Pre-selling vs. RFO Condominium: What’s the Difference?

Written by: Rita Magallona

Ready to take the leap and purchase your first-ever condominium unit? As you browse through property listings, you may encounter the terms “preselling” and “ready for occupancy” (RFO). How do they differ? Why is it important to know the distinction between these real estate terms?

Preselling Condos

Preselling condominiums, as the name implies, are units that are offered for sale while the condo building is still under construction. In some cases, you can buy a preselling unit before the groundbreaking for the project. This scheme is popular because it gives several advantages to property buyers.

Pros of buying a preselling condo

1. Lower prices. Preselling prices are typically 30% lower than RFO prices simply because the project isn’t completed yet. Developers begin selling units to interested buyers long before the project is finished so that they could immediately get actual sales. Buying a pre-selling condo is considered a good investment. Should you decide to sell the unit, you would make a profit as soon as the project is completed.
2. Flexible payment terms. Apart from cashing out a lesser amount for your unit, you may also enjoy flexible payment terms. Some developers offer terms of up to three years or structure the payments so that the monthly amortization is affordable. Note that in the latter case, you may need to fork out a balloon payment or lump sum on top of your monthly amortization.
3. Choice of unit. When you buy a preselling condo, you would have a wider selection of units to choose from. Depending on availability, you can select what floor your unit will be in, how close to the elevators, your unit layout, where the windows will face, etc. Some developers may even give you the opportunity to customize your unit (i.e., taking down or adding a partition wall or built-in cabinets).

Cons of buying a preselling condo

1. Longer wait. As mentioned, preselling condos are sold before the condo building project itself is completed. After you have signed the papers and paid the initial fees, you may have to wait up to five years before you can move in.
2. Buying a unit unseen. You are purchasing your preselling unit on faith. Unlike other purchases where you can see a product firsthand before paying, your decision would be based on model units, artist’s perspectives, and staged pictures of what the developer is promising to build.
3. Changes without prior notice. Brace yourself for sudden changes in the amenities, materials, and other features. The contract may allow the developer to make technical changes during construction, often without having to inform the buyer ahead of time. What you see in the brochure is not always what you’ll end up getting upon turnover.

To avoid anxiety, go for reputable developers who have a track record of delivering quality projects on time. Look for online reviews of previous projects, or better yet, visit their existing projects to see what your future condo building might look like.

Ready-For-Occupancy (RFO) Condos

RFOs are completed units in finished condo building projects. These include be brand-new completed units purchased directly from the developer and resale units purchased from an individual property owner.

Pros of buying an RFO condo

1. Move-in ready. RFO condos are in moving-in condition, so you can inspect the actual unit. Being on site will give you a better idea if the condo matches your needs, as well as any improvements required. The biggest advantage? You can quickly move into an RFO condo as soon as you’ve signed the papers and arranged financing.
2. Property management. Some condo buildings age better than others, which is often a matter of how well the property is managed. If you go for an RFO condo, you will see how well the property is maintained and managed. You can also check out the condo facilities and surrounding neighborhood firsthand.
3. Rent-to-own arrangement. In some cases, buyers may negotiate a rent-to-own scheme for an RFO condo. This lease-to-buy arrangement gives a tenant the option to purchase the unit they are renting within a specified period.

Cons of buying an RFO condo

1. Higher prices. RFOs sell for higher prices than preselling condos, often with less flexible terms. Sometimes, the down payment – which can be from 5% to 20% of the selling price – has to be paid upfront in cash. Not only that, completed units will incur a higher tax.
2. Renovation costs. You would need to budget for renovations or improvements if you’re purchasing an RFO unit in an older building or one that has not been maintained well by the previous owner.
3. Limited unit choices. Your selection of RFO condos is limited, as the more desirable units have already been purchased at the preselling stage.

As you can see, the good points and the bad points of preselling and RFO condos almost even out. So which is the savvier choice?

Choose the property type that best suits your needs – will the condo unit be your permanent residence, vacation home, or rental investment? This way, you can save more on housing, have a faster turnover, and get the home of your dreams.

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Ohmyhome was launched in the Philippines in September 2020, following the company’s establishment of a tech team in the country in 2017. Ohmyhome was originally founded in 2016, and subsequently rose in Singapore as a leading PropTech solution and licensed real estate agency.

Ohmyhome expanded into the Philippines so that Filipino home seekers can have a real estate partner that they can trust to have their best interests at heart and can be relied upon to provide exceptional services throughout the entire property journey.

Featuring thousands of properties across many of the Philippines’ major real estate brands, Ohmyhome differs from other local platforms by going the extra mile and extensively helping buyers narrow down the choices and find the property that best suits their budgets, home needs, and lifestyle preferences.

The company’s Real Estate Agents not only help in the shortlisting of options, but also provide professional services through the entire purchasing process. These include assistance in property inspections, negotiations, the finalization of the Conditions of Sale, deposit collection, the submission of property documents, as well as providing buyers regular updates.

Ohmyhome helps Filipinos find their dream homes, all while making sure each real estate transaction is complete and is an efficient and enjoyable experience.