What Are the Risks of Buying Pre-Construction?

Pre-construction luxury real estate purchases carry five primary risks that buyers should understand and evaluate before committing.

Delivery risk is the most fundamental. Construction projects can be delayed by permitting issues, construction cost increases, financing challenges, contractor disputes, and market conditions. Delays of one to two years beyond the originally advertised timeline are not uncommon in major luxury development markets. In rare cases, projects do not complete at all — though developer escrow requirements in Florida and other states provide buyer protection in the event of project failure.

Design risk is the gap between the renderings, samples, and specifications presented at presale and the finished product delivered at closing. Finishes, views, floor plan execution, and amenity quality can differ from presale representations. The purchase contract typically includes developer rights to make modifications — buyers should review these provisions carefully.

Market risk affects buyers in both directions. If the market appreciates significantly between presale and completion — which is the hoped-for outcome — the buyer's pre-construction discount is validated and the unit has equity at closing. If the market declines, the buyer may be purchasing at a price above current market value.

Financing risk arises when the buyer's financial situation or market lending conditions change between contract execution and closing. A buyer who qualified for financing at contract may face challenges at closing two to four years later — particularly if their income, assets, or credit profile has changed, or if lending conditions have tightened.

HOA risk involves uncertainty about the actual operating costs of the building once it opens. Developer-estimated HOA budgets are frequently lower than the actual costs of operating the building — which can result in significant HOA increases in the first years after completion.