WHY BUY PRECONSTRUCTION? Preconstruction is an opportunity to purchase a condominium that has not been built, but has been proposed.

HOW DO I RESERVE A UNIT? A Preconstruction condo can be reserved by completing a reservation agreement that can be signed with a deposit required of usually 10%, or it could be as low as $5,000 or $10,000.

WHO HOLDS THE DEPOSIT MONIES? An escrow agent of the developer. It can be a law firm, a bank, a title company, or a real estate agency.

DO I EARN INTEREST ON MY CASH DEPOSIT? Yes. The funds are invested in a low interest passbook account. Any interest paid on the account is applied to the purchase price. When the developer sells enough units, and is applying to go to hard contract for his construction loan, you will be asked to go to hard contract.

WHAT IS A HARD CONTRACT? A hard contract is the binding agreement that converts the reservation to a sale. When the contract is signed generally you have 7 to 15 days to review the offering, and make your decision on proceeding with the purchase, or cancel. "Going hard" occurs shortly after the reservation stage.

WHEN DOES CONSTRUCTION BEGIN? Construction will usually commence once the developer has sold 75% or more of the units and the Developer's construction loan has been funded.

WHY DOES THE LENDER REQUIRE SO MANY SALES? The loan to build a project is substantial. The construction lender usually requires binding contracts, with deposits, in order to fund the construction loan.

HOW MUCH DEPOSIT MONEY IS REQUIRED? 20% of the purchase price, usually in the form of cash or a letter of credit. Usually a two year irrevocable letter of credit can be used to secure the deposit placed with the developer's escrow agent, and with the approval of the construction lender.

WHAT DOES A LETTER OF CREDIT COST? Banks and lending institutions vary, however, 1% to 2% per year of the deposit amount is usually charged. Check with your local bank for rates.

CAN I LOSE MY DEPOSIT? The only way you will lose your deposit, whether it is a letter of credit or cash, is if the building is built according to the contract, and you fail to close when asked.

WHAT HAPPENS IF THE BUILDING IS NOT BUILT DUE TO NO FAULT OF THE PURCHASER? Your cash deposit will be refunded with interest. Your letter of credit will expire and it will not be called.

HOW LONG DOES IT GENERALLY TAKE TO BUILD A NEW CONDOMINIUM? Generally it takes a year and a half to two years to complete, depending on weather and other factors.

ARE THERE ANY OTHER COSTS RELATED TO THE SALE? Yes. You will be responsible for closing costs such as title insurance, funding of the association, insurance, reserves, etc. These charges will be outlined in a "Good Faith Estimate" provided by the selling agency, and in the developer's offering statement.

ARE THERE ANY OTHER CONTINGENCIES, SUCH AS FINANCING? No. This sale is treated like a cash sale. However, you are welcome to obtain financing, and agree to pay the additional costs related thereto. I repeat, this sale is not subject to financing.