Mapping Your Real Estate Plan
A real estate expert shares her must-ask questions
By Carol S. Billups
It’s the real estate question you didn’t know you were supposed to ask: Which option are we ready for? With so many new opportunities in Los Cabos, there are more choices (and requisite decisions) than ever before. Should you buy a pre-owned custom home in an established community? Opt for new construction in a newer development? Or maybe elect to cash in on pre-construction pricing? How can one choose the path that’s best?
When working with a client at the start of his or her search, I find it helpful to have a preliminary meeting to explore the buyer’s situation; that meeting usually leads us to a specific strategy. Here are a couple of the points we go over in that session:
How will you be using this property?
It seems like an obvious question, but the answer affects much of the decision process. In particular, it is important to know whether you will be using the property as a full-time or winter residence. Some developers are quoting expected delivery times 36 months away, which could severely impact your planned move. In such cases, it might be better to limit your search to properties that are ready for occupancy, even if you are a year away from moving. Various factors affect the future delivery dates of properties under construction; it’s wise to check with local brokers about the delivery history of a particular project.
If your interest is a vacation property, the pre-construction program might be a good fit. Some developers provide free accommodations in other units prior to delivery of your own if they have a relationship with a hotel or a rental program is in place in the communities they previously built. In effect, they are offering you free vacations during the construction phase. Pre-construction pricing is generally based on a discount of up to 20 percent from the anticipated cost of the same unit when delivered. If you will be using the property as a vacation rental, the calculation has to take into consideration the opportunity cost of missed rentals during the construction phase while at least 30 percent and up to 50 percent of the purchase price is tied up with the developer. A lot can change in 18 to 36 months; sometimes units that were sold pre-construction come back on the market just as they are ready to be delivered. This might be a good compromise depending on your circumstances.
Are you paying cash, or do you need financing?
Commercial mortgages are still rare in Los Cabos, so most financing is seller carryback or developer financing. Some are getting quite competitive in offering attractive packages. Tramonti, a new condominium complex on the tourist corridor, offers a full array of financing packages in both peso and U.S. dollar denominations with interest rates as low as 0 percent for the shortest term (essentially a cash deal with payments spread out over the construction period) and up to 7 percent for a 12-year term. Many developers offer pre-construction-to-mortgage packages although not on all of their products.
Developer financing is very structured, and you will have to accept the terms offered with no modification. Seller carryback, on the other hand, is a completely different situation. Because it is a one-time, one-person offer, the sellers can often be persuaded to accept a more creative financing situation. They are also much more flexible on price as a general rule. In June 2017, the average home seller accepted offers of about 85 percent of the original asking price per the multiple-listing service (MLS). While each deal is individual, it would not be surprising to see a seller accept 35 percent cash down payment with the remainder financed at 6 percent amortized over 15 years and with a balloon payment at the end of five years.
Working with your MLS-BCS member agent, you can decide which options are best for your situation. With so many new projects under way, there is sure to be one tailor-made for your needs. Y
Carol S. Billups is broker-owner of Cabo Realty Pros, a full-service real estate firm in Cabo San Lucas. After more than 17 years, she still loves working with clients to find the perfect property and buy it safely. Billups can be reached by email at carolbillups@hotmail .com or by phone at 044-624-147-7541 in Cabo or (760) 481-7694 from the United States or Canada. You can search the entire multiple-listing service inventory for free on her website, www.caborealtypros.com.