Pre-construction Deposits

[argos]

Are deposit payments for pre-construction sales insured or guaranteed from being "lost"?

In times like this, where sales for pre-construction are slowing down, impeding builders from starting the excavation, is it possible that 1) builder returns the deposit with accrued interest OR 2) builder "runs away" with the money?

In other words, are purchaser's deposits safe?

 

[MBS-Guru]

no, you're money should be safe. However, the bigger concern is builders playing the delay game in poor economic times. They'll keep your deposit and delay the project for years on end (Extra 2 or 3 years i believe from proposed occupancy? Correct me if i'm wrong though). They'll start building again when costs comes down in a year or two later but usually that means market values have also gone down as well......

 

[cdr108]

Your deposits are safe since they have to be held 'in trust' with a lawyer. I believe this change came about after the 80s recession when projects were left uncompleted and left buyers hanging with no deposits and no place.

MBS is right about the delays though.
In the past several months, the cost of raw materials has dropped at least 50% (look at commodity prices for copper, crude, raw steel, etc) so many developers are trying to re-negotiate their contracts with suppliers.
More profit for the developer since they are still selling around $450 - $550 PSF for new construction.