Questions to Ask Real Estate Developers
There are as big risks in real estate investments as there are rewards. Investing in real estate often comprises of big decisions that involve a huge commitment and is therefore not a matter to take lightly. Real estate investing, just like any other industry, has its own contentious segments that cause confusion and uncertainty in people interested in investing.
It is important for you to have an understanding of what you should expect from a real estate developer, right before any transactions happen. To ascertain their capability, legitimacy, and intent, there are a few questions that you should ask your real estate developer before you trust them to build your dream home for you.
What is the Background of their Company?
It is crucial to have an understanding of the background of a business partner, whether it is in real estate development or any other industry. When you are researching for the history, scales, services, and the portfolio of a commercial real estate developer- these things will help you to determine the capability and experience of your real estate developer beforehand.
You will be in good hands to find out that the company you are liaising with are preferred developers. You can further your research by communicating with previous clients and asking of their experiences with the real estate development company.
How Stable is the Developer Financially?
Going with a developer who shows signs of financial instability might be a bad idea for you. The developer may choose to use underhand methods and cut corners by using cheap materials to try to keep more money to themselves. It is therefore crucial that you require of their financial reports first before getting into an agreement with them.
How Will the Developer Update You on the Progress of the Project
This question will help you in informing your project manager of how they should update you on the progress of the project in future. It is also important that you secure their contact details so that you can have a direct communication channel with your real estate developer.
Does the Developer have Legal Documents for his Projects?
It is very important that you ascertain that the developer has all the required legal work before committing to any project. The title deeds, authority approvals, building plan approval, construction commencement, and other documents should all be in the possession of the developer. Things get much easier for you if you pursue this channel with the help of a lawyer in independently reviewing and understanding the terms and conditions that are mentioned in your agreement.
How much does the Developer Charge?
The charges and pricing of a developer are important and should be discussed before handing the project to them. Developers, whose prices are low, can be a sign of danger and may indicate use of low-quality materials or inadequate manpower for a project.
What are the Terms and Timelines of Project Delivery?
Most of the agreements are marked with a timeframe in which a developer should give the possession of the property. However, while most developers will mention the timeframe, only a few mention the start date of the time frame To make sure you are on the safe side before signing on the binding agreement, ensure that your real estate developer is clear on the start date of the time frame. Make sure that the start date is also documented. Also, ensure that you have checked on the penalty clause, which outlines what the developer will pay if they delay a project.
Inquire about the Pricing
Chances are, most people forget to dig more when they find a developer with relatively low prices. While quotes on the high end are not a guarantee of good work, it is important that you do a market survey of properties within a similar axis of what you are looking for and fully discuss the prices and every other hidden charges.
Will there be Extra Charges?
There may be extra charges coming from the developer and you may have to inquire about this beforehand. A developer may charge you extra on things such as PLCs (Preferential Location Charges), internal and external development charges, or even the advance maintenance fee. Find out what the value of the purchase amounts to after including these charges. Unless the price agrees with your budget, ensure that you do not buy
Are there any Payment Plans?
It is important that you pay close attention to the payment plan. In normal terms, you should not pay a large cost at the initial stages of buying the property. Common advice is that you ensure you stick to the construction-linked payment plan. Such plans allow for payment of a portion of the cost after possessing the property.
Another keynote that you should clearly observe in the builders agreement is the escalation clause. This clause states that a developer reserves the right to increase the project cost in case the cost of materials goes up. To know if the builder has abused this clause in the past, refer to other previous clients who have hired the developer.
What Factors may Influence the Price of the Property?
There are many factors, which influence the pricing on the property. Knowing these factors will help you understand whether you are willing to pay more due to such factors. Some of the factors that influence pricing include:
- Competition amongst buyers
- The property’s initial price upon launch.
- The number of property units going for sale.
- The date of the project’s turnover.
- The price of similar properties in that area.
- Ask about the drawbacks that the property has
In conclusion, ensure that you take all caution while looking for the right real estate developer. Finding the right one may call for some more homework and researching. You may not find the right developer immediately, but one can never be too sure about finding the right match that you will safely depend on for the completion of your projects. It is also important to ensure that you are fully involved in the whole process of the project with all the due follow up that is required of you.