Successfully Preselling Unbuilt Condominiums using Virtual Reality
Image by Outer Realm, Development by Lendlease and Magellan Development
Successfully Preselling Unbuilt Condominiums using Virtual Reality
New Development Real Estate projects are inherently risky ventures. They require huge capital expenditures for construction and other development costs, and are sensitive to the broader market conditions.
In residential real estate, this is most pronounced in the condo sector. When you are building individual homes, you have the flexibility to build in phases, depending on demand. But in condo development, you have to build the building(s) in one go.
Financing new condo developments is tricky because most such developments have pre-sale requirements. Typically a project must secure presales of 30-50% of the units before a construction loan will be approved. In the case of Federal Housing Administration (FHA) approved condos, the FHA requires that the builder sell at least 70 percent of the units in a new-construction project before it will back mortgages there.
Pre-sales also reduces overall project cost for the developer because it provides tangible proof of existing demand and consumers’ interest in the development. During valuation for loan consideration, proof of demand lowers the risk of development, allowing banks and lenders to offer loans at a lower rate. This can result in millions of dollars in savings on large projects.
So real estate developers benefit greatly by pre-selling units as early in the construction phase as possible, or even during the planning stages.
But pre-selling condos to individual buyers is not easy, for two primary reasons:
#1. Condo buying is inherently an emotional choice at its root. Where commercial property leasing decisions are relatively straightforward and numbers-driven, buying a home is as much an emotional decision as it is financial (affordability of mortgage). Individuals buying a home consider a lot of non-financial, and sometimes intangible, factors - whether they love the home’s look and feel, quality of materials and appliances, views that say “I’ve made it”, not to mention neighborhood safety, quality of schools, ease of commute to work, and so on. All of these factors add up to an emotional decision.
#2. Individuals are typically unable to visualize or understand a project through traditional formats such as artistic drawings, CAD renderings, tabletop models, and detailed prose found in brochures. From conceptualizing the property to signing sales contracts, the biggest challenge to pre-selling condos is handling buyers’ lack of vision or understanding of the project and its offerings. To convert prospects, sales centers must explain the property’s vision and details clearly and viscerally to excite them to buy. And all this must take place in a market where uncertainty has unsettled consumers, leading to a decrease of 6.6% in pre-sales in 2019. So how can developers pre-sell condos successfully?
Here at Outer Realm, we have created Unbuilt, the perfect product to help pre-sell condos successfully long before the project is complete. Unbuilt is our Virtual Reality product for new development sales and marketing, and has proven to be more effectiv e, cost-efficient and compelling than traditional 2D renderings.
Image by Outer Realm, Development by Lendlease and Magellan Development With Unbuilt, you can convey your condo development’s layout and details in the most realistic way possible. It’s like a CG rendering, except you can step inside, walk around, and get an exact sense of scale, look, and feel. You can focus on key features you wish to draw attention to, showcase customizations on the fly, and combine all this with a guided tour to enhance your storytelling.
This approach also helps you make that human connection. As we mentioned earlier, buying a home is, at its root, the fulfillment of an emotional need. You can tap into this element of pride of ownership, and help the prospect explore your unbuilt space and truly imagine themselves living there.
Pre-selling can be challenging, but it doesn’t have to be. We can help you go the extra mile; invest in giving your prospects an engaging experience that answers their questions and gets them into their home.
Curious? Email david@outerrealmvr.com or call +1-607-237-5362 to learn more!