In Pre-Construction Real Estate, the Payment Schedule Often Says More Than the Rendering

Pre-construction sales have always asked buyers to pay for something they cannot yet see. That gap is widening. Developers can now produce photorealistic renderings and video that make an unbuilt project look finished and occupied, while the slower sales seen in many markets over the past year have left some projects short of the money needed to complete them.

The risk is not limited to any one country. It is sharpest, though, for buyers purchasing far from home, who are often relying on marketing materials alone.

“In today’s world, a lot of developments use AI to create a beautiful picture,” said Ed Eakin, a Texas broker and Certified International Property Specialist based in Cabo San Lucas. “It looks like the project is done and people are living there. In reality, no dirt has been moved.”

Questions a rendering cannot answer

Eakin’s starting point is a set of direct questions for the developer. Has the project broken ground? How many units have closed? What are the expected completion dates for each phase? When will the amenities be started, and when will they be finished?

The amenity question is often where marketing and reality separate. Some projects build their headline feature first, and the rest follows slowly. Eakin points to a development near Spicewood, Texas, where the golf course has been finished for about a year, but no homes have been built. Streets and utilities are still going in, and the clubhouse is a temporary tent.

The most revealing question concerns money. Many developers cannot start construction until they reach a set level of pre-sales. Eakin asks a version of the same thing each time: if no further units sell over the next year, can the project still be finished?

Track record carries similar weight. A developer with decades of operation and dozens of completed projects presents a different risk than a first-time builder, and asking what a developer has already delivered is a fair question at any price point.

What the payment schedule signals

The structure of the deposit schedule offers a less obvious clue. Payment terms vary widely. Some developers ask for around 30 percent at contract, another installment when the foundation is complete, and the balance at delivery. Others take an initial deposit and ask for nothing more until the end.

In Eakin’s view, the second structure usually points to a stronger developer, one able to fund construction without drawing on buyers’ money along the way. At the other extreme, a developer asking for half the purchase price before breaking ground warrants extra caution.

How deposits are held matters as well. Eakin advises against wiring funds directly into a developer’s own account. A local third-party escrow service can release money as construction milestones are met: the foundation poured, the walls up, the roof on. Lenders can offer another layer of scrutiny. Eakin notes that mortgage lenders active in Mexico typically vet a developer before agreeing to finance a unit in the project.

Reading a site

None of this replaces seeing the property. The signals on a site are straightforward. Workers, machinery, and noise suggest progress. A fenced, locked site with no crew, or ground where grass is growing over earlier work, suggests a project that has stalled.

“If nothing has changed in 30 days, let’s figure out what’s happening and why,” Eakin said.

For buyers who cannot visit often, that monitoring can be delegated. Eakin describes regular site checks on behalf of out-of-town clients, sending photos and video, and walking clients through a unit by live video call so they can ask questions as they see it. The same approach applies before purchase. When a client is weighing several projects, he visits each, collects price lists and construction timelines, and reports which are close to delivery and which are still years out.

When projects fail

The consequences of skipping these steps tend to arrive late. Eakin says he still receives calls from buyers who sent deposits directly to a developer who later disappeared, often after finding an online group of other buyers in the same position. “At that point, it’s really too late,” he said.

The outlook

As pre-construction marketing becomes more polished and financing for new projects tightens, the distance between what a buyer sees online and what exists on the ground is likely to keep growing. The questions that close it remain unchanged: who is building the project, how it is funded, and whether anyone the buyer trusts has stood on the site.

About the Expert: Ed Eakin is a Texas real estate broker and Certified International Property Specialist who leads Eakin Group in Cabo San Lucas, Mexico. He focuses on luxury and golf-community property in Los Cabos. eakingroup.com

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.

Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.