Birds do it, bees do it, even educated fleas do it, let’s do it, let’s … buy a home!” So you’ve decided to do the grown-up thing and buy a house. Now what? Buying a newly built — or half built or even unbuilt — property is indeed a daunting task, not only because of the big sums of money involved (Can I afford it?) but also because of the commitment necessary (Will I still love it in the morning?) and the risk associated with it (Will the market go up or down? Will the building collapse on my head in 20 years?).
The obvious first step is to find the right property. Real estate agents in Lebanon may help, but if you are looking to buy new property, you can easily eschew agents’ fees (2.5% of the final price) as all new projects are advertised clearly, allowing you to contact the developer directly.
The earlier you commit in the project’s development, the bigger the discount you get. That is because developers are usually looking to recoup their investment costs as quickly as possible and are therefore more willing to negotiate prices. Once developers do recoup their costs, they look to maximize their profits. Although buying ‘on spec’ may reap its rewards financially, the risk is greater. You’re expected to pay 30% of the total price up-front upon signature of the contract, although sometimes legal and/or financial problems may hinder the developer from obtaining the necessary licenses and planning permissions, and in some cases you may end up without an ownership deed.
Another risk of buying on spec are the specs themselves. Always ask for a list and sign on it: some developers eager to sell may agree with you on many points such as number of parking spaces available to you or the size of the storage room although some may renege on these agreements. An easy way out of this is to make sure the developer is reputable (in a country this size, that is the easy part) and to check out some of their other projects. Don’t be shy to ask some of the residents how happy they are with their property. Also, visit the site with an architect or an engineer who may point out issues you may not have thought of: they tend to see the minutest details.
When it comes to negotiating the price, that’s when you need someone like my sister. Don’t be afraid to argue, most developers will negotiate between 10% and even 20% of the asking price. But think of the hidden or extra costs that can amount up to $50,000 depending on the property. Firstly, you need to factor in charges that you pay upon signature of the contract (0.3% the value of the property) and 5% of the total cost upon registration of the property (plus another 0.6% in fees and miscellaneous costs) — an extra $31,500 on a half- million dollar property. Extra costs may also be incurred through the building process as some developers will charge for any extras you will want to install (one extra plug in a room can cost $50, electric shutters $500) and can easily amount to around $15,000 in total.
Financing is a different thing altogether. Usually, in Lebanon you are expected to have paid up to 90% of the house price by the time you move in. So unless you can pay up cash, you’d need to get a housing loan. In Lebanon this puts you into a Catch-22 situation as you need a document proving ownership of the property which is usually only given to you by developers after you’ve already paid about 60% of the house price already. Also, there’s a limit to just how much the bank will give you. For example, a salaried employee earning around $4,000 a month can borrow up to a maximum of $115,000 over 15 years which is repaid at a current interest rate of between 8-9%. With current house prices in central Beirut averaging around $2,000 per square meter, you would either need to settle for a 100 m2 home in the city or for a bigger house in suburbia.
So, if you find the idea of buying a new house unnerving, perhaps it is best to do as the birds and the bees do and find a good tree somewhere else!