Pre-Sold Home
Definition and meaning of Pre-Sold Home in real estate.
A pre-sold home is a residential property that is purchased by a buyer before construction has begun or is completed, allowing the buyer to select certain custom finishes.
In more detail
This arrangement is common in new subdivisions, where home builders offer various models and floor plans for buyers to choose from. The buyer enters into a contract and typically pays a deposit or earnest money, which the builder uses to secure materials and permits. Buyers enjoy the advantage of choosing their own design elements, such as flooring, countertops, paint colors, and lighting fixtures.
However, pre-sold homes carry risks, including construction delays, rising material costs, and the potential for the final product to differ slightly from initial expectations.
Key facts
| Category | Property Types & Construction |
|---|---|
| Who pays | The buyer pays a deposit, while the builder typically secures construction financing |
| Watch out for | Delays in construction schedules and changes in material availability |
| Main benefit | Ability to customize layouts and finishes |
A family signs a contract with a builder to buy a house in a planned community, choosing a specific lot and a three-bedroom layout before construction workers break ground.
Frequently asked questions
How does financing work for a pre-sold home?
Buyers typically secure a standard mortgage pre-approval initially, but the final loan is not funded until the home is complete, which may require locking in interest rates early.
Is the deposit on a pre-sold home refundable?
The refundability of the deposit depends on the purchase contract, but it is typically non-refundable if the builder completes the home as agreed and the buyer backs out.