When describing payment terms for pre-selling projects, developers present three numbers. Here’s how to read it.
The first number pertains to the percentage downpayment that’s required. Slow moving projects would even spread this number over a period of time (e.g., 2 years).
The second number pertains to the percentage that needs to be paid between the time the contract is signed and when the Developer turns over the property. So, the farther the turnover date is in the future, the smaller the monthly payments will be.
The last number pertains to the percentage that needs to be paid upon turnover. Buyers may get a bank loan to fund this portion.
Developers can relax payment terms by reducing the first downpayment and moving the turnover date forward. This is a strategy developers have used to make their projects more affordable.
But what if buyers don't have the money to settle the balance on the turnover date?
Most developers also allow the re-assignment of properties before turnover, and most pre-selling investors have banked on this transfer method as a fail-safe. For as long as property prices continue increasing, the risk of selling at a loss is slim.
To my surprise, even the richest of the rich take advantage of these payment terms. They likely peg the monthly payments on the cash flow of their businesses.
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