Buying a home for the first time may not be as easy as you may think. At first, it might seem like the only secret to buying the perfect home is having enough money to pay for the down payment and mortgage, but in reality, the payment is just the tip of the iceberg. There’s a whole lot more in the home buying world than that, and that includes weighing all your options, advantages and disadvantages, checking out what amenities you need, and a lot more. But one of the most important things you need to think about before going on your search, is whether the home you will purchase is ready-for-occupancy (RFO) or pre-selling.
Sure, this may seem too easy to figure out --just assess the urgency of your need for a home and then decide. But the truth is, there are more factors that you should consider in this feat. For instance, RFO homes are far more expensive than the pre-selling ones, but at the same time, they are faster when it comes to turnovers and other paperworks. On the other hand, pre-selling may be a lot less expensive than RFO units, but it will take a long time, and we’re talking about years here, before you can move in. There are many factors to consider in deciding which home you should purchase, and to help you in this endeavor, we have created a guide for you. Let’s dive into the pros and cons of RFO and pre-selling home buying.
RFO - PROS
The property is already existing
Many buyers prefer a property that they can already see. And that is not an odd quality to look for when you’re buying a home, especially when you are planning to start a family. You might want to start dreaming and imagining how your life would be with your loved ones, and seeing it in person, the exact location and layout of the place gives a vivid vision of how your future in the place would be like. It is better than looking into a rendered perspective of course, and it provides you the feeling of having something tangible to hold on to.
If you’re looking for a home where you can move-in immediately, RFO is the best choice. This may happen for plenty of reasons, like getting assigned to a new place for work, or any other factors. Oftentimes, when homebuyers decide to buy a home, it does not only mean they are ready to pay for down payments and mortgages, but might also mean that they are ready to settle in and move to their forever home. In cases such as this, homebuyers visualize themselves not only paying for a home that is under construction, but actually living in it while paying for it.
In some cases, developers offer discounts or promos for RFO units, which homebuyers can take advantage of while it lasts. This is why some homebuyers who are planning to purchase pre-selling units usually end up purchasing an RFO unit instead, because of the discounts and promos offered. However, overall, RFO units actually cost more, but we’ll look into that later.
RFO - CONS
More expensive in total contract price
Despite the discounts and promos offered for RFO units, they are actually more expensive than those that aren’t constructed yet. This is because of the growth in the marketplace since it was built. Real estate investment is one of the most stable businesses, and that means the value of properties continues to go up overtime. This is why pre-selling units cost less, because by the time that it is ready to be turned over, its price has definitely gone up by many percent. That is why RFO home buying is perfect for personal use instead of investment.
Spot cash or shorter payment terms
Since you can move into the place immediately, RFO units, unlike pre-selling ones, require shorter payment terms, and sometimes full cash payments. Some developers can also offer staggered payments when requested, but usually needs to be in shorter terms. So if you don’t have that kind of money to put on spot yet, you might review your choices.
Ready for occupancy units are typically sold within house and lot or condominium communities that are nearly sold out. This is because most of the houses or condo units in the project are already built and constructed. For some cases, RFO units are forfeited units that were once bought while it was still pre-selling, and were later on given up by the original buyer. Because of this, the choices for the best spot and location usually becomes an issue, because the number of available fully-constructed units are now limited. Some house and lot buyers often choose a good location in a neighborhood, for instance, facing the morning sun, or facing the main road. But due to limited RFO slots, choosing the best location becomes less possible.
PRE-SELLING - PROS
Low introductory price
As the project or property is still on the stage of being introduced to the market, its original prices can be low and affordable. This is a great way to start an investment, because by the time when the property is fully-constructed, the prices have already gone up high, and the returns of your investment will be huge.
Flexible payment terms and more payment options
When you buy a pre-selling property, it will be years before the property will be turned over. As a result, aside from the fact that you are buying the property at its cheapest price available, you can also break your payments down for years.
Discounts for spot full payments
Apart from the longer payment terms offered in pre-selling properties, if you already have the huge sum of payment needed to pay for the down payment or even the whole contract price, there will be a huge sum of discounts too that will be waiting for you. When you are buying a property for investment, this is a very good way to put your money into good use, where you can surely reap tons of benefits later on.
You have more units to choose from
As the development is still in its first stages, you will have a plethora of options. You can choose what level of unit in a condominium property you prefer or whether you want your home to be facing the main road, deep inside the middle of the subdivision, or facing the morning sun. Apart from that, you are sure to have state-of-the-art buildings and amenities once the project is turned over to you.
PRE-SELLING - CONS
No groundbreaking yet/ Ongoing construction
Despite all the good side of buying a pre-selling property, there are still the parts that might not tick your checklist. Since pre-selling properties are not yet constructed, unlike RFO units, you cannot see yet what the property you are buying actually looks like in real life. All you’ve seen so far are rendered from the architect's perspectives of your home, but not its actual appearance. So for many homebuyers, the homebuying journey really starts once you see an actual progress in your purchase.
Time frame of completion depends on many factors
While a target completion date is often disclosed to homebuyers, there are a lot of factors that affect the adjustments on these dates. And some of these concerns make many home buyers rethink about buying a pre-selling property. However, completion dates usually range from one to four years, depending on the project and its developer.
Financial capacity changes by the time of completion
Many homebuyers pursue purchasing a home as soon as they can afford one because of their needs, and oftentimes, in order to fulfill life-long dreams. However, one of the factors that you must consider when buying a home is your long-term financial capacity. Most pre-selling properties are not fully constructed and turned over after years of payment, and over time, there may be changes in your financial status. If you are confident about the payment term that you have adopted, and if you believe you can make it through until the turn over date, then pre-selling is perfect. But if you have doubts about your financial capacity a few years from now, then either you pay a larger amount now for an RFO unit, or build a back-up plan for the future.
Either way, choosing between all the pros and cons laid out is still hard, but everyone has a unique set of needs and capabilities, and that is why carefully assessing the factors mentioned above is crucial to determine which home you should really avail now.
For more information about home buying, and if you have further questions need answered, visit our home buyers’ guide made specifically for you.