades hoping the house will sell for more if he does, which is not usually the case. If the buyer is in the room at the point of upgrades, it is not uncommon for the buyer vs the builder to pay for the extra flooring changes, lighting upgrades, even accent paint colors out of pocket during the process. 

 

So even if the presale is permitted and started before a buyer commits, it is the builders hope that the buyer will enter into a contract to purchase long before it turns from a pre-sale into a spec house without the buyer's input of choices and the buyer's money paying for his choices..

 

ARDELL DellaLoggia
Sound Realty